Market Mantra: 12/10/2017 (09:00)
SGX-NF: 10020 (+38)
For the Day:
Key support for NF: 9990-9945/9925
Key resistance for NF: 10040-10065/10085
Key support for BNF: 24000-23750
Key resistance for BNF: 24250-24550
Hints for positional trading:
Technicals indicate that, NF has to sustain over 10065-85 area for
further rally towards 10125-10165 & 10205-10275 area in the short term
(under bullish case scenario).
On the flip side, sustaining below 10045 area, NF may fall
towards 9990 -9950 & 9900-9840 area in the short term (under bear case
scenario).
Similarly, BNF has to sustain over 24250 area for further rally
towards 24400-24550 & 24650- 24800 area in the near term (under bullish
case scenario).
On the flip side, sustaining below 24200 area, BNF may fall
towards 24000-23750 & 23600-23400 area in the near term (under bear case
scenario).
As par early SGX indication, Nifty Fut (Oct) may open around
10020, edged up by almost 38 points following positive global/HK cues ahead of earnings deluge & macro data
(CPI/IIP) today.
Overnight US market edged up & closed in another record milestone on lower USD after a dovish FOMC minutes
for Sep published yesterday. Although, it seems that Fed is poised to hike in
Dec’17, the rate hikes projections for 2018 may be in doubt on concern of
subdued inflation as several Fed members felt that the persistent lower
inflation in the US economy is not transitory.
An environment of lower USD, lower US rates, lower inflation and
a decent real wage growth may be good for the US economy & the stock
market; it’s like a goldilocks situation!! All the three main US stock indexes
closed in a record trifecta; DJ-30 closed around 0.18% higher, S&P-500
edged up by almost 0.20% to close at 2555, while NQ-100 gained by almost 0.30%.
Overall, yesterday US market was supported by techs and some
defensive bets like McDonald, J&J along with some other names like Black
Rock, Delta Airlines on upbeat Q3 results. But overall market mood was quite
cautious ahead of earnings dump by various big names in banks & financials
coupled with fresh NK saber-rattling.
US stock future (SPX-500) is now trading around 2553, almost flat ahead of EU market
opening. Looking ahead, technically, SPX-500 need to sustain above 2565 zone
for further rally towards 2580-2595 & 2620 area; otherwise it may come down
and sustaining below 2540 area, may further fall towards 2525-2510 & 2485
zone in the coming days.
USDJPY is now trading around 112.30, down by almost 0.14% on renewed
NK rhetoric and dovish FOMC minutes:
Many Fed officials saw
another rate hike warranted this year &
concerned that low-inflation is not only transitory. A few Fed officials wanted
hikes delayed until inflation goes higher & some patience warranted while
assessing inflation.
Several Fed officials said hike should hinge on incoming data. A
few officials pointed to upside inflation risks due to tight jobs. Fed
officials saw next few inflation reports affected by storms; most officials saw
wages picking up as labor market strengthens.
Many Fed officials expect tighter job markets to lift inflation.
Most Fed officials did not assume fiscal stimulus enforce; Several Fed
officials concerned trend inflation running under 2%; Couple Fed officials saw financial
conditions posing stability risks.
Thus, in brief, majority of the FOMC are concerned about US
inflation “mystery” and its consistent subdued nature, although they are quite upbeat
about US job market and believe that it will ultimately push wage growth,
higher consumption & inflation.
Although Dec’17 rate hike may be almost certain now considering
Fed’s credibility, 2018 dot-plots may be in doubt for muted US inflation, mixed
economic data, uncertainty about Fed leadership after Yellen, who is set to
exit by March’18 and poor visibility of Trump’s fiscal stimulus package. FFR is
now showing around 80% probability of a Dec Fed rate hike despite yesterday’s
dovish FOMC minutes.
In reality, Fed will wait for financial market reaction, if any
for its ongoing BS tapering effect, which is slated to start from this month
and also watch the dual QT (Dec rate hike & QE tapering) for another
quarter till March and if everything is fine, then it may go for another 2-3
rate hikes in 2018 to bring the Fed rate at around 2.00-2.25% form present
1.25% (3-4 hikes from Dec’17 to Dec’18). Thus RRI for US may be around 0% by
2018, if CPI also moves around 2% by then and this will be a “new normal”.
USD was under further pressure early in the Asian session today,
when NK Foreign Minister again issued
some fresh rhetoric in Russia by commenting that Trump has “lit the fuse
(wick) of war” with NK by his “bellicose & insane” statements at UN labeling
Kim as “rocket man”. The NK foreign minister further went on by saying that all
the North Koreans need to settle the final score with the Americans only with a
“hail of fire & not words”.
All eyes are now on Trump’s tweeter handle for his counter
rhetoric in this epic game of chickens; but it may be a great instrument for
Trump to keep USD down despite Fed is going for dual QT. Thus the NK hangover
may continue in the days ahead despite some serious diplomatic effort by China
& Russia and also by a former US Prez (Jimmy Carter) to resolve it for “peace”.
NK will never abandon its Nuke ambition as it’s an insurance
against any US-SK attack and US will never accept a “nuclear” NK, capable of
hitting US mainland with its ICBM.
USD was also on pressure yesterday after subdued JOLTS job openings report for Aug, one of the favourite
indicator for Yellen.
Meanwhile, EUR is gaining
strength on hawkish scrips by ECB and hopes of an imminent & inevitable
QE tapering and policy normalization, despite Catalonian political uncertainty
and duet between Madrid & Barcelona. As par latest report, Spanish
authority has given 5-8 days to Catalonian autonomous authority to explain
their “independence” bid and to cancel it with clear languages.
It’s now clear that Spanish PM is not interested to negotiate
with Pro-Independence Catalan autonomous authority/party and is dealing with
the whole situation very strictly to keep Spain as united.
But, domestic political compulsion of Catalan may also force
them not to budge too much and thus this political uncertainty in Spain will go
on in the days ahead. But, overall strict stance taken by the Spanish authority
may be also good for the EUR as there is no immediate chance of any extreme
step (secession) by Catalonia. A higher EUR is not good for the export heavy EU
economy & the market.
Back to home, Indian
market (Nifty/India-50) is now trading around 10030, up by almost 0.40%
after opening around 10018 amid positive global cues and trying to consolidate ahead
of deluge of Q2 earnings and macro data.
India’s net direct tax collections for Apr-Sep’17 grew by 15.8%
to Rs.3.86 tln, helped by healthy growth in corporate advance tax; total budget
estimate of direct taxes is at Rs.9.8 tln for FY-18; thus around 39.4% of the
total BE has been achieved till now.
Indian Govt yesterday also gave a “Diwali” bonanza to nearly 8
lakh teacher and educational staffs (central employees) by extending them
revised pay scale as par 7-CPC with arrears. Thus, this may also act as some
direct fiscal stimulus for the economy as it will help for more consumers
spending in the ongoing Festival season. But, considering “poor response” from earlier
7-CPC push for high value spending, the overall effect on the corporate earnings
may not be so much significant also.
As par RBI report, Q1FY18 net profits of listed Indian cos fall
by almost 21.2% (YOY) on higher cost of raw materials, power & fuel.
SGX-NF
SPX-500
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