Effects of fresh quake in Japan to result in soft opening for Indian stocks: Friday Market Preview

The US markets ended lower on Thursday but displaying resilience, markets in Asia were mostly higher despite the latest quake in Japan

The local market is likely to open soft this morning as effects of a fresh 7.1 magnitude, which had its epicentre in the sea off the northeast coast of Japan on Thursday, rattled markets worldwide. US markets ended lower on Thursday following the news and as a difference in opinion over the federal budget threatened to shut down some government offices. The Asian pack was mostly higher in early trade on the last trading day of the week taking the Japanese earthquake news in its stride. A hike in interest rates by the European Central Bank (ECB) on Thursday, the first in almost three years, also weighed on investors in Asia. The SGX Nifty was five points down at 5,897 compared to its previous close of 5,902.

Yesterday the market opened flat, tracking the mixed bias in the Asian region. The Sensex opened at 19,621, nine points up from its previous close, while the Nifty shed three points at the opening at 5,989. Profit booking amid a fair degree of choppiness ensured that the indices stayed in the negative for the entire morning session. The market touched the day's low at around 10.30am, with the Sensex retracing 75 points to 19,537, its intra-day low, and the Nifty touched 5,866, down 26 points.

The market inched its way up, and was back into the green at around 12.50pm. However, continued fluctuations saw the indices popping in and out of the red quite a few times. The benchmarks scaled their intra-day highs at 2pm, but could not sustain those levels on continued volatility. At the day's high, the Sensex touched 19,665 and the Nifty was at 5,906. The market closed in the red for the third day in a row, the Sensex falling by 21 points to 19,591 and the Nifty erasing six points to close at 5886.

The market is moving in a tight range after the recent rally. It has to break above the recent highs for the rally to continue. If not, the market will give up some of the recent gains.

US markets closed lower on news of the latest earthquake hitting northeast Japan. However, stocks ended off the day’s lows on positive economic news, which also offset concerns about the debt problems in the Euro zone. Initial jobless claims fell more-than-expected last week. Initial claims for state unemployment benefits slipped 10,000 to a seasonally adjusted 382,000, the Labor Department said. The previous week’s figure was revised up to 392,000 from the earlier figure of 388,000. A rise in same store retail sales lifted stocks like Costco Wholesale, Limited Brands and Kohl’s.

Meanwhile, the ECB on Thursday increased its benchmark rate by a quarter percentage point to 1.25% and said that it would resort to more hikes, if needed.

The Dow fell 17.26 points (0.14%) to 12,409.49. The S&P 500 shed 2.03 points (0.15%) to 1,333.51 and the Nasdaq was down 3.68 points (0.13%) to 2,796.14.

Markets in Asia were mostly higher in early trade on Friday as investors brushed aside news of the latest earthquake. Northeastern Japan was rocked by a magnitude 7.1 earthquake, the biggest since 11th March, causing widespread power outages through the north, shaking buildings in Tokyo and putting the country on alert for the safety of its nuclear power plants. The 0.25% hike in key benchmark rates by the ECB also raised concerns about lower spending in Euro zone nations.

The Shanghai Composite gained 0.17%, the Hang Seng rose 0.36%, the Jakarta Composite advanced 0.22%, the Nikkei 225 surged 0.91%, the Straits Times added 0.05%, the Seoul Composite rose 0.41% and the Taiwan Weighted was up 0.05%. On the other hand, the KLSE Composite shed 0.06% in early trade.

Back home, global banking giant StanChart yesterday projected India’s economic growth to slow down to 8.1% in 2011-12 in view of continuing inflationary pressure and high interest rates.

StanChart said that although private consumption has been on an upswing, the growth in investments has been hit by inflation, higher interest rates and increased risk in the area of governance like the recent political confrontations due to various scams

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