Global recovery hopes are a weakening a bit with the release of a slew of data on Thursday which pointed to a weaker global demand led by slower growth in China.
Figures showed manufacturing output slowing across large parts of the world, posing further challenges to leading economies as they attempt to shore up shaky fiscal positions without falling back into recession, Financial Times reported.
The overall level of factory activity still suggested production was expanding but at a more moderate rate than in recent months.
Last weekend s G20 meeting in Toronto was marked by concern in some quarters, notably the US, that overly rapid fiscal tightening would deprive the global economy of much-needed domestic demand. Some economists are concerned that with monetary policy in the US and western Europe reaching the limits of what it can do, the weakness of demand risks letting the world economy slide back into recession.
Figures for the US also suggested the economy was losing impetus in spite of being well short of its productive capacity and receiving unprecedented support from monetary and fiscal policy. The Institute for Supply Management s manufacturing index fell from 59.7 in May to 56.2 in June, a much larger drop than most economists had predicted. Although any reading above 50 indicates an expansion in manufacturing activity, this is now the second consecutive monthly drop in the index.
POINTERS
RBI may hike bank rates again
Reserve Bank of India (RBI) has raised bank repo and reverse repo rates by 25 basis points in a move intended to curb inflation. This may be followed up with further rate hikes on July 27, given concerns about inflation above 10 percent, Reuters reported.
On an assessment of the current macroeconomic situation, RBI has decided to increase the repo rate and reverse repo rate under the Liquidity Adjustment Facility (LAF) by 25 basis points from 5.25% to 5.50% with immediate effect.
China's soybean imports to surge
Soybean imports by China, the world s biggest buyer, may be more than 50 million metric tons next year, driven by rising wealth as rural inhabitants move into cities, said the head of a U.S. industry group. Imports of 50 million might even be conservative, Phillip Laney, the China country director for the U.S. Soybean Export Council, said yesterday in an interview at a conference in Ho Chi Minh City. It isn t going to be 60 million, but it could be 51 or 52.
Govt to allow market pricing of diesel
The government will allow market pricing of diesel, Prime Minister Manmohan Singh said on Tuesday, signalling his resolve to push bold reforms despite strong protests from political allies and opposition parties.Last week, the government allowed market prices for petrol and said diesel may also be freed in the future, to bolster the government's finances and open up a key sector long dominated by state-run institutions.
Singh's comments showed his commitment to a policy that has made his own political allies uncomfortable as it would hurt farmers, raise transport costs and further stoke inflation already in double-digit, putting pressure on the Reserve Bank of India (RBI) to quicken the pace of monetary tightening.
India for sweeping overhaul of commodity derivates
The government is considering a sweeping overhaul of commodity derivatives, looking to kindle more interest in the market with new products such as futures and options on weather and allowing investors to hedge against rainfall and other meteorological risks.
A fresh Cabinet note has been circulated to garner views of various ministries and departments, said an official familiar with the matter, adding that the government will also look at strengthening commodities regulator Forward Markets Commission (FMC).
Food inflation falls on low base effect
Food inflation eased to its slowest annual growth this year, mainly on account of a low base and helped by a drop in price levels of pulses, fruits and milk, Government data on Thursday showed. The food price index increased 12.92 per cent in the year to June 19, sharply lower than the previous week's annual rise of 16.9 per cent.
The year-on-year surge in pulses slowed to 32 per cent on an annual basis from over well over 34 per cent the previous week, fruits registered a 9 per cent growth (as against 14 per cent the previous week) and milk at 16 per cent (21 per cent). Week-on-week, however, the wholesale price index for food articles inched up 0.3 per cent, driven by higher inflation in items such as potatoes and onions, indicating that food inflation is still on the boil.
India coffee exports surge 49%
India s coffee exports surged 49 per cent in the first six months of the year to 153,000 tonnes on the back of higher domestic output, according to Coffee Board data. The country had exported 103,000 tonnes in the same period last year.
India to create 570 mn jobs in next 5 years
The UPA government has announced an estimated 2.5 per cent annual growth in employment and a possibility of creating 570 million jobs over the next five years, if an economic growth rate of 9 per cent is maintained.The present work force in the country is estimated to be 520 million.
The report on employment a first in a series of annual reports promised by the Centre is pitching for equity and inclusion of the majority of the workforce who are in the unorganised sector. It also seeks for an increase in the share of the organised sector in the total employment of India particularly in the manufacturing and service sectors.
Isabgul seed top performer in NMCE
Isabgul seed (psyllium seed), produced and traded largely in Unjha (Gujarat) and bordering areas of Rajasthan, has suddenly emerged as the top performer on the Ahmedabad-based National Multi Commodity Exchange Ltd (NMCE).
NMCE launched isabgul seed futures on February 13, 2006. The Unjha-centric traders had never actively used the exchange platform. Still, the commodity, with three active contracts on the NMCE platform, was first included in the list of top 10 traded commodities between May 1-15, according to data compiled by the commodity market regulator, the Forward Markets Commission (FMC).
Bullion
Spot Gold prices declined sharply towards the end of the week touched a low of $1186/oz. Gold prices have rallied this year gained around 12% on a year-to-date basis. Inevitable profit booking at higher levels exerted pressure on the yellow metal prices. The global economic situation continues to remain bleak. The global equity markets tumbled last week as poor economic data from the larger economies decreased the investor appetite towards riskier investments. Economic data from the US indicated that pending home sales decreased by 30% in May as against a previous increase of 6%. This was the biggest decline in a month since 2001.
The ISM Manufacturing PMI also declined to 56.2 in June from 59.7 in the earlier month, indicating slower manufacturing activity. Moreover, unemployment claims in the US climbed by 13,000 to reach 472,000 in the last week. Slow manufacturing growth in China also weighed on the sentiment. Spain was successful in raising 3.5 billion euros last week, helping to ease concerns amongst the investors. However, the average yield on the bonds increased as Moody s investors said that it may cut Spain s ratings by two grades after reviewing its status. Spain faces 24.7 billion euros of debt redemptions this month. In the coming week, gold prices are expected to remain under pressure on the back of mixed sentiments in the financial markets. Strength in the DX will also make gold look unattractive for holders of other currencies. Negative economic data from the US has led to doubts over economic progress in the world s largest economy. Concerns and negative sentiments are expected to lead to lower risk appetite among investors. For the coming week, Spot gold has a strong support at $1175/$1155 levels and resistance at $1250/$1280 levels. MCX August Gold has a strong support at Rs.18250/Rs.18000 levels and resistance at Rs.18860/Rs.19220 levels.
Base Metals
Base metal prices declined on the LME last week as poor economic data from the major economies weighed on the metal prices. However, the metal prices conquered some part of the lost territory on the back of the weakness in the US dollar index (DX). Economic data indicated that manufacturing activity is slowing down, having a negative impact on the metal prices. This factor would lead to lower demand for the base metals, thus hurting prices. China announced that its manufacturing activity slowed for a second consecutive month in June.
The Asian tiger said that its manufacturing PMI declined to 52.1 in June from the previous figure of 53.9 in May. The US Manufacturing PMI also declined to 56.2 in June from 59.7 in the earlier month. UK s manufacturing index declined to 57.5 in June from a previous figure of 58.0 in May. For the coming week, we expect the DX to rebound this week as risk aversion in the financial markets may increase demand for the currency as a safe-haven. This factor will exert pressure on the metal prices. Moreover, economic updates also are not very supportive for the metal prices, which would act as a bearish factor for the metal prices. MCX June Copper shall find a strong support at 295/285 levels and resistance at 317/325 levels for the coming week.
Energy
Crude oil prices fell drastically on the Nymex towards the end of the week, Poor manufacturing data from the large economies weighed on the crude oil prices. Slow manufacturing may lead to lower demand, which in turn can hurt prices. On the hurricane front, Alex missed the crucial Gulf of Mexico region, avoiding any disruptions in the production activities. Crude inventories declined by 2 million barrels in the last week. In the short-term, we do not expect a sharp rise in crude oil prices on account of ongoing economic concerns. Slow manufacturing growth in economies like US, China and the UK further reiterates concern over demand for crude oil. But at the same time, crude oil inventories in the US are now witnessing a moderate decline. Also, the hurricane season in the US is expected to be above-average this year. On the back of this, some support to crude oil prices will remain but a sharp rise in the commodity will be capped due to slowdown in manufacturing in world s major economies. MCX July Contract shall find a strong support at 3310/3250 levels and resistance at 3620/3710 levels for the coming week. NYMEX August Crude has support around $69.00/$67.50 levels whereas resistance is seen around $75.40/$78.00 levels.
Figures showed manufacturing output slowing across large parts of the world, posing further challenges to leading economies as they attempt to shore up shaky fiscal positions without falling back into recession, Financial Times reported.
The overall level of factory activity still suggested production was expanding but at a more moderate rate than in recent months.
Last weekend s G20 meeting in Toronto was marked by concern in some quarters, notably the US, that overly rapid fiscal tightening would deprive the global economy of much-needed domestic demand. Some economists are concerned that with monetary policy in the US and western Europe reaching the limits of what it can do, the weakness of demand risks letting the world economy slide back into recession.
Figures for the US also suggested the economy was losing impetus in spite of being well short of its productive capacity and receiving unprecedented support from monetary and fiscal policy. The Institute for Supply Management s manufacturing index fell from 59.7 in May to 56.2 in June, a much larger drop than most economists had predicted. Although any reading above 50 indicates an expansion in manufacturing activity, this is now the second consecutive monthly drop in the index.
POINTERS
RBI may hike bank rates again
Reserve Bank of India (RBI) has raised bank repo and reverse repo rates by 25 basis points in a move intended to curb inflation. This may be followed up with further rate hikes on July 27, given concerns about inflation above 10 percent, Reuters reported.
On an assessment of the current macroeconomic situation, RBI has decided to increase the repo rate and reverse repo rate under the Liquidity Adjustment Facility (LAF) by 25 basis points from 5.25% to 5.50% with immediate effect.
China's soybean imports to surge
Soybean imports by China, the world s biggest buyer, may be more than 50 million metric tons next year, driven by rising wealth as rural inhabitants move into cities, said the head of a U.S. industry group. Imports of 50 million might even be conservative, Phillip Laney, the China country director for the U.S. Soybean Export Council, said yesterday in an interview at a conference in Ho Chi Minh City. It isn t going to be 60 million, but it could be 51 or 52.
Govt to allow market pricing of diesel
The government will allow market pricing of diesel, Prime Minister Manmohan Singh said on Tuesday, signalling his resolve to push bold reforms despite strong protests from political allies and opposition parties.Last week, the government allowed market prices for petrol and said diesel may also be freed in the future, to bolster the government's finances and open up a key sector long dominated by state-run institutions.
Singh's comments showed his commitment to a policy that has made his own political allies uncomfortable as it would hurt farmers, raise transport costs and further stoke inflation already in double-digit, putting pressure on the Reserve Bank of India (RBI) to quicken the pace of monetary tightening.
India for sweeping overhaul of commodity derivates
The government is considering a sweeping overhaul of commodity derivatives, looking to kindle more interest in the market with new products such as futures and options on weather and allowing investors to hedge against rainfall and other meteorological risks.
A fresh Cabinet note has been circulated to garner views of various ministries and departments, said an official familiar with the matter, adding that the government will also look at strengthening commodities regulator Forward Markets Commission (FMC).
Food inflation falls on low base effect
Food inflation eased to its slowest annual growth this year, mainly on account of a low base and helped by a drop in price levels of pulses, fruits and milk, Government data on Thursday showed. The food price index increased 12.92 per cent in the year to June 19, sharply lower than the previous week's annual rise of 16.9 per cent.
The year-on-year surge in pulses slowed to 32 per cent on an annual basis from over well over 34 per cent the previous week, fruits registered a 9 per cent growth (as against 14 per cent the previous week) and milk at 16 per cent (21 per cent). Week-on-week, however, the wholesale price index for food articles inched up 0.3 per cent, driven by higher inflation in items such as potatoes and onions, indicating that food inflation is still on the boil.
India coffee exports surge 49%
India s coffee exports surged 49 per cent in the first six months of the year to 153,000 tonnes on the back of higher domestic output, according to Coffee Board data. The country had exported 103,000 tonnes in the same period last year.
India to create 570 mn jobs in next 5 years
The UPA government has announced an estimated 2.5 per cent annual growth in employment and a possibility of creating 570 million jobs over the next five years, if an economic growth rate of 9 per cent is maintained.The present work force in the country is estimated to be 520 million.
The report on employment a first in a series of annual reports promised by the Centre is pitching for equity and inclusion of the majority of the workforce who are in the unorganised sector. It also seeks for an increase in the share of the organised sector in the total employment of India particularly in the manufacturing and service sectors.
Isabgul seed top performer in NMCE
Isabgul seed (psyllium seed), produced and traded largely in Unjha (Gujarat) and bordering areas of Rajasthan, has suddenly emerged as the top performer on the Ahmedabad-based National Multi Commodity Exchange Ltd (NMCE).
NMCE launched isabgul seed futures on February 13, 2006. The Unjha-centric traders had never actively used the exchange platform. Still, the commodity, with three active contracts on the NMCE platform, was first included in the list of top 10 traded commodities between May 1-15, according to data compiled by the commodity market regulator, the Forward Markets Commission (FMC).
Bullion
Spot Gold prices declined sharply towards the end of the week touched a low of $1186/oz. Gold prices have rallied this year gained around 12% on a year-to-date basis. Inevitable profit booking at higher levels exerted pressure on the yellow metal prices. The global economic situation continues to remain bleak. The global equity markets tumbled last week as poor economic data from the larger economies decreased the investor appetite towards riskier investments. Economic data from the US indicated that pending home sales decreased by 30% in May as against a previous increase of 6%. This was the biggest decline in a month since 2001.
The ISM Manufacturing PMI also declined to 56.2 in June from 59.7 in the earlier month, indicating slower manufacturing activity. Moreover, unemployment claims in the US climbed by 13,000 to reach 472,000 in the last week. Slow manufacturing growth in China also weighed on the sentiment. Spain was successful in raising 3.5 billion euros last week, helping to ease concerns amongst the investors. However, the average yield on the bonds increased as Moody s investors said that it may cut Spain s ratings by two grades after reviewing its status. Spain faces 24.7 billion euros of debt redemptions this month. In the coming week, gold prices are expected to remain under pressure on the back of mixed sentiments in the financial markets. Strength in the DX will also make gold look unattractive for holders of other currencies. Negative economic data from the US has led to doubts over economic progress in the world s largest economy. Concerns and negative sentiments are expected to lead to lower risk appetite among investors. For the coming week, Spot gold has a strong support at $1175/$1155 levels and resistance at $1250/$1280 levels. MCX August Gold has a strong support at Rs.18250/Rs.18000 levels and resistance at Rs.18860/Rs.19220 levels.
Base Metals
Base metal prices declined on the LME last week as poor economic data from the major economies weighed on the metal prices. However, the metal prices conquered some part of the lost territory on the back of the weakness in the US dollar index (DX). Economic data indicated that manufacturing activity is slowing down, having a negative impact on the metal prices. This factor would lead to lower demand for the base metals, thus hurting prices. China announced that its manufacturing activity slowed for a second consecutive month in June.
The Asian tiger said that its manufacturing PMI declined to 52.1 in June from the previous figure of 53.9 in May. The US Manufacturing PMI also declined to 56.2 in June from 59.7 in the earlier month. UK s manufacturing index declined to 57.5 in June from a previous figure of 58.0 in May. For the coming week, we expect the DX to rebound this week as risk aversion in the financial markets may increase demand for the currency as a safe-haven. This factor will exert pressure on the metal prices. Moreover, economic updates also are not very supportive for the metal prices, which would act as a bearish factor for the metal prices. MCX June Copper shall find a strong support at 295/285 levels and resistance at 317/325 levels for the coming week.
Energy
Crude oil prices fell drastically on the Nymex towards the end of the week, Poor manufacturing data from the large economies weighed on the crude oil prices. Slow manufacturing may lead to lower demand, which in turn can hurt prices. On the hurricane front, Alex missed the crucial Gulf of Mexico region, avoiding any disruptions in the production activities. Crude inventories declined by 2 million barrels in the last week. In the short-term, we do not expect a sharp rise in crude oil prices on account of ongoing economic concerns. Slow manufacturing growth in economies like US, China and the UK further reiterates concern over demand for crude oil. But at the same time, crude oil inventories in the US are now witnessing a moderate decline. Also, the hurricane season in the US is expected to be above-average this year. On the back of this, some support to crude oil prices will remain but a sharp rise in the commodity will be capped due to slowdown in manufacturing in world s major economies. MCX July Contract shall find a strong support at 3310/3250 levels and resistance at 3620/3710 levels for the coming week. NYMEX August Crude has support around $69.00/$67.50 levels whereas resistance is seen around $75.40/$78.00 levels.
