Mixed Global Cues To Act On The Markets Today

Since last week, the US markets have been extremely nervous about prospective action by the Federal Reserve. Post its meeting, and comments from Ben Bernanke, it appeared that the Fed would taper down its USD 85 billion bond-buying programme. So far, the markets had been touching multi-year highs because of the stimulus provided by Quantitative Easing.

Since then, the sensitivity of the markets to comments by various honchos of the Fed has increased manifold. Yesterday, Fed Bank of Kansas City President Esther George cancelled her speech to be delivered in New Mexico. However, her prepared remarks were in favour of the central bank cutting the size of its asset purchase programme.

Questions over the continuation and quantum of the monetary easing have been creating tremendous volatility in the US markets. This has also been showing its effect in global markets.

While the US has been getting excessively jittery, Europe has been rather optimistic. Data from Spain indicated the number of people filing for jobless claims dropped by 2% in May 2013, the lowest level since December 2012. This data came in right after Spain’s manufacturing Purchasing Managers’ Index (PMI) climbed to a two-year high. At the same time, the Markit/CIPS construction PMI for the UK rose to 50.8 in May 2013, reaching its highest level since October 2012. All of these factors have brought about a new wave of optimism in Europe.

In Asia-Pacific, HSBC reported China’s Services Business Activity Index at 51.2 in May 2013, over 51.1 in April 2013. Although the level has inched up a little, it remains one of the lowest readings in the series history. The Australian GDP also managed to miss expectations as it clocked 0.6% in the quarter ending March 2013. These factors have led to a weak opening in this geography.

So, it’s positive in Europe and negative in the US and in Asia. How do we expect India to fare today?

Yesterday, the sentiment was weak. However, the Indian markets started on a positive note. However, trades started to turn negative as the day passed and the markets ended lower by 0.33%. But the Nifty yet managed to hold its crucial support level of 5910 and managed to close above that.

Overall, the global mood doesn’t seem to be too optimistic. Markets are expected to see a choppy opening today. However, its movement ahead in the day will define how the trend is. If it is not able to sustain its crucial support level, a heavy downfall can be expected.