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- I think both the US and Russia are taking it a bit too far now, but then I fail to understand what’s new as this has been going on for many years now. US has announced a series of fresh sanctions and penalties against Russia and as a retaliatory measure Moscow stock exchange has halted USD and Euro trading
- Mind it, Russia happens to be the current BRICS president and the trade block that started with 5 members and currently has over 11. The entire block is already pressing for de dollarisation and this move comes in on the heels of a monumental trade agreement where the group announced its decision to settle trade in native currencies. This Is going to be interesting
- All eyes are on FOMC and let me clarify at the outset that I’ve not covered FOMC announcement or the Fed statement in today’s write up beyond a stop press statement. The rates have been left unchanged and indication is that there will only be one rate cut in current year. A threadbare analysis of the same will be covered tomorrow. The CPI numbers though have given a hope to the market that September rate cut is once again back on table
- My few questions – when did the September cut get lifted off the table because according to me it was always on. Why are the markets rejoicing that the inflation numbers are down? Haven’t they been down in past as well and isn’t Fed aware about the direction? Then what was the need to warn of a rate hike by a few officials?
- The headline CPI number for May stood at 3.3% vs. projection of 3.4%, while the core CPI that was projected at 3.5% has come at 3.4%. The numbers in a way have changed the entire narrative as there is a sharp decline in treasury yields. The 10y dropped 15 bps to 4.25% but I can simply say – let’s wait for this to turn out to be real
- Wall street started off on a high Dow having seen a gap up opening and at day’s high trading at 325 pts before cooling off and at the time of finishing this write up was still up 70 pts. S&P touched a high of 5446 almost 70 pts up and Nasdaq also hit a lifetime high of 17677 gaining 325 pts
- On the expected lines dollar index lost big, down to 103.93, straight from 105.20; Gold managed to gain 27 dollars to close at USD 2353 but it was the silver that pulled back a bit more sharply gaining 3% to regain USD 30 mark closing at USD 30.20
- Well I still maintain the September cut is on, irrespective of what the Fed tone is, what the CPI number is and I’ve a reason to think so, exactly the same reasoning that I carried a couple of days back citing what Christine Lagarde has indicated – cutting once the ECB has given the direction and from here on leave it open for next cut
- India – I am only going to talk about equities as nifty opened 80 pts higher and scaled a new high at 23441 before finally closing the day higher by 60 pts 23323 and the a/d ratio was 2:1. Market is rallying but the element of trading fatigue is clearly evident as the market is not able to hold on to the day’s gain
- Valuations are a bit stretched and flows are shifting to other emerging economies. I think I had highlighted this a couple of weeks back but then it was without any data points but have got something to share today though not been able to vouch the authenticity from some official source
- Got these numbers y’day that in CY 2024 the FII flows are positive USD 33 bn in Japan, USD 16 bn in Korea, China got USD 12 bn and Taiwan got USD 6.5 bn. What was the allocation for India – USD 3.3 bn and that too negative. We have fundamentals on our side agreed, we still have a stable political set up, some may agree; in core ministries we still have old timers at helm but then everything has a value at a time and a place. Somewhere the markets are running ahead of times
- Initial indications on US CPI data were that nifty may manage to open in deep green and we may not only see 23500 but maybe 23600 even but it looks like the FOMC action may act as a dampener and we may see the nifty fighting a tug of war between the red and the green today. I won’t be surprised if we end in red
- Closing remarks – off the cuff – corrections are healthy for the market as they tend to weed out the weak hands and infuses the fresh blood in the market, so no harm and one shouldn’t get rattled if the market goes down. One point to note however is that in over stretched market there are deep cuts at times and in run up to the budget a deep cut can be witnessed in Indian markets. Deep cut no more means a slide below 20 or 21k but something towards 22k and worst case scenario 21800
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Vikas Miglani writes 