Equities On A Roll

2013 has been rather good for equities, in fact, extremely good for equities (so far). The S&P is up 8.3% so far and the Dow is ahead by 9.4%. Globally, there has been a combination of positive economic data and monetary policy action that has been pushing markets upwards. The same set of reasons applies to this week’s movement as well. The week was a host to a series of cues from across the globe. Similarly, yesterday too was action-packed.

Yesterday’s data release in the US had a mixed outcome but equities continued their upward movement and hit record for third day. Jobs data came in positive as continuing jobless claims were below expectations at 3,094,000 and initial jobless claims were lower than the previous reading at 340,000. On the flipside was the trade balance in the US which widened from USD 38.1 billion to USD 44.5 billion. The lion’s share in this widening was that of the sharp increase in imports of petroleum.

In Europe, markets saw an upside as the ECB (European Central Bank) held its main refi rate at 0.75%. At the same time, BoE (Bank of England) too kept rates unchanged at a record low of 0.5% and made no changes to its asset purchase programme, as widely expected. This had European indices seeing gains in the range of 0.18% and 0.54%.

In Asia, the opening has been positive. Japan has been particularly quick at its climb today with gains of 1.88%. Japan’s Cabinet Office revised its GDP for the period October to December 2012 to show an annualised growth of 0.2%. This reading has turned the situation around from the preliminary reading which showed a contraction of 0.4%. Meanwhile, the Finance Ministry in Japan showed that the trade deficit had widened further from December 2012’s 567.6 billion yen to 1.479 trillion yen in January 2013. This has heavily (and negatively) impacted the yen, causing a massive upward movement in Japanese equities.

Just in is data from China that has shown a surplus in its trade balance. Markets had been expecting a trade deficit due to seasonal weakness from the week-long Chinese Lunar New Year holiday. The surplus has summed up to USD 15.3 billion although it has narrowed from January’s USD 29.15 billion.

Domestically, movement in the markets has been caused by strong global cues. Yesterday, markets were range-bound for about three-fifths of the day. A strong upward movement was seen right after which took the markets higher by 0.84%.

Owing to a positive reaction from the US over economic data, status-quo in Europe and England over key rates and better-than-expected trade data from China, the Indian markets are likely to see another day with a positive opening.