9 Factors That Will Shape The Markets Today

Central bank meets in Europe and employment data in the US had caught the global investment eye yesterday. Markets worldwide were nervous about these two factors. This also had an effect on the Indian markets, which saw a gradually declining trend through the day.

While the sentiment was weak yesterday, there has been a series of developments, globally and domestically and that is likely to cause a rather volatile trading session ahead.

1. In the US, ADP’s private sector report showed better-than-expected numbers on the employment front for June 2013.The data showed a gain of 180000 jobs.
2. In the US, The Labor Department data indicated a drop in initial weekly jobless claims from 348000 in the previous week to 343000 this week. Both these employment data points had the US markets rising ahead of its Independence Day holiday.
3. In Portugal, fears of the government losing majority in the parliament rose as two high-profile cabinet members resigned. This led to increased political tension and fears of instability leading to a spike in government bond yields. Investors have been pondering the possibility that Lisbon may require another bailout.
4. Tensions in Egypt rose as the deadline for Egyptian President Mohammed Morsi to resolve the country’s political crisis loomed. There was violent confrontation between Morsi’s supporters and opponents. This led to global tensions and hit investor sentiment. European stocks dropped by over 1%. Latest developments however indicate of a military coup ousting Morsi and suspending the constitution.
5. Since Federal Reserve Chairman Ben Bernanke’s expression of the intention to taper down the quantitative easing in Europe, bond yields across the globe have been on a rise. This includes those of the financially-stressed euro-zone economies, sparking fears of a deepening of the debt crisis, considering higher borrowing cost and thus difficulty in financing debts.
6. While globally, there has been mixed sentiment on account of positive data from the US and tension in the rest of the world, domestically the markets have been worrying over the rising dollar. The rupee closed yesterday at 60.22 to the dollar.
7. Adding to this worry was the fact that oil prices have been seeing appreciation. Developments in Egypt created fears of a supply crunch leading to oil futures closing above USD 101 a barrel. Prices also saw upward movement as a US report showed bigger-than-expected drop in last week’s crude supplies. This resulted in increased pressure on the Indian markets.
8. The government yesterday chose the ordinance route to launch its food security programme that will cover up to 75% of the rural population and 50% of the urban population to provide food-grains at highly subsidised prices. The roll-out of this programme will mean a spike in the government’s subsidy bill and will also take it above the budgeted amount. Talk about pressure on bills.
9. After consistent efforts by the central bank, banks have finally signalled they will be cutting their base rates. After a meeting of public sector banks with the Finance Minister yesterday, Bank of India announced a 25 basis points cut effective from Monday. One could expect more action on this front.

Cues are multiple and the sentiment is mixed. There have been major developments across the globe and domestically and all these factors are expected to act on the markets today. Overall, we expect a volatile trading session ahead.