INTRADAY calls for 21st Oct 2009
+ve Script & Sector : Dredgcorp, Brigade, TFCILtd
BUY Jindalsaw-822 above 827 for 854+ with sl 820
BUY LicHousing-840 above 847 for 859-865+ with sl 838
+ve Script & Sector : Dredgcorp, Brigade, TFCILtd
BUY Jindalsaw-822 above 827 for 854+ with sl 820
BUY LicHousing-840 above 847 for 859-865+ with sl 838
BUY DLF-470 above 473 for 487+ with sl 467
BUY FedBank-265 for 277+ with sl 261
BUY FedBank-265 for 277+ with sl 261
Positional
BUY STCIndia-368 for 417+ with sl 355
BUY STAR-184 for 210+ with sl 174
BUY STCIndia-368 for 417+ with sl 355
BUY STAR-184 for 210+ with sl 174
Strong & Weak futures
This is list of 10 strong futures:
State Bank Of India, Jindal Saw, Allahabad Bank, Indusind Bank, Indian Bank, Andhra Bank, Sesa Goa, Dena Bank, Bajaj Hind & Yes Bank.
And this is list of 10 Weak futures:
RCom, Bharti Airtel, Idea, Grasim, TV-18, MTNL, Ambuja Cement, Suzlon, Jaiprakash Hydro & DishTV.
Nifty is in Up trend
NIFTY FUTURES (F & O):
Profit Booking may continue up to 5079-5081 zone by non-stop.
Profit Booking may continue up to 5079-5081 zone by non-stop.
Hurdles at 5114 & 5120 levels. Above these levels, expect short covering up to 5149-5151 zone and thereafter expect a jump up to 5178-5180 zone by non-stop.
Cross above 5208-5210 zone, can take it up to 5237-5239 zone by non-stop. Supply expected at around this zone and have caution.
On Negative Side, rebound expected at around 5050-5052 zone. Stop Loss at 5021-5023 zone.
Short-Term Investors:
Bullish Trend. 3 closes above 4790.00 level, it can zoom up to 5155.00 level by non-stop.
3 closes above 5155.00 level, it can zoom up to 5520.00 level by non-stop.
BSE SENSEX:
Lower opening expected. Recovery should happen.
Short-Term Investors:
Short-Term trend is Bullish and target at around 17671.82 level on upper side.
Maintain a Stop Loss at 16613.22 level for your long positions too.
Short-Term trend is Bullish and target at around 17671.82 level on upper side.
Maintain a Stop Loss at 16613.22 level for your long positions too.
SL Triggered.
POSITIONAL BUY:
Buy XPRO INDIA (BSE Code:590013)
Buy with a Stop Loss of 27.50.
Buy XPRO INDIA (BSE Code:590013)
Buy with a Stop Loss of 27.50.
Above 39.50, it will zoom.
Buy NOIDA TOLL BRIDGE (BSE Code:532481)
Buy with a Stop Loss of 44.40.
Buy NOIDA TOLL BRIDGE (BSE Code:532481)
Buy with a Stop Loss of 44.40.
Above 45.85, it will zoom
Global Cues & Rupee
The Dow Jones Industrial Average closed at 10,041.48. Down by 50.71 points.
The Broader S&P 500 closed at 1,091.06. Down by 6.85 points.
The Dow Jones Industrial Average closed at 10,041.48. Down by 50.71 points.
The Broader S&P 500 closed at 1,091.06. Down by 6.85 points.
The Nasdaq Composite Index closed at 2,163.47. Down by 12.85 points.
The partially convertible rupee INR=IN ended at 46.11/12 per dollar on yesterday, stronger than Friday's close of 46.29/30.
Interesting findings on web:
Stocks dipped Tuesday as a stronger dollar and some disappointment about DuPont and Coca-Cola's results gave investors a reason to retreat from the recent rally.
Interesting findings on web:
Stocks dipped Tuesday as a stronger dollar and some disappointment about DuPont and Coca-Cola's results gave investors a reason to retreat from the recent rally.
Disappointing housing and inflation figures have overshadowed good earnings results from Apple and machinery maker, Caterpillar.
The Dow Jones Industrial Average finished the trading day at 10,041.48, down 50.17 points (0.5 percent).
The S&P 500 closed at 1,091.06, down 6.85 points (0.62 percent).
The NASDAQ Composite finished at 2,163.47, down 12.85 points (0.59 percent).
RUSSELL613.41-8.93-1.43%
TRAN4045.117.37+0.18%
UTIL381.92-5.78-1.49%
S&P 100504.52-2.23-0.44%
S&P 400708.93-6.67-0.93%
NYSE7158.27-63.94-0.89%
NAS 1001756.19-0.49-0.03%
A weaker-than-expected housing market report added to the downward pressure.
Mixed profit reports, a stronger dollar and a weaker housing market report are among the factors dragging on Wall Street.
"I'm impressed we've managed to stay above 10,000 as I would have expected a bigger pullback after the last few days," said Gary Webb, CEO at Webb Financial Group.
Webb said that after better-than-expected quarterly results last week from the likes of Goldman Sachs (GS, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Intel (INTC, Fortune 500) raised investors' expectations for the reports this week. As such, even companies that have reported strong results this week have seen a mixed stock reaction.
"When we see an economy that's going in the right direction at a stronger pace, we'll see a more positive reaction to the profit reports," he said.
Since bottoming at a 12-year low on March 9, the S&P 500 has risen more than 62%. But some worry that the Dow's move above 10,000 has been a ruse and that investors should beware.
"We've traded up on some optimism about the global recovery and there are technical reasons why the market could keep rallying," said Brian Battle, vice president at Performance Trust Capital Partners.
However, he said that a lot of the improvement in the economy and profits is being clouded by the enormous amounts of government stimulus. "Once you remove all the stimulus, the underlying economy is not as strong."
Housing starts rose to a 590,000 unit annual rate in September, versus a revised 587,000 in the previous month. Economists expected starts at a 610,000 unit annual rate.
Building permits, a measure of builder confidence, rose to a 573,000 unit annualized rate in September from a revised 580,000 unit annualized rate in August. Economists surveyed by Briefing.com thought starts would rose to 595,000 unit annualized rate.
"We remain optimistic for 2010 but the next couple of months will be tricky," Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote in a note to clients.
The housing data "is a bit of a surprise, the consensus going in was for a positive tone," said Keith Wirtz, chief investment officer at Fifth Third Asset Management Inc., which oversees $20 billion in Cincinnati. "The disappointment will have an impact on the market. The market at these valuation levels is susceptible to news flow each and every day."
The Producer Price Index (PPI), a measure of wholesale inflation. PPI slipped 0.6% in September versus forecasts for a flat reading. PPI rose 1.7% in the previous month. The core PPI, which strips out volatile food and energy prices, fell 0.1% after rising 0.2% in the previous month. Economists thought it would rise 0.1%.
Tuesday brought quarterly results from five Dow components: DuPont, Pfizer, Coca-Cola, Caterpillar and United Technologies. Apple and Texas Instruments were among the names who reported after the closing bell Monday.
DuPont (DD, Fortune 500) reported higher third-quarter earnings that topped estimates on weaker revenue that missed forecasts. The chemical maker used cost-cutting to temper the impact of weak sales and surging crude and energy costs.
Looking forward, DuPont narrowed its full-year earnings guidance to a per-share range of between $1.95 and $2.05. Shares fell 2.2%.
Coca-Cola (KO, Fortune 500) reported modestly higher third-quarter earnings that met estimates on weaker revenue that missed forecasts. The company was hit by weaker sales amid the impact of the recession.
Coke was also hurt by the comparatively strong dollar, at least versus a year ago. A stronger dollar hurts companies like Coke because the majority of its profit comes from sales overseas. Those sales then convert back to less U.S. dollars. Coke shares fell 1.3%.
Pfizer (PFE, Fortune 500) reported higher third-quarter earnings and weaker revenue, both of which surpassed analysts' estimates. Although the maker of Lipitor, Viagra and other drugs saw a decline in sales due to the recession, that was offset by aggressive cost-cutting. Shares fell 0.3%.
Caterpillar (CAT, Fortune 500) reported weaker quarterly earnings that topped estimates on weaker quarterly revenue that missed forecasts, due to lower sales. But the heavy-equipment maker also lifted its full-year earnings forecast to a range of $1.10 to $1.30 per share, versus its previous guidance of 95 cents per share. Caterpillar gained 3%.
United Technologies (UTX, Fortune 500) reported weaker quarterly earnings and revenue that missed estimates. Looking forward, the company said it expects earnings of $4.10 per share, in the middle of its previous guidance. UTX runs jet engine maker Pratt & Whitney, Otis elevators and other businesses. Shares were little changed.
Boston Scientific (BSX, Fortune 500) reported a profit versus a year-ago loss, but results were shy of forecasts. The medical device maker also cut its full-year 2009 earnings forecast due to slower sales of defibrillators and other products.
Shares fell 15.7% in very active NYSE trading.
So far, about 100 of the S&P 500 companies have reported earnings; 79 percent have beaten expectations, while 11 missed.
More than 130 companies in the S&P 500 were scheduled to report third-quarter results this week. Earnings have surpassed analysts' projections for 79 percent of the companies that released results so far, according to Bloomberg data. More than 72 percent beat the average estimate in the second quarter, matching the highest proportion in data going back to 1993.
"We're getting to the point in this market where we're going to have to see revenues come through," said Warren Koontz, head of large-company value stocks at Loomis Sayles & Co. in Boston, which manages $140 billion. "Though they're not declining as much as they were, to continue this move up, we have to start to see the evidence of revenues following, because we can't cut our way to prosperity in earnings management."
Sales have fallen 2.2 percent at S&P 500 companies that reported third-quarter results since Oct. 7 and have trailed analysts' estimates by 0.9 percent, Bloomberg data show.
"Earnings reports have been decent so far, but the way it works is that earnings reports have to come in good now because the market over the past few months has been forecasting better earnings," said Robert Stimpson, a money manager at Oak Associates Inc. in Akron, Ohio, which manages $800 million.
Companies in the S&P 500 will report a ninth straight quarter of declining profits, the longest streak since the Great Depression, before returning to growth in the final three months of the year, analysts' estimates compiled by Bloomberg show.
Pacific Investment Management Co. expects nominal economic growth of 3 percent to 4 percent and returns on assets to be half of what they were in the prior decade as consumers curb spending and increase savings.
"We are leaving the world where the U.S. dominated consumption and was the engine of global growth," Bill Gross, co-chief investment officer of the world's biggest manager of bond funds, wrote in a commentary on Pimco's Web site. "Now the rest of the world, whether it's China, Brazil, or other future tigers, will begin to dominate and must in turn replace their export-driven growth with internal demand-generated growth."
U.S. gross domestic product shrank at a 0.7 percent annual rate from April to June, the best performance in more than a year. China's GDP grew at a 7.9 percent rate in the second quarter and is forecast to exceed 10 percent in the first quarter of next year, according to the Development Research Center, an affiliate of that nation's State Council.
After the close, Yahoo (YHOO, Fortune 500) reported higher quarterly earnings that beat forecasts on weaker revenue that also beat forecasts.
Also after the close, Sun Microsystems (SUN, Fortune 500) said it was cutting 3,000 jobs related to its purchase by Oracle (ORCL, Fortune 500).
Of 10 key S&P indexes, utilities and materials were the biggest decliners, down more than 1 percent. Information-technology was the best performer, finishing flat.
Boeing [BA 51.90 -1.55 (-2.9%) ], Home Depot [HD 26.96 -0.67 (-2.42%) ] and DuPont were the biggest drags on the Dow.
Over on the Nasdaq, Apple [AAPL 198.76 8.90 (+4.69%) ] shares surged more than 5 percent after the iPod and iPhone maker blew past earnings and revenue expectations.The company said it earned $1.82 a share on revenue of $9.87 billion. Analysts polled by Reuters had expected earnings of $1.42 a share on revenue of $9.21 billion.
Analysts said the earnings indicate that consumer spending is coming back. Apple was also upbeat about the holiday season, which is usually a blockbuster quarter for the company. Analysts seemed to agree.
"These are huge numbers ... Apple is probably the best growth story in tech, maybe one of the best growth stocks in the market. I bet this stock can go to $250 in six to nine months," Jane Snorek, analyst at First American Funds, told Reuters. "Usually Christmas and back-to-school are correlated and Apple usually has a gigantic Christmas quarter. This makes me think Apple will have a great Christmas."
On the M&A front, staffing company Adecco [ADO 0.0080 --- UNCH (0) ] is buying MPS Group [MPS 13.51 2.37 (+21.27%) ] for $1.3 billion or $13.80 a share, a 24 percent premium over the most recent close for MPS.
Morgan Stanley [MS 32.54 -0.57 (-1.72%) ] is selling its retail asset management division to Invesco for $1.5 billion — that division includes both the Morgan Stanley and Van Kampen brand names. Morgan Stanley will get a 9.4 percent stake in Invesco.
Two other Dow stocks, Exxon Mobil and Chevron, were off more than 1% as oil slipped from Monday's 12-month high above $US80 a barrel.
Pulte Homes Inc. and Home Depot Inc. led builders and retailers lower as the Commerce Department report signaled the housing market may slow once tax incentives expire.
Coca-Cola Co. lost 1.3 percent after sales trailed estimates.
Lockheed Martin Corp. tumbled 6.5 percent to $71.99 after its 2010 forecast trailed analyst estimates. The world's largest defense company's third-quarter profit was 5 percent higher than the average estimate.
Boston Scientific Corp. fell the most in the S&P 500, slumping 16 percent to $8.57. The maker of Taxus heart stents lowered its 2009 sales forecast, prompting Wells Fargo & Co. to downgrade the stock to "market perform" from "outperform."
State Street Corp., the world's largest money manager for institutions, fell 8.4 percent to $47.84 after lowering its earnings forecast for the current year.
Results from Marshall & Ilsley Corp. and Zions Bancorp deepened losses for regional banks in the S&P 500, the sixth- worst performer among 154 industry groups this year. Marshall & Ilsley, Wisconsin's largest bank, fell 8.8 percent to $6.55 after posting a third-quarter loss on housing-related credits and loans to other bank holding companies.
Zions, Utah's biggest bank, reported a fourth straight quarterly loss as more borrowers fell behind on payments and writedowns on debt securities increased. The shares fell 6 percent to $17.23.
Raw-materials producers in the S&P 500 slumped 1.1 percent as a group. Copper retreated from a one-year high as the housing data spurred concern demand will abate. Energy shares declined 0.9 percent as crude oil for November delivery declined 0.7 percent to $79.09 a barrel in New York as the rebound in the dollar reduced the appeal of commodities as an alternative investment.
Exxon Mobil Corp., the world's biggest energy company, and Alcoa Inc., the largest U.S. aluminum producer, retreated at least 0.8 percent.
VIX20.9-0.59-2.75%.
Oil,Gold & Currencies:
U.S. light crude oil for November delivery fell 52 cents to settle at $79.09 a barrel on the New York Mercantile Exchange.
COMEX gold for December delivery rose 50 cents to settle at $1,058.60 an ounce.
The dollar gained versus the euro and the yen, reversing the direction after its recent slide versus a basket of currencies.
The dollar gained for a second day versus the euro as regional stocks extended losses in U.S. shares, sapping demand for higher-yielding assets.
The euro also retreated from a 14-month high against the dollar on speculation European policy makers will today reiterate concerns that the currency's gains are slowing the region's economic recovery. The New Zealand dollar pared earlier declines as central bank Governor Alan Bollard said strength in the so-called kiwi isn't an impediment to raising rates.
"The stock market continues to dominate the currency market and affect its direction," said Toshiya Yamauchi, a manager of the foreign-exchange margin-trading department at Ueda Harlow Ltd. in Tokyo. "We need to watch for a possible reversal of risk trades or short positions on the dollar." A short position is a bet that an asset will fall.
The dollar traded at $1.4895 per euro at 11:20 a.m. in Tokyo from $1.4945 yesterday in New York, when it touched $1.4994, the weakest level since August 2008. The greenback was at 90.82 yen from 90.78 yen. The euro bought 135.27 yen from 135.66.
New Zealand's dollar was at 74.72 U.S. cents from 74.96 cents yesterday after earlier falling as much as 0.4 percent. It yesterday touched 75.76, the most since July 2008.
The MSCI Asia Pacific Index of regional shares slid 0.7 percent and Japan's Nikkei 225 Stock Average lost 0.3 percent. The Standard & Poor's 500 Index lost 0.6 percent yesterday in New York, retreating from a one-year high.
Stocks Decline
Stocks fell after the U.S. Commerce Department said housing starts rose to an annual rate of 590,000 in September, lower than the median economist forecast for a 610,000 rate. Prices paid to factories, farmers and other producers fell 0.6 percent, the second drop in three months, the Labor Department said.
Demand for the euro abated after Henri Guaino, an aide to French President Nicolas Sarkozy, said yesterday a euro exchange rate of $1.50 "is a disaster for the European economy and manufacturing sector."
That echoed comments by European Central Bank President Jean-Claude Trichet on Oct. 19 that "excessive volatility" in currencies is "bad for economic development."
"European officials are expressing worry that the euro's appreciation is making things difficult for their economy," said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe Generale SA, France's third-largest bank. "This is causing the euro to undergo a downward correction."
Sarkozy will hold a weekly cabinet meeting at 10 a.m. in Paris, and European Commission President Jose Barroso will speak to the European Parliament at 9 a.m. in Strasbourg, France.
The euro has strengthened 15 percent versus the dollar in the past 6 months, making the region's exports more expensive to overseas buyers.
IFO
Losses in the euro may be limited before a report this week forecast to show business confidence in Germany improved, adding to signs that the recovery is gaining momentum.
The Ifo institute's business climate index, based on a survey of 7,000 executives, climbed to 92 in October from 91.3 the previous month, according a survey of economists. The Munich-based institute will release the report Oct. 23.
The kiwi trimmed earlier losses after Radio New Zealand reported Governor Bollard told parliament the currency's gains are being driven by a weak U.S. dollar and money markets. He said on Sept. 10 he didn't expect to raise rates until "the latter part of 2010."
Traders are betting that New Zealand's central bank will boost its benchmark rate by 2 percentage points over 12 months, according to a Credit Suisse Group AG index based on swaps.
Benchmark interest rates are 2.5 percent in New Zealand and 3.25 percent in Australia, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations' higher-yielding assets. The risk in such trades is that currency market moves will erase profits.
Tax Relief
A Japanese tax break on overseas dividends may underpin yen strength as exporters bring home more profits, according to Daiwa Institute of Research Ltd.
"Dividend profits have grown relative to reinvested earnings since the beginning of this fiscal year, suggesting the tax-system change is making an impact," said Yuji Kameoka, senior economist at Daiwa Institute of Research in Tokyo.
As of March 2007, Japanese companies had accumulated 17 trillion yen ($190 billion) in overseas earnings, based on data from the Trade Ministry. Those profits are now at about 20 trillion yen, according to estimates by Kameoka.
Bonds:
Treasury prices rallied, lowering the yield on the 10-year note to 3.34% from 3.38% late Monday. Treasury prices and yields move in opposite directions.
What to expect:
WEDNESDAY: Weekly mortgage apps; weekly crude inventories; Fed's beige book; Fed's Rosengren speaks; Earnings from Boeing, Eli Lilly, Wells Fargo, Altria, AMR, Continental, Morgan Stanley, USBancorp and eBay
THURSDAY: Weekly jobless claims; leading indicators; Fed's Rosengren, Lockhart and Dudley speak; Earnings from AT&T, Bristol-Myers, McDonald's, Merck, MMM, Travelers, UPS, Schering-Plough, Xerox, Amazon, AmEx, Braodcom and Capital One
FRIDAY: Fed chief Bernanke speaks; existing-home sales; Fed's Kohn speaks; Earnings from Microsoft, Honeywell and Ingersoll-Rand
Core TARP Programs Ending: Geithner
The Obama administration will shutter programs at the heart of a $700 billion financial bailout but remains focused on supporting a fledgling economic recovery, Treasury Secretary Timothy Geithner said on Tuesday.
"We are now at the point where we can begin to wind down the programs that really defined TARP in its initial stages," Geithner told Reuters in an interview, referring to the Troubled Asset Relief Program.
Instead, the administration will focus on "more-targeted programs directed at what are the principal areas where there's still weakness in access to credit," he said, specifically citing housing and small businesses.
While some programs would wind down, Geithner said the administration has not yet made a formal decision on whether to extend the life of the overall bailout program passed its scheduled expiry at the end of this year.
A Treasury official said three programs will be shut down by year-end: the Capital Purchase Program that was used to pump funds into banks, a rejigged version called the Capital Assistance Program that was never tapped and the Targeted Investment Program that supplied $40 billion of additional capital to prop up Citigroup [C 4.43 -0.11 (-2.42%) ]and Bank of America[BAC 17.02 -0.14 (-0.82%) ].
The official also said the total of bailout funds dedicated to a Federal Reserve securities loan program and to a public-private investment program for so-called toxic assets would be capped at $30 billion each.
Congress approved the financial rescue fund a year ago as the financial crisis was raging to allow Treasury to buy up troubled assets clogging bank balance sheets, but then-Treasury Secretary Henry Paulson quickly decided pumping money into banks was more critical.
Paulson called leaders from the nine largest U.S. banks to the Treasury and forced them to accept taxpayers funds, fearing that if only the weakest banks were given support they might be tainted in the public's eye.
To date, Treasury has invested $204.64 billion in over 600 banks with the Capital Purchase Program, and some $70.72 billion has been repaid. Insurer American International Group [AIG 40.34 -0.83 (-2.02%) ] and automakers General Motors and Chrysler [BAC 17.02 -0.14 (-0.82%) ]have also received government support.
Still Fragile Economy
Geithner said that while many areas of the economy showed signs of recovering from a deep recession, it was too soon to turn attention to reining in huge U.S. budget deficits. He said the administration would lay out plans to trim those deficits in its proposed budget in February.
"For there to be a recovery that's self-sustaining over time ... people have to be confident that we'll bring those deficits down over time and that's a difficult balance," he said, "Right now, the overwhelming imperative we face is still to make sure that we reinforce this nascent recovery."
The U.S. budget shortfall hit a record $1.4 trillion in the fiscal year that ended Sept. 30. At 10 percent of U.S. GDP, it was the largest budget gap since World War Two.
"The only strategy that makes sense is to make it clear that you will do what's necessary to establish conditions for growth" and then "get back to living within your means when you have growth established," Geithner said.
The prospect of continued huge budget deficits has worried some investors and has helped drive the U.S. dollar to 14-month lows against a basket of currencies.
Geithner reiterated that a strong dollar was important to the United States, and said Washington needed to pursue policies that strengthen long-term U.S. economic prospects, including putting the budget on a more sustainable track.
He suggested that some factors pushing down the dollar were positive. As the global economy regains its footing and investors become more willing to take risks, they lighten up on safe-haven assets like U.S. Treasuries, pressuring the dollar.
Take the Money Please
Some big Wall Street banks have already been permitted to repay capital injections they received from the government, and Geithner said more want to do so. "I think we're getting at the point where it's quite likely you're going to see significant further repayments," he said.
As banks return to better health, some that received bailout money have ignited public fury by returning to old practices of paying big bonuses to top employees and Geithner said he personally felt the public anger was justified.
"The frustration they have is completely understandable," Geithner said, though he added that there was a move among some firms to tie pay more closely to performance.
"I don't think they've gone far enough yet," he said, but he noted the Federal Reserve will soon propose sweeping rules to reform pay at banks.
Geithner said Congress was making solid progress in overhauling financial market rules -- something the Obama administration has said it wants completed by year-end. But he stressed lawmakers need to act quickly, while memories and anger over the financial crisis, that resulted in part from reckless lending, are still fresh.
Madoff Investors Sue KPMG and Major Banks
Housing Market Recovery Looks Slow in the Making
Yahoo Profit Tops Street Expectations, Sparking Shares
Consumers Buried Paul: 'Beatles Rock Band' a Sales Dud
Warren Buffett: 'Enormous Progress' Over Last Year On Economy
Warren Buffett says we've seen "enormous progress since a year ago" on the economy, but he's not making any specific predictions about what might happen in the next quarter or two.
In a video interview taped a month ago, and released today, Business Wire CEO Cathy Baron Tamraz asks Buffett what he thinks will happen with the economy in the fourth quarter of 2009 and into 2010.
His reply:
"I am not sure about exact quarters or anything of the sort. Who knows about next week or next month? We made enormous progress since a year ago. We had a real panic. And if you didn't panic, you didn't understand what was going on. What happened in September and October of 2008 will particularly be remembered for a long, long time. And while the governmental authorities malign things sometimes, they fortunately did some very right things, very important things. They did them properly, and they kept us from going over the cliff. The fallout from that financial panic hit the regular economy in the fourth quarter like a ton of bricks. We are coming back from that. The patient really went into the emergency room and it won't come out of the hospital entirely for a while."
That's in line with his comments in recent months in which he's said the economy has recovered from last fall's brink of total collapse, but remains very weak with no signs of imminent recovery.
He also repeats his belief that consumer spending won't be increasing for "a while," but he remains optimistic the American economic system will work "over time."
The interview (transcript) is designed to draw attention to Business Wire's new web site on the payments industry. Business Wire, of course, is a Berkshire Hathaway subsidiary.
Wednesday Look Ahead: Choppy Trading Expected Amid Earnings Tidal Wave
Stocks could trade a bit choppy Wednesday, as investors react to a tidal wave of earnings news and watch fluctuations in the dollar and other risk assets.
Wall Street had a blah day Tuesday, with the Dow [.DJI 10041.48 -50.71 (-0.5%) ]ending 50 points lower at 10,041 and the S&P 500 dipping 6 to 1091. While a handful of Dow components - Coke [KO 54.06 -0.73 (-1.33%) ]and DuPont [DPT 222.79 -0.72 (-0.32%) ]among them - reported mostly better than expected profits, the market instead focused on disappointing revenues and weaker than expected housing starts. Caterpillar was a standout, jumping sharply on stunningly better earnings but softer revenues.
In the after hours, Yahoo[YHOO 17.20 -0.02 (-0.12%) ] added some excitement, with its stock trading higher after it reported better-than-expected earnings of $187 million or $0.13 per share, on weaker sales of $1.13 billion. Tech was the only one of the 10 S&P sectors Tuesday that gained, rising a fraction of a percent on Apple's [AAPL 198.76 8.90 (+4.69%) ]good earnings news.
The Fed's beige book is the big economic news for markets Wednesday at 2 p.m., but there are also a bunch of major earnings before the bell, including Boeing, Wells Fargo, Morgan Stanley, Eli Lilly, Altria, AMR, Fiat, Freeport McMoran, US Bancorp, Northern Trust and Continental Airlines. After the bell, Amgen, EBay, Equifax, Citrix, Fidelity National, Lam Research, Noble, and Novellus report.
Reporting CompaniesBA51.90-1.55-2.9%8,055,689WSC324.65-6.35-1.92%5,301MS32.54-0.57-1.72%15,069,095LLY35.25-0.03-0.09%11,635,338MO18.670.32+1.74%17,145,866AMR7.680.23+3.09%13,008,469FIATY16.75-0.15-0.89%22,047FCX78.70-0.30-0.38%13,541,344NTRS57.46-0.82-1.41%2,467,811CAL15.940.25+1.59%8,069,326AMGN58.13-2.11-3.5%9,474,489EBAY25.06-0.09-0.36%13,406,303EFX28.60-0.33-1.14%1,583,553CTXS41.61-0.73-1.72%1,898,570FNF15.860.05+0.32%2,533,783NE42.56-0.63-1.46%3,651,404NVLS21.830.04+0.18%5,136,845
Earnings have been mostly a positive catalyst for the stock market this market. As of Tuesday afternoon, 96 S&P 500 companies had reported earnings and of those, 79 percent had better than expected earnings. Actual earnings are down 12.7 percent and have come in 19.1 percent above forecasts, according to Thomson Reuters.
"It could be choppy and trend lower," said Tim Smalls of Execution LLC of Wednesday's stock market.
"There's a lot of reason for the S and P to run out of steam at these levels. There's historical reason, there's technical reasons," he said. "After this week, you have the majority of the S and P reporting earnings so there's not much to look forward to. Today and tomorrow are really the big days."
As stocks waffled Tuesday, the dollar firmed slightly against other currencies and bonds found buyers. Commodities traded lower, with oil slipping $0.52 per barrel to $79.09 and gold nearly flat at $1057.80, down $0.50 per troy ounce. Oil could be volatile Wednesday after 10:30 a.m. inventory data. API data Tuesday afternoon weighed on oil prices, after the data showed oil stockpiles rose more than expected last week.
Treasurys found buyers across the curve but the bigger moves were in shorter duration securities. David Ader, Treasury strategist with CRT Capital, said the market appears to be moving on the expectation of new issuance next week, rather than other news.
"We have no auctions this week. The next bout of supply is 2s, 5s and 7s (year notes) so to find the curve flattening between 10s and 30s, then everything makes a bit of sense purely from a supply consideration. The market is relatively thin," he said.
Watching Brazil
Brazil's stock market fell nearly 3 percent and its currency lost 2.2 percent Tuesday, after the Brazilian government moved to put a 2 percent tax on foreign purchases of stocks and fixed income instruments, a move guaranteed to chill some of the excitement about its markets.
Win Thin, currency strategist with Brown Brothers Harriman, said the tax is old news in Brazil as it's been seen before. The government had reduced the tax in October, 2008 to zero from 1.5 percent, as capital fled emerging markets in the financial crisis. Brazil officials said they imposed the tax to stem the real's appreciation and avoid a bubble in stock prices.
Thin said Brazil is not alone in being worried about the strength of its currency against the U.S. dollar. He noted that the Bank of Canada warned its currency is getting too strong, a comment that triggered a decline in the Canadian dollar Tuesday to its lowest level since Oct. 9.
Thin said he sees Tuesday's trade against risk assets as temporary, and the trade should reverse and the dollar should continue its decline.
Michael Darda, economist with MKM Partners, said it makes sense to take profits in Brazilian stocks, which are up nearly 80 percent this year. However, he said in a note Tuesday, he would not yet consider the market a "short."
"..We do believe other emerging markets now offer a better risk/reward ratio," he wrote. Brazilian equities have outperformed the iShares Emerging Market Equity Index (EEM) by 1700 bps, he points out.
Darda said the tax doesn't signal the end to foreign investment in Brazil, but it will be less attractive than other markets. "We thus recommend taking profits in Brazil and redeploying them into positions in Russia, Africa/Middle East, India and/or various fast-growth East Asian nations."
What Else to Watch
The Labor Department releases its monthly jobs report, highlighting data from individual states, at 10 a.m.
Boston Fed President Eric Rosengren makes opening remarks at 4:30 p.m. at the Boston Fed's annual economic conference in Chatham, Mass.
The Senate Committee on Homeland Security and Governmental Affairs holds a hearing on monitoring the nation's response to swine flu.
The SEC holds a hearing to bring transparency to trading in Wall Street's dark pools. —
Fed Names Supervision Chief Who Aided Treasury Plan
The Federal Reserve named Patrick Parkinson to lead bank supervision, promoting a financial- markets specialist who helped craft the U.S. Treasury Department's plan to overhaul the industry's regulatory system.
The appointment of Parkinson, 57, who previously served as deputy director of research and statistics, is effective immediately, the Fed said today in a statement in Washington. Parkinson was on detail to the Treasury from late January to early July. He succeeds Roger Cole, who retired in August.
The Treasury plan proposes expanding the Fed's oversight to include systemically important financial firms, a move opposed by lawmakers including Senate Banking Committee Chairman Christopher Dodd. At the same time, Parkinson will help implement the Fed's own changes to bank examinations, which aim to identify potential threats across the industry.
Fed Chairman Ben S. Bernanke said in the statement that Parkinson has "deep expertise in financial markets" and will help the Fed determine how banks are "interconnected and are integrated into the financial system and the economy. Pat is the right person to lead the division as we develop these new methods."
Parkinson, a Ph.D. economist, joined the Fed in 1980 and has spent most of his career in the research and statistics division. He was manager of the bank-supervision unit's financial analysis section from 1986 to 1988. From 1993 to 2008, he served as the Fed chairman's principal staff adviser on issues considered by the President's Working Group on Financial Markets, the Fed said.
Help Oversee
Now he will be in charge of a division that supervises 5,757 U.S. bank holding companies as well as 862 state-chartered banks. The unit had about 262 employees at the end of 2008, and Parkinson will help oversee 2,600 employees in supervision and regulation throughout the 12 Fed district banks across the U.S.
"He's going to play a significant role in shaping the supervisory response to the crisis," said Gil Schwartz, a Washington banking attorney who worked with Parkinson at the Fed. "He does have quite a challenge ahead of him. Putting together a new financial structure in terms of supervision and regulation is going to require a lot of effort."
Parkinson is "very sharp, very smart," Schwartz said.
The Obama administration's financial-regulation plan, in addition to expanding the Fed's authority, would create an agency for monitoring consumer financial products and bring hedge and private equity funds under federal scrutiny. Parts of the proposal, released in June, are moving forward in the House, while the Senate has yet to fully take up legislation.
More Power
While Dodd opposes giving the Fed more power, Alabama Senator Richard Shelby, the banking panel's top Republican, said in August that the Fed's "failures as a bank regulator" should be examined by the committee as part of Bernanke's nomination to a second term.
Fed Governor Daniel Tarullo said this year the central bank's overhaul of supervision is aimed at providing an "independent perspective for what is going on among big institutions, but also in the system." It goes beyond the previous reliance on analysis of bank examiners deployed by the Fed's district banks, using the staff of the Fed's board in Washington as a new layer of oversight.
The existing structure relies on hundreds of examiners from the 12 district banks, from San Francisco to Boston, visiting lenders overseen by the central bank. Examiners make recommendations on individual banks rather than focusing on the system as a whole.
Parkinson may also supervise the Fed's plans to regulate bankers' compensation, which may concentrate on about 28 of the biggest bank holding companies and focus on the firms' safety and soundness. Bernanke said Oct. 1 that the Fed will soon issue the regulatory directive for public comment, seeking to prevent employees' and managers' pay from fueling too much risk-taking.
Esther George, the No. 2 official at the Kansas City Fed bank, had been serving as acting director of the division.
Asset-price bubble risk returns amid loose policy
The trillions of dollars in extra cash pumped into the global economy to ease the credit crisis could threaten a new asset-price bubble, finance officials say, but it's not yet time to sound the alarm bells.
"One of the things I've learned myself during this crisis is that monetary policy needs to be more sensitive and more attuned to the possibility of asset bubbles," San Francisco Federal Reserve President Janet Yellen told reporters Tuesday at a conference on Asia economic policy.
"We certainly need to be on top of understanding what vulnerabilities are developing in the financial system," she said. Read more on Yellen comments.
The steep rebound in stock markets and currencies of emerging markets, particularly those that export commodities used by industrial China, has raised fears some of the same drivers of the most recent crisis are again developing.
Many economists say a prolonged period of low interest rates in the U.S., combined with huge savings in China and elsewhere, helped create a sea of liquidity that led to an unsustainable run-up in real-estate prices and ultra-low yields on credit.
Fed Chairman Ben Bernanke earlier this week warned of a return of global imbalances, a term that refers to the uneven relationship between large and increasing current account deficits run by developed countries such as the U.S., and trade surpluses in export nations such as China. See full story on Bernanke remarks.
Andrew Sheng, chief adviser to the China Banking Regulatory Commission, said Asia is again seeing increased carry trade and capital flows.
"The spillover effects from large economies are still very complex," Sheng said
On Tuesday, the Brazilian real tumbled 1.6% after Brazil imposed a 2% on foreign purchases of fixed-income securities and equities, effective Tuesday. Guido Mantega, Brazil's finance minister, reportedly said that the government wants to reign in "speculative" investment and to "favor production." See full story on Brazilian investment tax.
"It points out the kind of problems that have been raised by the rebound in capital flows," said John Lipsky, first deputy managing director of the International Monetary Fund, in answer to a question about Brazil's move.
Before the new tax was announced, Brazil's currency had gained about 38% against the dollar since the start of this year, and the Bovespa stock index had risen nearly 80%.
In Asia, Korea's Kospi stock index has jumped 55% since early March, when many major stock markets began their recovery, while the Shanghai Composite Index has gained 59% since the start of the year.
Real estate prices in Asia have also surged. Regulators have started to curb what they see as speculative practices. Earlier this month, the Korean government asked non-bank lenders to raise debt-to-income ratios on mortgages in Seoul.
Some economists, such as such as Maurice Obstfeld of University of California, Berkeley, and Kenneth Rogoff of Harvard University maintain that global imbalances during the first part of the decade reflected and magnified underlying problems in the global economy that led to the past crisis.
In a recent paper, they argued a global environment of low interest rates contributed to the housing and credit bubbles that burst with such devastation last year. See story on Obstfeld-Rogoff paper.
Yellen said it's "logical and to be expected" that when there's a gap between interest rates across countries, and nations are recovering from a downturn at different rates, capital flows will rebound as investors seek higher yields.
She added, however, that she's "not by any means ready to call this a new dangerous asset-price bubble."
Asia:
Asian stocks declined, led by materials and consumer companies, on worse-than-forecast U.S. housing starts and declines in commodity prices.
James Hardie Industries NV, the biggest seller of home siding in the U.S., lost 2.4 percent in Sydney. BHP Billiton Ltd., the world's largest mining company, sank 1.1 percent as a gauge of metals in London fell from a two-month high. Toshiba Corp., the world's second-biggest maker of flash memory chips, gained 2.5 percent after U.S. rival SanDisk Corp. forecast sales that beat analysts' estimates.
The MSCI Asia Pacific Index lost 0.3 percent to 120.76 as of 10:10 a.m. Tokyo time. The gauge has surged 71 percent from a five-year low on March 9 amid signs the global economy is rebounding from the worst slowdown since World War II.
"The economic recovery is still intact, but data is showing that the pace of the rebound has started to slacken," said Kiyoshi Ishigane, a strategist at Mitsubishi UFJ Asset Management Co., which oversees about $56 billion. "Company profits are gradually returning, but we need to discern whether stock prices already reflect the improvement or not."
Japan's Nikkei 225 Stock Average fell 0.2 percent, while Australia's S&P/ASX 200 Index dropped 0.4 percent.
Futures on the Standard & Poor's 500 Index dropped 0.1 percent. The gauge sank 0.6 percent yesterday after a Commerce Department report showed housing starts rose 0.5 percent in September, missing economists' estimates.
James Hardie
James Hardie lost 2.4 percent to A$7.39. Sony Corp., which makes the PlayStation 3 game console, fell 1.1 percent to 2,625 yen on concern demand for electronic products will fall in the U.S. Shin-Etsu Chemical Co., which makes silicon wafers used in semiconductors, sank 1.3 percent to 5,350 yen.
Better-than-estimated economic and earnings figures have driven the MSCI Asia Pacific Index's seven-month rally. Stocks in the gauge are priced at 23 times estimated earnings, compared with an average of 18 times in the past three years.
BHP, Australia's largest oil producer, dropped 1 percent to A$39.51. Crude oil for December delivery fell for the first time in nine days yesterday, losing 0.5 percent to $79.09 a barrel in New York. The London Metals Index, a measure of six metals including copper and zinc, fell 1 percent, retreating from a two-month high.
Toshiba gained 2.7 percent to 539 yen. After the close of U.S. trading, SanDisk, the biggest maker of flash-memory cards used in digital cameras and mobile phones, said fourth-quarter sales will probably be between $1.1 billion and $1.2 billion, compared with analysts' estimates for $835.4 million. The shares surged 9.5 percent in late trading.
Nikkei 225 10,305.26 -31.58 ( - 0.31%).(08.37 AM IST)
Japan's Nikkei stock average lost 0.3 percent on Wednesday in thin trade as chip-linked shares such as Advantest Corp (6857.T) fell after anaemic U.S. home and producer price data prompted investors to book profits on recent gains.
Shipping lines climbed after a key shipping index rose to a more than two-month high, while heavy machinery maker IHI Corp (7013.T) rose on a media report of upbeat earnings as the start of Japan's results season nears.
New construction of U.S. homes rose less than expected in September, and U.S. producer prices posted an unexpected decline, raising concerns about the pace of economic recovery.
But analysts warned about making too much of the data, noting that global markets have been ripe for profit-taking after recent gains helped take them far from March lows. Even the Nikkei, a relative laggard, has risen some 47 percent.
"The data was really used as nothing more than an excuse for investors to lock in profits and it doesn't signal a change in trends for the markets," said Hideyuki Ishiguro, a supervisor in the investment advisory section of Okasan Securities. "The overall direction is still up, but stocks are likely to take a bit of a breather today ahead of the Chinese data tomorrow and as Japanese earnings get underway."
The benchmark Nikkei .N225 slipped 31.58 points to 10,305.26 after hitting a three-week closing high on Tuesday, while the broader Topix fell 0.4 percent to 910.01.
China's GDP figures for the third quarter are due on Thursday, with economists polled by Reuters expecting year-on-year growth of 8.9 percent, while Japan's earnings season swings into full gear next week. "While earnings are expected to be good, solid figures have already been factored in. So we may not get the lift we otherwise might from this without some really positive surprises," said Hiroaki Kuramochi, equity manager at Tokai Tokyo Securities. JAL UP, CHIPS FALL
Struggling Japan Airlines Corp (9205.T) (JAL) rose 5.1 percent to 124 yen, bringing its total gains this week close to 24 percent after falling 26 percent the week before.
A government-appointed task force crafting a revival plan for JAL is seeking to double fresh capital for the carrier to $3.3 billion by tapping public and private funds, the Nikkei business daily said on Wednesday.
Chip tester maker Advantest fell 2.7 percent to 2,380 yen and chip equipment maker Tokyo Electron (8035.T) lost 2.4 percent to 5,630 yen. Nikon Corp (7731.T), a maker of steppers, lost 1.2 percent to 1,763 yen.
Mitsubishi Corp (8058.T) and other commodity-linked shares slipped after commodity prices fell, with the Reuters/Jefferies CRB commodity index .CRB down on Tuesday for the first time in seven sessions. Oil prices also edged lower CLc1.
Mitsubishi, Japan's largest trading house, shed 0.3 percent to 2,035 yen, while fellow trader Itochu Corp (8001.T) lost 0.7 percent to 610 yen.
Shipping firms advanced after the Baltic Exchange's main sea freight index .BADI, which tracks rates to ship dry commodities, rose to over a two-month high on Tuesday helped by stronger demand for coal and iron ore cargoes.
Mitsui O.S.K. Lines (9104.T) rose 1.6 percent to 576 yen, Kawasaki Kisen (9107.T) jumped 2.7 percent to 381 yen and Nippon Yusen KK (9101.T) added 2.5 percent to 369 yen. IHI Corp jumped 3.4 percent to 181 yen after the Nikkei business daily said it was likely to report around 15 billion yen ($166 million) in operating profit for the April-September period.
Trade was light on the Tokyo exchange's first section, with 823 million shares changing hands, compared with last week's morning average of 956 million.
Declining stocks outnumbered advancing ones by more than 2 to 1.
HSI 22231.49 -153.47 -0.69%.(08.40 AM IST)
Hong Kong, China fall amid losses in metals stocks
Hong Kong's Hang Seng Index edged 0.6% lower to 22,250.18 in early action Wednesday, while the Hang Seng China Enterprises Index shed 0.7% to 12,947.68, with many metals-related stocks losing ground as futures prices for gold slipped on Globex. Shares of Aluminum Corp. of China /quotes/comstock/22h!e:2600 (HK:2600 9.10, -0.13, -1.41%) /quotes/comstock/13*!ach/quotes/nls/ach (ACH 29.47, -0.40, -1.34%) was down 1.4% in Hong Kong, and Angang Steel Co. /quotes/comstock/22h!e:347 (HK:347 16.18, -0.12, -0.74%) /quotes/comstock/11i!anggf (ANGGF 1.95, -0.05, -2.50%) was down 1.6%. In mainland China, the Shanghai Composite was down 0.3%, with Jiangxi Copper Ltd. /quotes/comstock/28c!e:600362 (CN:600362 41.38, -0.34, -0.81%) /quotes/comstock/22h!e:358 (HK:358 18.76, -0.10, -0.53%) /quotes/comstock/11i!jiaxf (JIAXF 2.35, -2.35, -50.00%) losing 1.8% and Shandong Gold-Mining Co. /quotes/comstock/28c!e:600547 (CN:600547 69.71, -1.90, -2.65%) falling 2.8%.
Chinese stocks open mixed on Wed
Chinese stocks opened mixed on Wednesday morning.
The benchmark Shanghai Composite Index, which covers both A shares and B shares on the Shanghai Stock Exchange, opened at 3,080.52 points, down 0.13% or 3.93 points from the previous closing.
The Shenzhen Component Index on the smaller Shenzhen Stock Exchange opened 0.06% or 7.49 points higher at 12,683.73 points.
Lumena Resources to raise US$250 mln via global bond offering (21 Oct)
Chairman Gordon Wu raises stake in Hopewell Holdings to 27.47% (21 Oct)
Hang Seng Index opens 85 points lower on Wed (21 Oct)
Hang Lung Properties to invest more in mainland (21 Oct)
Zijin Mining buys remaining 50% stake in Zijin Copper (21 Oct)
China-Russia trade volume down 34.9% in Jan-Sep (21 Oct)
Chinese stocks open mixed on Wed (21 Oct)
CLP Holdings' revenue down 11.9% in Jan-Sep (21 Oct)
Chunghwa Telecom, Microsoft to sign cloud-computing MOU (21 Oct)
Tyntek's board approves Ubilux acquisition proposal (21 Oct)
Fosun Pharmaceutical forecasts 250% growth in net profit for Jan-Sep (21 Oct)
China's Minsheng Bank Q3 net profit hits RMB 2.83 bln (21 Oct)
Baidu signs wireless search agreement with China Unicom (21 Oct)
Trade fair sends strong signal of export upturn
China's 'Growth on Steroids' Raises Danger of Renewed Slowdown
China's stimulus-induced lending binge probably propelled growth in the third quarter to its fastest pace in a year. Now, policy makers have to figure out how to wean the economy off state support.
The country's rebound has been powered by 4 trillion yuan ($586 billion) of spending on railways, roads, power plants and public housing. The program ends next year, forcing Premier Wen Jiabao to find new ways to sustain the expansion with increased consumer spending and the financing of small businesses.
"This has been growth on steroids," said Michael Pettis, a Peking University finance professor and former head of emerging markets at Bear Stearns Cos. "The question now is how to stop pumping so much money into the system without a sharp reduction in growth."
State-directed support will make up more than four-fifths of growth this year, says the World Bank, spurring record iron- ore production at Rio Tinto Group and car sales in China at Volkswagen AG. An exit from the stimulus won't be easy without unnerving investors: A plunge in July loan growth sent the Shanghai Composite Index down more than 20 percent in August.
Extending the stimulus for too long risks the diversion of funds into stocks and real estate, an erosion of bank asset quality and inflationary pressures, the Asian Development Bank said in a report last month.
"Such a scenario might trigger a round of severe monetary tightening in the medium term that would pull growth down again," the lender said.
Cars and Property
The state-driven credit boom, which led to a record $1.27 trillion in new loans in the first nine months, the stimulus plan and resulting growth in car and property sales will help the economy expand 11.2 percent in the fourth quarter, according to Frankfurt-based Deutsche Bank AG. That follows a 7.9 percent expansion in the second quarter of this year, the first acceleration in growth since the last three months of 2006.
Industrial output probably grew 13.2 percent in September and investment in properties and factories surged 33.1 percent in the first nine months, pushing gross domestic product growth to 9 percent in the third quarter. It was the fastest pace since the third quarter of last year, according to the median estimate of 34 economists surveyed by Bloomberg News. The data are due for release tomorrow.
Figures this week will probably show no signs of inflation, allowing the People's Bank of China to keep in place what it calls its "moderately loose" monetary policy. China will stick to that policy, guide reasonable loan growth to boost domestic demand and further cement the nation's economic recovery, the central bank said Sept. 29.
Consumer Prices
Consumer prices dropped an estimated 0.8 percent in September, according to the survey.
Retail sales rose 15.5 percent last month, the fastest pace since January, according to the data survey. Car sales surged 84 percent to more than 1 million units for the first time, putting China on course to overtake the U.S. this year as the biggest market for sales of new cars.
The stimulus, record lending, tax cuts and subsidies may help push China's imports 30 percent higher to $313 billion this quarter, according to Zurich-based Credit Suisse Group AG. Iron ore imports jumped to a record 64.6 million metric tons last month while copper imports rose 23 percent.
China's demand for goods from overseas can play "a critical role in some locomotive way for the world," Jim O'Neill, chief economist at Goldman Sachs Group Inc. in London, said in a Sept. 2 research note.
Loan Growth
The lending boom, equivalent to about 50 percent of China's GDP in the first half, drove public and private investment in factories and properties 33 percent higher in the first eight months, helping restore investor confidence in stocks and property after the start of the financial crisis.
The Shanghai index has soared 69 percent this year as government-influenced spending helped growth rebound from 6.1 percent in the first quarter, the slowest pace of expansion in almost a decade.
Wolfsburg, Germany-based Volkswagen, the biggest overseas carmaker in China, sold 150,000 cars last month, a monthly record, as sales for the first nine months surged 37 percent. Car sales were buoyed after the government halved sales taxes and announced 5 billion yuan in subsidies to help rural residents to buy vehicles. Volkswagen is investing 4 billion euros ($5.9 billion) to expand capacity in China through 2011.
Rio Tinto
"China is the steam engine of the world economy," Volkswagen sales chief Detlef Wittig said in a Sept. 25 interview in Frankfurt. "The lust for mobility there seems almost bottomless. We're very well positioned there and will keep investing to secure our share of the market."
Iron-ore production at London-based Rio Tinto, the world's third-largest mining company, rose 12 percent in the third quarter to a record 47.5 million tons on demand from steelmakers in China, the company said in an Oct. 14 statement.
The effect of stimulus spending will taper off starting in mid-2010; the overall impact will be less than half what it was this year, said Wang Tao, a UBS AG economist in Beijing.
On the World Bank's list for measures to reduce dependence on investment-led growth are: boosting spending on health, education and social welfare to aid low-income earners and reduce their reluctance to consume; providing greater funding for small- and medium-size enterprises; and allowing more flexibility for the yuan to appreciate, making imports cheaper.
Avoiding Instability
"Keeping the Chinese economy growing is very important for employment generation and to avoid social instability," said Yolanda Fernandez Lommen, chief China economist at the ADB in Beijing. "The easy part has been done. The real challenge is ahead."
By developing service industries and ensuring easier access to consumer products and credit, China can boost domestic consumption by $2.2 trillion, or more than France's annual output, by 2025, the McKinsey Global Institute said in an Aug. 21 report.
Some areas of the economy may emerge as new drivers of growth even as stimulus and new lending slow. Net exports may contribute 0.5 percentage point to next year's expansion after slashing more than 3 percentage points from this year's GDP rise, said UBS's Wang.
A rebound in property construction, which contributes about a quarter of urban fixed-asset investment, will also pick up some of the slack in 2010, said Wang. Property sales jumped 73.4 percent in the first nine months of 2009 from a year earlier to 2.75 trillion yuan.
China may still have to get used to a lower average annual growth rate as reduced demand from Western nations slows exports. The World Bank estimates 2 percentage points may be shaved off the average 10 percent yearly growth recorded over the past decade, the ADB envisions a trajectory of 8 percent to 9 percent and Pettis says the economy may have to adjust to a trend growth rate of 5 percent to 7 percent.
"The government has been postponing the difficult and painful reforms," said Fernandez Lommen. "It's a huge task ahead."
INVESTMENT VIEW
Sugar-Sweet And Smiling
Sugar inventories are likely to fall to an all time low of 1.3 months of forward demand in SY10; this is despite an assumed 30% rebound in sugar production and an unprecedented 3mt of imports notwithstanding. The tight demand supply should last well into SY11; UP based players are best bets in the up cycle given strong leverage to sugar prices. Bajaj Hindustan, Balrampur Chini, Dhampur and Shree Renuka Sugars will OUTPERFORM.
Sugar-Sweet And Smiling
Sugar inventories are likely to fall to an all time low of 1.3 months of forward demand in SY10; this is despite an assumed 30% rebound in sugar production and an unprecedented 3mt of imports notwithstanding. The tight demand supply should last well into SY11; UP based players are best bets in the up cycle given strong leverage to sugar prices. Bajaj Hindustan, Balrampur Chini, Dhampur and Shree Renuka Sugars will OUTPERFORM.
India's tightest sugar demand-supply
Expect India's sugar production to rebound 30% to 19mt in SY-Sept-10 after falling 44% in SY09 underpinned by a 0.5m ha increase in cane acreage (the second highest YoY increase ever) and a 90bps rise in sugar recoveries to 10.1%.
Increased imports of 3mt (an all time high) on the back of the recent decision of the government to allow duty free imports.
Sugar inventories will continue to fall, nonetheless, to 2.6mt by Sep-10. At only 1.3 months of forward demand, this will be its lowest level in the last three decades.
Demand-supply will remain tight in SY11 as well implying a 24-30 month up-cycle.
Stronger balance sheets
The last down-cycle had dented investor confidence but this was accentuated by rapid expansions and the resultant higher capital charges (depreciation, interest).
With the companies out of the capex cycle and profitability rebounding, free cash flow should rise and balance sheets will get stronger; the net debt/ equity for the main Sugar players of UP will fall to 50% by SY11.
Further, by-product integration projects would also reduce future cyclicality.
Sugar gross margins to rise above Rs8/kg
The tight demand-supply should reflect in higher sugar prices but the underlying cyclicality is reflected more in sugar gross margins (sugar price – cane costs).
This allows the players to pass on higher cane costs in an up-cycle; this should dampen the impact of irrational cane cost increases over the next two years.
Consequently, normative margins will rise to Rs8/kg in SY10; this is 15-20% higher than the previous up cycle given the tighter demand-supply.
(Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.)
FUNDS DATA
| FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores) | ||||
| Category | Date | Buy Value | Sell Value | Net Value |
| FII | 20-Oct-2009 | 3079.01 | 2803.12 | 275.89 |
| DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores) | ||||
| Category | Date | Buy Value | Sell Value | Net Value |
| DII | 20-Oct-2009 | 1195.77 | 1336.57 | -140.8 |
SPOT LEVELS
 | 5114.45 | ( -0.53 %) | -27.35 |  |
| 1 | 2 | 3 | ||
| Resistance | 5163.38 | 5212.32 | 5242.68 | |
| Support | 5084.08 | 5053.72 | 5004.78 | |
 | 17223.01 | ( -0.59 %) | -103.00 | | |
| 1 | 2 | 3 | |||
| Resistance | 17391.83 | 17560.66 | 17664.05 | ||
| Support | 17119.61 | 17016.22 | 16847.39 | ||
--
Arvind Parekh
+ 91 98432 32381
