The S&P 500 has seen return on equity up six quarters to 23% (it may reach 27% next year, the highest annual level since 2000), but companies are yet to reap the benefits in their stock valuations.
US markets closed marginally lower on Monday while the Asian pack was in the red in early trade today as investors focussed on economic recovery
The Indian market is likely to open lower on unsupportive global cues and cautiousness ahead of the Reserve Bank of India’s announcement of the monetary policy for 2011-12. Markets in Asia were lower in early trade on Tuesday and US markets closed marginally lower overnight on profit booking after eight consecutive sessions of an upmove. The SGX Nifty was down 27.50 points to 5,691.50 against yesterday’s close of 5,719.
As expected the market fell on Monday for a sixth consecutive day. Both the Nifty and the Sensex have fallen for six days in a row. In the last six days, the Sensex declined 604 points and the Nifty lost 183 points.
In the past, when markets have fallen for six days in a row, what has been the outcome on the seventh day? In the period between July 1990 and 2nd May 2011, the Sensex has fallen for six days in a row on 79 occasions (excluding the current drop). Out of the past 79 instances, the market turned positive 42 times on the seventh trading day, while 37 times it continued in the negative. It's really a toss of a coin. A rally above 5,775, which was Monday's high, would be positive.
The US markets closed marginally lower on Monday on profit booking after eight straight days of gains. Lower oil prices pulled down Chevron (down 1.2%) and Exxon Mobil (down 1.01%) in trade. On the other hand, Cephalon gained 4% after Teva Pharmaceutical agreed to buy the company for $6.8 billion.
In economic news, the Institute for Supply Management’s April index of manufacturing fell less than expected to 60.4 from 61.2 in the previous month. Besides, construction spending gained 1.4% in April to an annual rate of $768.9 billion, according to the Commerce Department, topping analysts’ expectations.
US crude initially slipped over 1% after the news that Bin Laden was killed, but prices later stabilised. London Brent crude fell slightly to close at $125.12 a barrel, while US light crude also fell marginally to $113.52.
The Dow fell 3.18 points (0.02%) at 12,807.36. The S&P 500 slid 2.39 points (0.18%) to 1,361.22 and the Nasdaq shed 9.46 points (0.33%) at 2,864.08.
Markets in Asia were lower in early trade on Tuesday as investors turned their attention to economic recovery. Automakers in South Korea were under pressure with shares of Kia Motors and Hyundai Motor down over 4%, dragging the Seoul market into the red.
In economic news, South Korean inflation was lower than expected in April, easing pressure on the country’s central bank to hike interest rates. However, economists said they still expected a 25 basis point rise this month. The consumer price index rose by 4.2% in April from a year ago and lower than the 29-month high of 4.7% in March. The core CPI climbed 3.2% year-on-year, down from a 3.3% rise in March.
The Shanghai Composite declined 0.55%, the Jakarta Composite fell by 0.53%, the KLSE Composite was down 0.15%, the Straits Times retraced 0.65%, the Seoul Composite tanked 1.19% and the Taiwan Weighted tumbled 1.21%. On the other hand, the Hang Seng gained 0.07%. The Japanese stock market is closed for a local holiday.
Back home, The Directorate General of Hydrocarbons (DGH) and the oil ministry were critical of Reliance for drilling only 20 out of the committed 22 wells by April 2011 while the Mukesh Ambani- run firm was of the opinion that more wells would not be able to solve the problems of falling pressure at its eastern offshore KG-D6 reservoir.
With the DGH and oil ministry trying to pin it down at the three-hour long meeting of the Management Committee that overseas operations of the Krishna Godavari basin fields, Reliance stated that more wells would only drain the same reservoir and would not help raise output.
DGH director general SK Srivastava said Reliance and its Canadian partner Niko Resources in the Field Development Plan (FDP) have committed to drill 31 wells on Dhirubhai-1 and 3 fields in the KG-D6 block by April 2012 to raise output to 80 million standard cubic meters per day.