Saturday 30 September 2017

Nifty Closed Almost Flat But Erases The Entire Gain On Fiscal Discipline Squabbling Despite Supportive Global Cues



Market Wrap: 29/09/2017 (17:00)

NSE-NF (Oct):9795 (+8; +0.08%) 

(TTM PE: 25.49; Abv 2-SD of 25; TTM Q1FY18 EPS: 384; NS: 9789; Avg PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360)


(TTM PE: 27.11; Abv 2-SD of 25; TTM Q1FY18 EPS: 887; BNS: 24053; Avg PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220)

For 03/10/2017: 

Key support for NF: 9760-9695

Key resistance for NF: 9825-9865

Key support for BNF: 23900-23700

Key resistance for BNF: 24100-24300

Hints for positional trading:

Technicals indicate that, NF has to sustain over 9865 area for further rally towards 9925 -9975 & 10015-10050 area in the short term (under bullish case scenario).

On the flip side, sustaining below 9845 area, NF may fall towards 9800-9760 & 9695-9645 area in the short term (under bear case scenario).

Similarly, BNF has to sustain over 24100 area for further rally towards 24300-24550 & 24750-24850 area in the near term (under bullish case scenario).

On the flip side, sustaining below 24050 area, BNF may fall towards 23900-23800 & 23700-23600 area in the near term (under bear case scenario).

Indian market (Nifty Fut) today closed around 9795, almost flat (+0.08%) after making a day high of 9881 and low of 9788, thus erasing the entire day gains Market today opened in a positive tone around 9802, almost 17 points up, tracking positive global cues on US tax reform optimism and it rallied quite smartly to the day high amid yesterday’s after market hours news that Govt is committed for its fiscal discipline for FY-18 and likely to adhere the 3.2% fiscal deficit target without any additional borrowings till Dec’17or H2FY18.

As par DEA yesterday, to revive growth (fiscal stimulus), Govt may issue bonds for around Rs.2.08 tln apart from support of enhanced PSU dividends and some other sources of revenue. No additional borrowings by the Govt may be positive for the banks as they can lend more to the business & retails on greater margin/interest rate rather than to the Govt with discounted rate.

However in the last hour of trade today, there was buzz that Govt may have some room to borrow Rs.1 tln in H2FY18 in addition of its total FY-18 borrowing target of Rs.5.8 tln (if needed). This confusion along with long weekend may have induced the market to sell and wait for further clarity as concern of fiscal slippages and subsequent rating downgrade may be the primary reason behind recent surge in FII selling & market plunge.

Meanwhile, after market hours, Indian fiscal deficit till Aug’17 also came as terrible, almost 96.2% at Rs.5.25 tln of FY-18 budgeted target of Rs.5.47 tln. The revenue deficit was also at almost 133.9% till Aug!! Although it may be an alarming situation amid calls for a sizable fiscal stimulus package to revive the slowing economy, the fiscal situation may improve by Sep-Oct as this Aug figure may not include the GST proceeds and will also include the advance tax figure.

Still, the ballooning fiscal & revenue deficit may impair Govt’s ability to stimulate the economy without adhering the fiscal discipline and as par some estimates as par present trend Govt may end up around 3.8% of fiscal deficit by FY-18 instead of 3.2% projected and that may be the prime concern of the market as rating agencies may downgrade India in that scenario, causing more FIIs outflow.

Today Nifty was supported by Eicher Motors, HDFC Bank, VEDL, Gail, IOC, Adani Ports, M&M, Maruti, L&T and Bajaj Auto by combined around 30 points, while it was dragged by ITC, TCS, HUL, RIL, Wipro by almost 20 points cumulatively. Overall Automobiles supported the market today on optimism about Sep monthly sales to be released next week coupled with reality/property developer stocks on optimism about affordable housing and consumer durable goods ahead amid ongoing festival season.

Looking ahead all eyes may be now on India’s Mfg PMI, Auto sales nos for Sep along with RBI on 4th Oct for any surprised gift to the economy on the eve of Diwali by cutting 0.50% (?) to lend a helping hand to the Govt to revive the slowing Indian economy. But any drastic unusual rate cut by RBI this time, although very unlikely may be also dubbed as “panic” response by a Central Bank and thus it may cause more harm to the equity as well as the bond market, which is so far not reacted negatively for the “gloom & doom” debate.

Indian Market Resumes Oct Series In Positive Tone And May Focus On “War Of Words” Between FM & Former FM Over Trajectory Of Economy & Fund Outflow Concern:

Indian market rallied quite smartly after starting the Oct series in an upbeat note following 7 days of losing streaks on concern of slowing economy, dilemma of fiscal stimulus & fiscal slippages, a hawkish Fed, strong USDINR and ongoing FIIs fund outflows. 

A combination of higher USD, higher US bond yields and an “attractive” US corporate tax system may be not good for the EM including India as FIIs fund outflow may accelerate in the days ahead.

Market may also focus on the current spate of “war of words” between FM & the former FM (columnist) for “diagnosis & prescription” of slowing Indian economy.
It may be now increasingly clear that Govt is in no mood for tolerance even for constructive criticism of its policies and this may not be a good signal for the investors, who rely only on the hard facts & figures, which tells that between March’15 to March’17, Nifty EPS was around 374-370-395 and currently it stands around 384 (Q2FY18); thus where are the earnings growth? 

Despite all the so called green shoots in Indian the economy under NDA, Nifty EPS is not able to break the 400 barrier in the last three years and thus the problem may be structural & it needs some structural resolution rather than rhetorical or political. Not only GDP slowed down, but CAD has surged to almost 4 times in the recent times, which indicates a weaker economy and need for some appropriate Govt policy support. 

Market may be also worried about new mandatory disclosure of any debt obligation defaults norms by SEBI even by a day (technical default) to be effective from Oct’17. There are also significant risks of revenue collection on account of GST/GSTN disruptions and private capex may be also subdued due to muted bank credit growth. Farm loan waivers (political populism) across various states may be also negative for state’s fiscal discipline and subsequent capex ability to stimulate the economy. 

USDINR-I today fall by almost 0.40% to around 65.45on month end flow adjustment ahead of RBI next week, which is expected to be neutral (hawkish hold) despite current scenario of “gloom & doom” (RBI Gov Patel is an inflation hawk).Also Govt’s earlier commitments about fiscal discipline may have helped the INR today.

Globally, most of the major Asia-Pacific markets except Japan were in moderate to deep green today tracking positive global cues on Trump tax reform optimism after US TSY Sec yesterday signalled that they will “try” to pass the bill with “retroactive effect” from Jan’17. Lack of retrospective effect in the original tax proposal might be an element of disappointment for the market initially, but this clarification along with some other details like tax cut deficit funding may have boosted the US stock sentiment to some extent yesterday.

But, still, market may not be convinced too much as all these proposals including the Tax reform bill itself is subject to whims & fancy of US legislation and Trump’s ability to pass it; otherwise it may be another instance of legislative squabbling like Trumpcare. 

Although, Trump was able to extend the US debt limit on DNC support amid an environment of dual hurricane related humanitarian relief sentiment, going forward he may not be able to garner such bipartisan support for not only hostile DNC, but also for some of his own RNC members. Thus, Trump is now trying to shape the tax reform bill as a political agenda and engaging himself with political campaign to garner support for this tax cut plan from the electorate like a matured politician.

Overall, the present form of Trump’s tax reform proposal may be good for small US corporates, but may not be so much different for the US middle class and thus it may not help the US discretionary consumer spending significantly

Overnight US market closed in positive after making another record high on US tax optimism; especially for the small cap shares (Russel-2000). US market was helped by materials/utilities & techs to some extent yesterday, while dragged by banks & financials as US bond yields came down after a good 7YTSY bond auction. Also, bond & currency market (USD) may be concerned about not only Trump’s legislative ability to implement the tax reform proposal under present shape but may be also concerned about credibility of Fed’s dot-plots projection itself.

DJ-30 was up by 0.20% on support of McDonald (analyst upgrade), while S&P-500 closed almost flat at 2510 (+0.10%) and NQ-100 was also almost unchanged. US stock future (SPX-500) is now trading around 2509, almost unchanged on muted month end Asian cues ahead of EU market opening.

Elsewhere, Australian market (ASX-200) closed around 5682, up by almost 0.20% on support of materials & mining (upbeat metal prices on China optimism), consumer staples & utilities, while financials, healthcare dragged the market to some extent.

AUDUSD is now trading around 0.7847, almost unchanged on lack of any real AU story today ahead of RBA next week, expected to be neutral (dovish hold).

Japan (Nikkei-225) closed around 20356, almost unchanged (-0.03%) on support of a lower Yen as USDJPY still flirting around 113 zone on US tax reform optimism and Fed’s bandwagon for a Dec’17 hike. But mixed JP economic data (good IIP & core CPI, but subdued retail sales) today along with month/quarter end fund flow/position adjustments may have also impacted USDJPY to some extent in the morning Asian session and it’s now trading around 112.40, up by almost 0.10%.

JP market was today helped by exporters, Toshiba’s hostile M&A deal, while dragged by automakers, techs, banks & financials & energies.

China (SSE) closed around 3349, up by almost 0.28% ahead of the long Golden week holiday on SOE (PSU) reform optimism and hopes for a big consumer spending in the forthcoming holiday season; consumer cos are also helping the market today. All eyes may be now on China’s Q3 data including Sep PMI & GDP to gauze the strength of the economy amid deleveraging; thus defensive bets is on the rise also as an insurance protection against any terrible China data.

Today PBOC has fixed the mid-point of USDCNY at 6.6369 VS 6.6285 yesterday, at weakest level since 25th Aug and drained 160 bln Yuan citing higher liquidity in the banking system. For the week it drained 360 bln Yuan against 450 bln injection previous week.

Hong-Kong (HKG-33) future is now trading around 27505, up by almost 0.60%, but posted the 1st monthly loss this year on worries about a hawkish Fed, US monetary policy normalization, fund outflow, stretched valuation coupled with concern of China slowdown.

HK market today was helped by mixed property & resource stocks, M&A news in Kunlun energy while ragged by telecoms.

Meanwhile, Crude Oil (WTI) is now trading around 51.65, up by almost 0.30% on month end contracts expirations  after an overnight fall of around 1% on reports by Genscape that storage at the certain US hubs (Cushing, Okla) has risen recently.

Elsewhere, EU market is trading in green on the last day of Oct QTR end with Stoxx-600 up by almost 0.16% on EZ economic & corporate earnings optimism and being helped by banks & financials on higher bond yields and expectations of gradual monetary policy normalization and subsequent rate hikes (Fed in Dec’17 & BOE in Nov’17) favourable for their business models.

Market is expecting a growth of around 11% in Stoxx-600 earnings supported by uptick in global growth and rebound in commodities despite negative effect of a stronger EUR on exports!!

But VW is dragging the market today on muted guidance warning due to the diesel/pollution scandal coupled with news of Aviva JV sell in Italy to Banco, which is positive for Aviva and negative for Banco as an initial natural reaction for capex concern. Record unemployment rate in Germany is also boosting the overall market sentiment today. Dax-30 & FTSE-100 are both up by almost 0.70%, while CAC-40 has gained around 0.30%.

FTSE-100 was also helped by some fall in GBPUSD, after subdued (below expected) UK GDP data today at 1.5% for Q2.


USD Caught A Bid After Blockbuster Chicago PMI Despite Subdued Core PCE:





SGX-NF


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GBPUSD

Friday 29 September 2017

Nifty May Open Oct Series In Positive Tone Tracking Upbeat Global Cues On US Tax Reform Optimism; Indian Market May Focus On “War Of Words” Between FM & Former FM Over Trajectory Of Economy & Fund Outflow Concern



Market Mantra: 29/09/2017 (09:00)

SGX-NF: 9810 (+25)

For the Day: 

Key support for NF: 9780/9750-9695

Key resistance for NF: 9825-9865/9925

Key support for BNF: 23900-23700

Key resistance for BNF: 24100-24300

Hints for positional trading:

Technicals indicate that, NF has to sustain over 9865 area for further rally towards 9925-9975 & 10010-10050 area in the short term (under bullish case scenario).

On the flip side, sustaining below 9845 area, NF may fall towards 9800-9780/9750 & 9695 -9645 area in the short term (under bear case scenario).

Similarly, BNF has to sustain over 24100 area for further rally towards 24300-24550 & 24750-24850 area in the near term (under bullish case scenario).

On the flip side, sustaining below 23850 area, BNF may fall towards 23700-23600 & 23450-23250 area in the near term (under bear case scenario).

As par early SGX indication, Nifty Fut (Oct) may open around 9810, up by almost 25 points tracking positive global cues on Trump tax reform optimism after US TSY Sec yesterday signalled that they will “try” to pass the bill with “retroactive effect” from Jan’17. Lack of retrospective effect in the original tax proposal might be an element of disappointment for the market initially, but this clarification along with some other details like tax cut deficit funding may have boosted the US stock sentiment to some extent.

Still, market may not be convinced too much as all these proposals including the Tax reform bill itself is subject to whims & fancy of US legislation and Trump’s ability to pass it; otherwise it may be another instance of legislative squabbling like Trumpcare. 

Although, Trump was able to extend US debt limit on DNC support amid an environment of dual hurricane related humanitarian relief sentiment, going forward he may be able to garner such bipartisan support for not only hostile DNC, but also for some of his own RNC members. Thus, Trump is now trying to shape the tax reform bill as a political agenda and engaging himself with political campaign to garner support for this tax cut plan from the electorate like a matured politician.

Overall, the present form of Trump’s tax reform may be good for small US corporates, but may not be so much different for the US middle class and thus may not help the discretionary consumer spending in a great way.

Overnight US market closed in positive after making another record high on US tax optimism; especially for the small cap shares (Russel-2000). US market was helped by materials/utilities & techs to some extent yesterday, while dragged by banks & financials as US bond yields came down after a good 7YTSY bond auction. Also, bond & currency market (USD) may be concerned about not only Trump’s legislative ability to implement the tax reform proposal under present shape but may be also concerned about credibility of Fed’s dot-plots projection itself.

DJ-30 was up by 0.20% on support of McDonald on analyst upgrade while S&P-500 closed almost flat at 2510 (+0.10%) and NQ-100 was almost unchanged. US stock future (SPX-500) is now trading around 2509, almost unchanged on muted Asian cues ahead of EU market opening.

Back to home, Indian market (Nifty Fut) is now trading around 9845, up by almost 0.58% after starting the Oct series in an upbeat note following 7 days of losing streaks on concern of slowing economy, dilemma of fiscal stimulus & fiscal slippages, a hawkish Fed, strong USDINR and ongoing FIIs fund outflows. A combination of higher USD, higher US bond yields and an “attractive” US corporate tax system may be not good for the EM including India as FIIs fund outflow may accelerate in the days ahead.

Market may also focus on the current spate of “war of words” between FM & the former FM (columnist) for disease & prescription of slowing Indian economy. 

It may be now increasingly clear that Govt is in no mood for tolerance even for constructive criticism of its policies and this may not be a good signal for the investors, who rely only on the hard facts & figures, which tells that between March’15 to March’17, Nifty EPS was around 374-370-395 and currently it stands around 384 (Q2FY18); thus where are the earnings growth? 

Despite all the so called green shoots in the economy under NDA, Nifty EPS is not able to break the 400 barrier in the last three years and thus the problem may be structural & it needs some structural resolution rather than rhetorical or political.



SGX-NF

Nifty Closed Almost Flat Amid Concern Of Fund Outflows & Economic Slowdown; Combination Of Higher US Rates, Higher USD & Attractive US Tax System May Be Not Good For EMs



Market Wrap: 28/09/2017 (17:00)

NSE-NF (Oct):9785 (+13; +0.13%) 

(TTM PE: 25.44; Abv 2-SD of 25; TTM Q1FY18 EPS: 384; NS: 9769; Avg PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360)

NSE-BNF (Sep):24050 (+178; +0.75%) 

(TTM PE: 27.07; Abv 2-SD of 25; TTM Q1FY18 EPS: 887; BNS: 24008; Avg PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220)

For 29/09/2017: 

Key support for NF: 9750-9695

Key resistance for NF: 9825-9865

Key support for BNF: 23900-23700

Key resistance for BNF: 24100-24300

Hints for positional trading:

Technicals indicate that, NF has to sustain over 9825 area for further rally towards 9865-9915 & 9975-10050 area in the short term (under bullish case scenario).

On the flip side, sustaining below 9805 area, NF may fall towards 9750-9695 & 9645-9585 area in the short term (under bear case scenario).

Similarly, BNF has to sustain over 24100 area for further rally towards 24300-24550 & 24750-24850 area in the near term (under bullish case scenario).

On the flip side, sustaining below 23850 area, BNF may fall towards 23700-23600 & 23450-23250 area in the near term (under bear case scenario).

Nifty Well Off The Day Low & Snapped 7 Day Losing Streak On FNO Exp Short Covering:
Indian market (Nifty Fut-Oct/India-50) today closed around 9785, edged up by almost 13 points (+0.13%) after making an opening session low of 9729 and closing hours high of 9813 in a moderate day of FNO exp volatility.

Indian market snapped seven day losing steaks on short covering as Nifty achieved its short term technical target of 9695 in Nifty Fut-Sep amid swift correction from 10200 level on hawkish Fed, strong USD, concern of FII outflows coupled with NK geo-political tensions & domestic concern of economic slowdown and fiscal slippages.

Premium differences (Roll over analysis) in Nifty Spot & Fut may be indicating a subdued long rollover or tepid value buying (bargain hunting) as market may be still in dilemma over extent of economic slowdown & nature of the stimulus drugs. Actually, institutions (FII/DII/Prop) may have created big short rollover against longs by retails/HNI.

Govt may be also pressurizing the PSUS for ramping up capex to stimulate growth and at the same time asking for fabulous dividends for revenue or for its own capex; PSUS may feel the brunt of Govt’s stimulus package now. Govt may be also asking RBI for a special DeMo dividend (?), but that may be virtually impossible as of now.

Govt may also issue special Banks recap fund for recapitalization of the PSBS. Govt (DEA) has also assured that there will be no change in Govt’s borrowing plan till Dec’17 and expressed confidence to meet the FY-18 deficit target. No additional borrowing by the Govt may be positive for the banks, especially PSBS and thus they may have rallied today.

Nifty was today supported by HDFC, HDFC Bank, ITC, Kotak Bank, Maruti, Bharti Infratel, Axis Bank, DRL IOC & SBI by combined 66 points while it was dragged by RIL, Asian Paints, Bosch, TCS, Tata Motors, Auro Pharma, Eicher Motors, Infy, Yes Bank & IBULLS HSG cumulatively by almost 41 points.

Overall banks & financials has supported the market today as it recovered by over 400 points from the day low amid huge short covering and Nifty fell almost 1.6%, while Bank Nifty lost around 1.3% for the Sep series. Today NSE FNO segment clocked the highest ever turnover of Rs.15 lakh cr till date.

Indian Market Closed Almost Flat Tracking Subdued Global Cues & Concern Of Domestic Slowdown:

Indian market (Nifty Fut) closed almost flat after some early panic amid slow down fears; but may have covered some shorts from the positional vital support zone of 9695 in Nifty Fut (Sep) today.

Govt may be also concerned about GSTN fiasco and low number of return fillings for Aug amid subdued GST collections. Thus Govt is engaged itself with the concerned GST stakeholders, especially the exporters, SMES and small traders, for which proper GST implementation may be a big challenge.

Govt may be also under immense pressure to “do something” for the economic revival after DeMo & GST disruptions, which is now become a “hot political issue” for both the Govt/BJP & Oppositions/INC; but an immediate or even short term relief through a credible fiscal stimulus package may be very limited as the core issue may be of structural in nature.

Slow down in India started long before DeMo with an environment of very high real rate of interest/bank lending rate, stressed twin balance sheets and lack of private investments. Also, legacy issues of very high inflation/price instability may be hampering real wage growth and eventual discretionary consumer spending & GDP.

But drastic cut in RBI repo rate like 1% may not be possible for India right now because of bond market factor/high & attractive Indian bond yields for FPIS and USD/INR equation. Unless Indian banks lend to the corporates & SMES at a comparable rate with its DM/EM counterpart like China around 4-6%, it may be very difficult for them to sustain the increasing competition from overseas cos.

It now seems that due to GSTN malfunctioning, over regulations for GST refund rule and some liquidity crisis both within Govt & business circle, exporter’s organizations (FIEO) has expressed their inability to pay further taxes/GST, if previous refunds do not some by 20th Oct.

Overall, it appears that Indian FM is also under immense political pressure from various stakeholders including some of his own party stalwart (Swami) and previous BJP FM (Yaswant Sinha) for alleged mishandling of the Indian economy including poor plan & implementation of DeMo & GST; if the current Indian FM will resign for such pressure tactics, then it may be another black day for the Indian market. Market also does not like any such political, economical or administrative uncertainty.

Overall banks & financials has supported the market today as it recovered by over 400 points from the day low amid huge short covering and Nifty fell almost 1.6%, while Bank Nifty lost around 1.3% for the Sep series. Today NSE FNO segment clocked the highest ever turnover of Rs.15 lakh cr till date.

Globally, most of the major Asia-Pacific markets except Japan are trading almost flat points tracking subdued global cues after an “unimpressive” Trump tax reform/cut plan without any retrospective effect and very little on details about deficit funding. Regional Asian market (HK/China) is also under some pressure on rating downgrade of a blue-chip Chinese property developer (Wanda) by S&P coupled with forthcoming long holiday season in China (Golden week).

USD got some boost yesterday after upbeat durable goods order, pointing towards a higher inflation for the US economy. But core portion of the same was not so much impressive and tepid pending home sales figure may be also distorted by Harvey & coupled with that some disappointments for the Trump tax reform proposal, USD dropped a little bit along with risk trade.

But US stock market got some boost after dovish jawboning by Fed’s Bullard, an influential known dove, advocating for no rate hike in Dec’17 for inflation “mystery”; he also doubted about credibility of Fed’s dot-plots in the financial market; a lower USD may be good for US stocks/exports earnings & imported inflation perspective.

Also, a tax cut is a “tax cut” be it retrospective or not and thus US stocks got some late boost yesterday along with long term 30YTSY & also10YTSY yields; thus the old Trumpflation trade may be again coming back for the US market. US small caps (Russel-2000) may be benefited most from Trump’s tax plan and as par US comm. Sec (Ross), US GDP may be boosted by 1% for this long awaited tax reform.

But, the retrospective effect may also be significant for US corporate earnings this year (CY-17) and was one of the reasons for so much US stock market optimism; previously market was expecting that all cuts of the Trump’s tax proposal may be effective from Jan’17 irrespective of their date of legislative passage & implementation.

Market may be also concerned about Trump’s ability to pass his tax reform plan by the US congress amid deep divisions within his own RNC party and a hostile DNC as this tax plan is basically aimed to slash taxes on corporates & the riches. Market may be also disappointed because the US tax reform proposal may be far less than Trump’s campaign promise.

Elsewhere, although, NK tension seems to be cooled down a bit, as par latest report SK is apprehending some NK ICBM or even a Nuke test around 10-18th Oct coinciding with the anniversaries of NK Communist Party and also China’s Party Congress time!! Thus market may be also concerned about any fresh NK provocations in the days ahead.

Overnight US stock market closed in green, supported by US tax cut optimism, banks & financials on higher bond yields and bargain hunting in tech/FANG stocks, while dragged by utilities, consumer staples and real estate investment trusts; DJ-30 closed around 0.20% higher, while S&P-500 was up by around 0.40% and closed at 2508 after hitting an all-time high of around 2510; NQ-100 rallied by almost 1.2%.

US stock future (SPX-500) is now trading almost unchanged at around 2505 (+0.04%) on subdued Asian cues ahead of EU market opening. Looking ahead, SPX-500 need to sustain above 2415 zone for further rally; otherwise it may come down again.

Elsewhere, Australian market (ASX-200) closed almost flat around 5670 (+0.10%); it was helped by banks & financials, utilities, healthcare and consumer discretionary while resources & metals dragged the market. AUDUSD is down today around 0.78240 (-0.35%) on fall in commodities amid concern of China slowdown ahead of Golden week holiday coupled with S&P downgrade of Wanda, a leading Chinese property developer. Technically, 0.7808550 may be a big support for AUDUSD.

Today RBNZ hold rates at 1.75% as expected, but with a more dovish stance concerned for a strong NZD on the economy; it also gave a hint to lower its GDP expectations amid an environment of political uncertainty in NZ. Subsequently NZD falls after RBNZ.

Japan (Nikkei-225) closed around 20363, up by almost 0.47% bucking the regional trend on lower Yen as USDJPY is hovering around 113 on US tax optimism & hopes of Trump trade; yesterday JP stocks were dragged after ex-dividend related issues but today most of them are trading normally. JP market was today helped by banks & financials on higher US bond yields; also exporters & manufacturers has helped the market, while automakers were mixed.

China (SSE) edged down by around 0.17 % today & closed around 3340 on S&P downgrade of a leading property developer (Wanda), while overall market may be also in light mood ahead of Q3 data & a long holiday from 1st Oct (Golden week). Overall, market may be cautious of a China slowdown story after mixed Q2 economic data, but also optimistic about various Q3 economic indicators amid construction boom.

Today China market was helped by retail/consumer stocks on hopes of higher discretionary consumer spending (shopping & entertainment) in the forthcoming Golden week (Chinese festival season), but dragged by energy, property & financial shares.

PBOC today fixed mid-point of USDCNY a little higher at 6.6285 vs 6.6192 with neutral OMO operations today (injection matched maturity) ahead of Golden week; thus China money market may be remained tight ahead of holiday related cash demand (deleveraging), which may be little negative for the overall market sentiment today. Some analysts are projecting a wide range of USDCNY in the coming days (6.40-7.20) for Yuan flexibility in line with PBOC’s new policy for a market oriented gradual shift of Yuan.

Hong-Kong (HKG-33) future is now trading around 27340, slumped by almost 1.10% affecting the regional market sentiment including India. HK market was today dragged by S&P downgrade of Wanda, a prominent China based property developer and also by capital out-flow concern on higher USD (US tax reform optimism and hawkish Yellen; FFR is now showing above 70% of a Dec rate hike by Fed).

Today HK market was dragged by absence of Chinese buying ahead of Golden week and China based banks & insurance cos are affecting the market sentiment, while internet & online gambling stocks are helping it to some extent.

Overall, a dual combination of higher USD & higher US interest rates (bond yields) coupled with an attractive US tax system may not be good for the EM, including HK & India.

Meanwhile, Crude Oil (WTI) is now trading around 52.25, up by almost 0.20% on geo-political (Syria-Iraq pipeline) and OPEC optimism coupled with mixed inventory report yesterday (higher Crude production & gasoline stock and higher Crude drawdown on recent hurricane distortions).

EU stocks were also upbeat on US tax optimism and banks & financials on higher bond yields favorable for their business model:

Elsewhere, EU market is trading almost unchanged in Stoxx-600, while DAX-30 is up by around 0.37%, CAC-40 almost flat (+0.13%) and FTSE-100 edged down by 0.05%. EU stocks were upbeat on US tax optimism and helped by banks & financials on higher bond yields favorable for their business model; global bond routs continue today.

Apart from banks, EU market is today helped by energies, while dragged by some retailers (H&M on muted earnings) and utilities. But overall, a higher EUR may be also affecting the EU market sentiment as of now.

FTSE-100 is also being affected by a higher GBP today tracking some hawkish jawboning from BOE/MPC, but being supported by banks & financials on prospect of rate hikes not only in UK, but also in US. Overall, UK market is also supported by industrials, infra while it’s dragged by tobacco related & FMCG cos.

USDJPY Flirting Below 113 On Fed's Dot-Plots Credibility Despite An Upbeat US GDP & More Details About Trump's Tax Reform And A Hawkish Yellen:



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