Markets going forward will take cues from macro-economic data points and FED policy meeting before reacting to the Q2 earnings expectations. Reflation (rebound of inflation from lows) trades have been the theme for many traders & investors, post the first wave of Covid-19. However, since the inflation pressures are rising and central banks could possibly start cutting down their massive stimulus programs, this move would lead to sell-off in the Reflation trades. Hence, from here on markets will start focusing on sectors which can report growth even if economies move from Reflation to Stagflation (rising inflation without wage growth). ���������������
During the week, Sensex & Nifty gained by 0.30% each. Gains were driven by Grasim Industries, HUL, Nestle India and Bharti Airtel offset the losses in some banking stocks. Ford India made a bold move to exit domestic markets amid recognising USD 2 billion loss in last 10 years, this move would help rest of the auto OEMs to capture the 1.4% domestic market share (reported by WSJ) of Ford. Industrial output in India increased 11.5% (Y-o-Y) in July 2021, lower than 13.6% in the previous month, but above market forecasts of 10.75. It is the 5th month of double-digit growth due to low base effects from last year.
Next week, market participants will look for inflation reports & industrial production figures from US. Eurozone and Japan will be releasing foreign trade data. Domestic investors will watch out for inflation growth data.
FIIs/FPIs have invested Rs. 20.83 billion in August 2021 and Rs. 43.85 billion in September 2021. Foreign Institutional Investors (FIIs) Derivative Statistics have shown a rise in the open interest across stock options, and stock futures. Implied volatility (IV) fell for call options and for put options in the last week. Fall in IV for call option and for put option shows steady support for Nifty at present levels.
Wallstreet indices closed on negative note on Friday amid concerns over rising inflation which can put pressure on FED to start tightening the monetary policy. Apple Inc fell by 3.3% on Friday after a federal judge ruled that the tech giant can no longer force developers to use in-app purchasing which dragged Nasdaq 100 index. During the week, Dow Jones declined by 2.15%, Nasdaq gained by 0.50%, and S&P 500 fell by 1.65%.
European indices reversed gains to close lower on Friday, tracking losses on Wall Street as economic uncertainty persists while rising inflation would put pressure the Fed to step back easy policies. During the week, FTSE fell by 1.53% and DAX declined by 1.09%.
Brent crude prices were under pressure as China is planning to tap for the first time ever its giant oil reserves to ease the pressure of rising raw material prices. However, supply cuts & disruption caused by Hurricane Ida kept the prices afloat. During the week, Brent crude prices gained by 0.43%.
Global Economy
Producer prices for final demand in the US were up 0.7% (M-o-M) in August 2021, the lowest reading in 3 months and compared with market forecasts of 0.6%.
The number of Americans filing new claims for unemployment benefits declined to a new pandemic low of 310,000 in the week ending 4th September 2021 and less than market forecasts of 335,000.
US crude oil inventories fell by 1.529 million barrels in the week ending 3rd September 2021 to 423.9 million barrels, a fifth period of decline to the lowest level since September 2019 and compared with market forecasts of a 4.612 million drop, data from the EIA Petroleum Status Report showed.
European Central Bank left interest rates at record-low levels but said it would start conducting a moderately lower pace of net asset purchases under the PEPP for the rest of the year due to improved economic and financial conditions. The central bank reiterated the PEPP envelope would be maintained at 1.85 Euro trillion until at least the end of March 2022.
China's annual inflation rate unexpectedly was at 0.8% in August 2021, compared with market consensus and July's figure of 1%.
China's trade surplus was at USD 58.34 billion in August 2021, above market consensus of USD 51.05 billion and compared with a surplus of USD 57.14 billion in the same month a year earlier. Exports grew 25.6% from a year earlier to USD 294 billion, while imports jumped 33% to USD 236 billion.
The Japanese economy grew 1.9% on an annualized basis in the second quarter of 2021, compared with the preliminary estimate of a 1.3% expansion and beating market consensus of 1.6%.
