March 11, 2013 FacebookTwitter


BSE Sensex Last Week

The Sensex gained 800 points after its drop of nearly 300 points immediately following the budget.

It appears the market is beginning to take seriously, the FM's commitment to cut fiscal deficit.

This coupled with a positive outlook on growth by the chief economic adviser, Moody's announcement that the worst is over for India and of course the impending interest rate cut gave buoyancy to Sensex. 

g7Slowing growth in India’s services sector

In February, India’s services sector expanded at a slower pace as the HSBC India Services PMI fell to a three-month low of 54.2 points, from 57.5 in January.

Since late 2011, the index has consistently been above the threshold of 50 which separates expansion from contraction. The expansion in the sector is positive for the economy as services contribute to around 60% of India’s GDP.

US stocks rise to record highs, driven by buoyant economic data

The U.S. services sector expanded at a faster rate as the ISM Non Manufacturing Index rose from 55.2 in January to 56.0 in February -  the highest reading since February 2012.

The four-week moving average of jobless claims, which smoothens out volatility in weekly data, fell by 7,000 to 348,750 for the week ended March 2 —the lowest level since March 2008.

Dow Jones rose to a new all-time high of 14,329.49 on Thursday.

The expansion in the services sector and the fall in jobless claims indicate that the U.S. economy is improving. These indicators supported rallies in U.S. stocks, as the Dow Jones rose to a new all-time high of 14,329.49 on Thursday.

The outlook for the Eurozone remains dismal

In the fourth quarter of 2012, Eurozone exports fell by 0.9% from the third quarter – the biggest quarterly fall since the first quarter of 2009. Imports also fell by 0.9%.

In January, retail sales in the common currency area fell by 1.3% (y-o-y). In Germany – the Eurozone’s largest economy - factory orders declined by 1.9% in January (m-o-m).

These indicators suggest that growth in the Eurozone remains sluggish. However, at a meeting on Thursday, the European Central Bank (ECB) did not lower interest rates.

Central banks pause monetary easing

At monetary policy meetings this week, the central banks of the G7 countries (except the U.S.) left interest rates unchanged as shown in the table below. 

g7Emerging markets such as India have benefited from strong portfolio investments over the past few years, as central banks around the world cut interest rates and injected liquidity to stimulate their economies.

Rising exports may drive the rebound in growth in China

In February, China’s trade surplus was $15.25 billion as exports rose by 21.8% on an annual basis while imports fell by 15.2%. Additionally, the services sector expanded at a slower pace as the HSBC Services PMI fell to 52.1 in February from 54.0 in January.

The fall in imports was higher than expected; suggesting that domestic demand in the world’s second-largest economy has not yet recovered.


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