Mixed Cues Call For Volatility

Globally, signals have been mixed. While the US saw a downfall on account of various cues, European indices traded higher because of strength in the PMI data. At the same time, Asian stocks have seen a negative opening.

Global cues are clearly mixed. How will the markets shape up in this situation?

In the US, downbeat earnings were announced by Caterpillar, AT&T and Boeing. At the same time, good numbers were announced by Facebook, Ford Motor, Apple and VMare.

Apart from the mixed earnings, government data indicated new-home sales rising to a five-year high in June. Parallely, the preliminary reading of the manufacturing Purchasing Managers’ Index (PMI) for July 2013 climbed to 53.2, touching a four-month high.

The positive data was reacted upon negatively as it strengthened the case for the Federal Reserve to start cutting down on its monetary easing sooner.

Europe was positive because of upbeat PMI data. The composite euro-zone index climbed to 50.4 in July 2013, as compared to 48.7 in June. Climbing above the 50 mark to an 18-month high and indicating expansion came across as a big positive for the economy. Similarly, Germany’s index climbed to a five-month high of 52.8 and France’s to a 17-month high of 48.8.

In Asia, China’s cabinet said that it would cut taxes for small enterprises and aid some exporters to boost growth. It would also make investments in railways to provide stimulus to the economy. Regardless of this, Asian stocks have seen a negative opening.

While the global sentiment is mixed, India has been facing liquidity pressure on account of the measures announced by the RBI to curb the fall in the rupee. The rupee did gain considerably yesterday and closed the day at 59.13 to the dollar. However, liquidity tightening is bitter for the markets. The markets have been pondering over short-term concerns and a hiccup in growth. This pressure is likely to continue on the markets today.

The markets are thus likely to see a negative opening. The day ahead is expected to be volatile with major results announcements and global developments.