BOJ, ECB and BOE are facing short supply of bonds, which is hampering their efforts to pump in liquidity into their economies to aid economic recovery. Data from Japan and Eurozone shows that inflation is staying down prompting fears of deflation. Latest economic figures suggest tepid economic recovery.
U.S retail sales fell more than expected in August amid weak purchase of automobiles and other range of goods. U.S industrial production fell to -0.4% from 0.6% in the preceding month, these economic factors led to diminishing expectations of Federal Reserve interest rate hike this week.
Euro zone employment reached a new post-crisis high in the second quarter of the year, it rose by 0.4% when compared with previous quarter figures and 1.4% up on Y-o-Y basis.
Japan’s core machinery order data, a highly volatile data series regarded as an indicator of capital spending in coming next six months, rose 4.8% in July when compared with previous month.
Japan’s Manufacturers order rose by 0.3% which includes steel industry, chemical manufacturing sector etc. whereas service sector orders increased by 8.6%, lead by communication sector. Although Japan posted good figures it is still surrounded by worries, due to appreciation of yen and weak demand which may discourage companies to spend on capital expenditure.
The Sensex and the Nifty fell by 0.69% and 0.98% respectively last week, due to concerns on the possibility of FOMC rate hike. However on 16th September 2016, U.S posted weak industrial data, which diminished expectations of Federal Reserve interest rate hike this week, Sensex & Nifty clawed back losses suffered during the week post the US industrial data release. Mixed Signal from the US has kept Indian equities on the edge.
The telecom sector saw the biggest consolidation deal, Reliance Communication and Maxis communication (promoters of Aircel). They agreed to merge their wireless business to form the fourth largest Telecom operator in the country. Both the companies would de-merge their wireless segment and transfer it to new unnamed entity. R-Com & Aircel would be holding 50% each in the new entity and they would hold equal number of seats in the board room. The new entity will have an asset base of approximately Rs. 650,000 million and net worth of Rs. 340,000 million. R-Com shares rose by 3% intra-day after the announcement of the deal.
HDFC Ergo General Insurance has completed acquisition of L&T General Insurance , post merger the company will become the third largest private sector non-life insurer. The new merged entity has the potential of clocking a 45% business growth this financial year.
Tata Motors is expecting a higher demand from tippers segment to offset lower demand of cargo vehicles and expects CV sales to grow at 10%-15% in FY17, despite posting lower sales figures in the previous quarter. The company is also planning a Rs. 8900 million capex spend for its JLR manufacturing unit at Castle Bromwich Plant.
IIP growth came in negative for the month of July 2016; CPI inflation fell to 5.05% in August from 6.07% seen in July. Trade numbers for August showed negative exports and imports growth. The government going ahead with the implementation of GST will ease fiscal deficit concerns for the RBI. All of this economic data released last week has the potential for a rate cut by the RBI in its 4th October 2016 policy review. But a lot hinges on what the Fed action and guidance in its policy meet.
Apple share price rose by 11.92% last week, due to positive outlook of its new flagship product sales by investors. On 15 Sep 2016, the company announced that all the initial quantities have been sold out and is working towards making the new launch available globally by end of October 2016.
Samsung share price has fallen by 7.8% which wiped off $14.3 billion market capitalisation after recalling their smartphone (Galaxy Note 7) due to the risk of the handset burning into flames. The sharp fall in share price was triggered after U.S Aviation authorities banned travelers to carry the Note 7 smartphone with them.
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Industry and Stock Specific trends
The sectoral indices closed in negative territory last week. The S&P Bankex, Auto,IT, PSU and Oil & Gas indices lost 2.22%,1.86%, 2.19%, 2.84% and 0.90% respectively in the last week.
Yes Bank continued to witness rise in turnover and open interest in the stock futures segment. The Stock price of Yes Bank fell 8% in the last week.The Bank withdrew the Qualified Institutional Placement offer of USD 1 billion which was launched in the week before the last. Volatility in the market price of the stock was blamed for the withdrawal of the offer by the management of the Bank
USD remained highly volatile during last week on the changing expectation for a rate hike by the Federal Reserve in its upcoming policy meet scheduled this week. The comment made by a Federal Reserve official on Monday sparked fresh uncertainty over the timing of future rate hikes. However, better-than-expected U.S. inflation data released on Friday boosted the expectation for the rate hike and sparked a rally in USD which helped USD to post weekly gain against major currencies. USD Index (DXY), which tracks the movement of the USD against six major currencies, gained by 0.81% week on week and closed at levels of 96.11.
Indian Rupee depreciated by 0.46% against the USD and remained flat against the Euro, Chinese Yuan appreciated by 0.15%.