Japan learns to slow down

The country's companies are actually learning to profit from deflation.

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Will the contagion spread?

Risk analysts fear that Egypt's uprising may set off escalating protests in Saudi Arabia.

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Tuesday’s Market Preview: Flat-to-positive start in Sensex and Nifty

The local market is likely to witness a flat-to-positive opening today, tracking global cues. The US markets closed with modest gains overnight on positive economic data, brushing aside worries arising from the Egyptian crisis. The Asian pack was in the positive territory in early trade on Tuesday on improved earnings outlook and higher commodity prices, which boosted commodity-related shares. The SGX Nifty was up 0.50 points at 5,525 from its earlier close of 5,524.50.

The market opened with a deep cut yesterday, worried that the strife in Egypt could have global repercussions, impacting trade and commerce. Analysts opined that early losses in the domestic market were the result of offloading of funds by foreign investors. However, after 2.30pm, strong buying took the Nifty into the positive territory (the day's high was 5,527). The Sensex closed 68 down at 18,328 while the Nifty was down six at 5,506. The Sensex is making lower highs and making new lows, but this spell will be broken soon.

Markets in the US closed with modest gains on Monday on the back of positive economic data and earnings numbers. Consumer spending rose more-than-expected in December. Purchases, accounting for about 70% of the economy, increased 0.7% after climbing 0.3% in the previous month, Commerce Department figures showed. Incomes increased for a third month, and the Federal Reserve’s preferred measure of inflation advanced at the slowest pace on record. 

The Institute for Supply Management-Chicago Inc said its business barometer rose to 68.8 in January. Figures greater than 50 signal expansion. Economists had predicted that the measure would slip to 64.5.

Brent crude, which crossed $100 a barrel for the first time since 2008, boosted energy companies. Exxon gained 2.1% as the company posted its fourth consecutive quarterly profit increase as burgeoning energy demand boosted oil and fuel prices. Massey Energy jumped 9.8%, after Alpha Natural Resources said it had entered into a pact to buy the rival coal company for $7.1 billion in cash and stock. However Intel Corporation closed flat after cutting its first-quarter revenue forecast by $300 million due to costs for correcting a design flaw in one of its chips.

The Dow advanced 68.23 points (0.58%) to 11,891.93. The S&P 500 gained 9.78 points (0.77%) to 1,286.12 and the Nasdaq rose 13.19 points (0.49%) to 2,700.08.

Spurred by the economic optimism in the US, markets in Asia were seen with modest gains in early trade on Tuesday. Higher commodity prices supported commodity-related stocks in the region. Meanwhile, China’s factories witnessed a marginal decline in January following monetary tightening measures, but input prices rose quickly, keeping the pressure on the government to tackle inflation despite easing growth.

The official purchasing managers’ index fell to 52.9 in January from 53.9 in December, the China Federation of Logistics and Purchasing said on Tuesday. The reading was the lowest in five months and below analysts’ forecast. On the other hand, input prices jumped to 69.3 from 66.7 in December, suggesting that inflationary pressure was still on the rise. Besides, good earnings reports from Honda and Hitachi supported the Japanese market.

The Hang Seng gained 0.21%, the Jakarta Composite surged 0.95%, the Nikkei 225 gained 0.34%, the Straits Times rose 0.45%, the Seoul Composite advanced 0.59% and the Taiwan Weighted was up 0.47%. On the other hand, the Shanghai Composite was down 0.05% in early trade.

Brent crude on the ICE futures exchange ended up $1.59, or 1.6%, at $101.01 a barrel on Monday, the highest settlement since 26th September 2008. The Brent contract was the first major benchmark to break the key $100-a-barrel threshold in more than two years. Light, sweet crude for March delivery closed up $2.85, or 3.2%, at $92.19 a barrel on the New York Mercantile Exchange, the highest settlement since 3rd October 2008.

Back home, the government’s fiscal deficit narrowed by 44.75% year-on-year to Rs1.71 lakh crore during the first three quarters of the current fiscal on the back of better-than-expected revenue from the sale of spectrum and robust tax collections. The fiscal deficit stood at Rs3.10 lakh crore in the corresponding period FY10.

The sharp fall in the fiscal deficit was also due to the fact that despite the enhanced flows to the central exchequer, there was not a commensurate increase in government’s expenditure and the RBI has blamed this for the present cash crunch in the system.
 

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