Fed’s Stern Message May Trip Markets

On Thursday Indian markets showed some resilience in the as global cues improved to some extent as shock of Volkswagen has somehow subdued on Thursday and domestic markets were now looking forward to big Tuesday when RBI would announce its bimonthly monetary review. As markets were expecting at least 25 basis point cut in the key interest rates, benchmark Sensex and Nifty made a sharp rebound during the last hour trade and bounced back from as low as 25693 points to 25863 points, jumping 0.16%, while Nifty also showed the strength and held 7800 points level strongly to close at 7868 points at the end of the week, a gain of 0.29%.  Positive thing was that all sector indices also showed optimism and closed in green.

Though Indian markets were closed in Friday, European markets were trading in a positive note. Interestingly whole of the Europe seemed optimistic about the recently released macro economic data and shun the concern around Volkswagen fiasco. European markets has consolidated the gains on Friday as Germany’s DAX gained whooping 260 points, while FTSE, CAC40, EuroNext 100 gained 147 points, 133 points and 25 points respectively.

Unlike the European markets, US markets were a mixed bag as major US markets remained in the positive territory as the confusion over Federal Reserve action has now slowly disappearing as Chair Janet Yellen has given clear indication that Fed will increase interest rates by December, though few others showed a persistent decline. US Q2 GDP data also remained at 3.9% versus an earlier estimate of 3.7%, which helped indices to post decent gain. Importantly US indices opened quite robust on Friday but weakened a little in the end but still managed to post gain. Dow Jones industrial average gained 0.70% on Friday trading to close at 16314 points, while, S&P 100 and Nasdaq declined 0.05% and 0.85% respectively on the weekend trade.

At the start of the week on Monday Asian Indices showed a subdued reaction. During the morning trade Japan’s Nikkei 225 was trading at 0.49 percent low on the heels of negative cues coming from west regarding US Federal action. SSE composite and STI too trading quite soberly with decline of 0.36% and 1.17% respectively. Hong Kong’s Hang Seng, though was closed due to Autumn break.

Pre-market benchmark index SGX Nifty depicting Indian market was also trading low with 0.41 percent decline. Taking this as an indication, Indian markets may also open on the a negative note as Federal Reserve strong signal may also annul the hope of a crucial rate cut by RBI on Tuesday.