Of US Data, UK EU Referendum, and Concerns for Global Growth...

Data released during the week stated that the US economy is gaining steam. Gross Domestic Product (GDP) expanded at a 0.8% seasonally adjusted annual rate in the first three months of 2016. This was recorded higher than the estimates of a 0.5% growth rate.

On an annual basis, GDP grew 2% in the first quarter of FY17. Consumer spending expanded at a 1.9% pace in the first quarter. Further, economic activity in the US expanded at a 1.4% pace during the fourth quarter of 2015. The Commerce Department stated that gross domestic income expanded at 2.2% in the first quarter against a 1.9% expansion recorded in the fourth quarter.

The robust data bolstered the likelihood of a near-term interest rate hike from the Federal Reserve. Investors are now awaiting the outcome of Fed minutes that will give further cues on this matter. The minutes released during the last week from a Federal Reserve meeting in April hinted that US interest rate hike is still in play.

The Fed is now going to meet a week before the UK EU referendum that is scheduled on June 23rd. The Brexit (British exit) campaign began in the United Kingdom when Prime Minister David Cameron received assistance for his call for the UK to remain in the European Union (EU).

Market participants are gauging that the Fed may even delay a decision on rates for fear of unsettling global markets as a possible Brexit looms.

During the week, a declaration at the G7 meeting in Japan opined that a vote by the UK to leave the European Union would pose a serious threat to global growth. The final communique by group set global growth as a priority for dealing with threats to the world's economy and security.

One of the articles from Vivek Kaul’s Diary offers insights on why globalization is under attack and how CEOs are thinking about the world in 2017.

Japan’s exports fell 10% while imports plunged 23% in April. Also, a monthly survey of factory managers showed the sharpest deterioration in operating conditions in over three years. The data undermined Prime Minister Shinzo Abe's policies to spur inflation and growth in the world's third-largest economy.

Moving on to the news from crude oil. Reports stated US crude stocks dropped by 5.1 million barrels to 536.8 million during the last week. The commodity witnessed buying interest after the announcement and touched US$50 per barrel mark this week. The surge was followed by gains seen during the last week when crude oil rose to fresh 2016 highs. Marketmen are now eyeing next week’s meeting of the Organisation of the Petroleum Exporting Countries (OPEC) in Vienna where a deal on capping production is to be discussed.

So, now that prices are recovering, does it make sense to bet on oil? Are crude oil companies a good long-term investment? Read the recent edition of The 5 Minute WrapUp titled 'This Could Be the Biggest Buying Opportunity Out There' to know what Richa Agarwal, research analyst at Equitymaster, has to say in this regard.

Also, Vivek Kaul, editor of Vivek Kaul’s Diary, recently shared his views on what the Modi government will do if oil prices continue to go up.

For the week, global markets traded on a positive note after tracking the above developments. Asian markets ended on a positive note with shares in Hong Kong leading the gains. For the week, the Hang Seng was up 3.65% and Japan's Nikkei 225 was up 0.59%. European markets traded on a positive note. For the week, the CAC 40 was up 3.69%, Germany's DAX was up 3.73%, and London's FTSE 100 was up 1.86%. Markets in the US also ended their session in the green with Nasdaq Composite up by 3.44% for the week.

Indian Indices Spike Upwards

Back home, Indian stock markets ended the week on a positive note. The BSE Sensex was up by 5.34%, while the NSE Nifty was up by 5.25%.

During the week State Bank of India (SBI) reported its results for the quarter ended March 2016. The net profits declined by 66% YoY to Rs 12.6 billion during the quarter. The decline was mainly because of higher provisioning on account of bad loans.

The gross non-performing assets (NPAs) increased to 6.5%, higher than 5.1% as reported in the preceding quarter. As an absolute number the gross NPAs increased by 35% to Rs 981.7 billion on a sequential basis.

SBI's earnings have been hit in the March 2016 quarter on account of the clean-up exercise undertaken in line with RBI's Asset Quality Review (AQR).

While the fallout of the same has resulted in higher provisions that have curtailed earnings, but it will also enable banks to quickly tide over the NPA crisis. A check on the asset quality will be the key things to watch out for going forward.

Indian Stock Markets Gain Momentum

The tug-o-war finally ended in favour of the bulls. They snapped back in style and have thrown the bears out of the ring with a 400-point move. It seems like the index could now trade in a range of 8,000 and 8,200 and consolidate its gains before making an up-move. Nevertheless, bulls may use any such dip to add on to their positions.


Gold Touches Eight Week Lows

Gold traded on a negative note during the week. It opened its session in the red on Monday. Prices fell after market participants cut their bets in gold after following a negative trend in the precious metals overseas. Losses were also seen midweek. Going forward, gold touched its lowest levels in eight weeks on Friday. This was seen as positive economic data in the US sparked expectations that the possibility of a US interest rate hike is on the table. Asad Dossani, editor, Profit Hunter, recently stated that gold is going to crash and how to make money trading gold. The MCX Gold June contract opened the session at 29,677/10 grams. It traded at a low of 28,536/10 grams before finally closing the session at 28,603/10 grams.

Gold Witness Downtrend

Silver Witness Downtrend

Silver traded in tandem with gold during the week. Prices fell during the start of the week after tracking a weak trend in precious metals in overseas markets. The downtrend further continued as Asian stocks witnessed buying interest. Finally, on Friday, the white-metal booked slight losses and ended its session in the red. The contract for July opened the session at 39,761/kg. It traded at a week low of 38,778/kg and settled at 38,866/kg on Friday.

Crude Oil Touches US$50 a Barrel

Crude oil traded on a mixed note during the week. Prices slipped on Monday as dollar gained. However, these losses were limited by a likely fall in US crude stockpiles. Prices rose and stood closer to US$ 50 a barrel on Wednesday. This was seen after reports showed a larger-than-expected drawdown in US crude inventories last week. Also, positive cues from Asian markets aided this rally. During the end of the week, crude oil witnessed mixed trades and ended its session in the red. The MCX June contract opened on Monday at 3,261/barrel and closed the Friday session at 3,310/barrel.

Crude Oil Ends Higher

Natural Gas Weighed by Supply Glut

Natural gas traded on a negative note during the week. It opened its session on a positive note on Monday, but failed to hold on to those gains. Losses were also seen during midweek as oversupply weighed on market sentiments. On Friday, prices skid southwards after it was noted that a glut leftover from winter continued to grow more quickly than expected. The MCX June contract opened the week at 151.70/mmBtu and finally closed the Friday session at 147.00/mmBtu.


Robust US Economic Data Supports Dollar

The dollar traded on a mixed note during the week. It opened its session on a positive note on Monday. This was seen on the back of sustained demand for the greenback from banks and importers. Further, the dollar surged to a two-month high against a basket of major currencies during midweek. This was seen on the back of robust US housing data that supported the case for a US interest rate hike in the near term. Some losses were seen during the end of the week. On Friday, the dollar witnessed losses against rupee on increased selling by exporters and banks amid higher foreign inflows. On Monday, the rupee opened the session at 67.48 against the US dollar and settled at 67.07 to close the week.

USD Trades on a Mixed Note

Euro Trades on a Negative Note

The euro traded on a negative note during the week. On Monday, it opened its session on a negative note. Losses were seen on the back of a firm dollar overseas. Some mixed trades were seen midweek and euro registered slight gains. However, it failed to hold on these gains and went on to trade in the red during the end of the week. On Monday, the euro opened at 75.75 against the INR. It reached a low of 75.03 and closed the week at 75.09 against the INR.

Brexit Concerns Rein Sterling

The pound traded on a mixed note during the week. It opened its session lower on Monday, but managed to cap those losses during the week. Some volatile trades were seen midweek on worries that a referendum in one month could see Britons vote to leave the EU. During the end of the week, the pound witnessed mixed trades and ended its session on a positive note. On Monday, GBP opened at 97.98 against INR. It touched a low of 97.63 and closed the week at 98.33.

Yen Ends Lower

The yen opened its session on a positive note. Some mixed trades were seen during midweek. Finally, prices fell during the end of the week and yen ended its session in the red against the rupee. JPY against INR traded at a low of 60.98 and a high of 62.07. Finally, it stood at 61.15 against the rupee to end its session.

Commodities 20th May 27th May % Change
Gold/10 gms 29,691 28,603 -3.66%
Silver/kg 39,834 38,866 -2.43%
Crude Oil/barrel 3,281 3,310 0.88%
Natural Gas/mmBtu 149.40 147.00 -1.60%
Currencies 20th May 27th May % Change
INR / USD 67.56 67.07 0.72%
INR / EUR 75.83 75.09 0.97%
INR / GBP 98.45 98.33 0.12%
INR / JPY 61.24 61.15 0.14%

Get Asad Dossani's Best Short Term Investment
Opportunities Delivered Straight To Your Inbox!

Sign Up For Profit Hunter Today... It's Free!
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use
We request your view! Post a comment on "Of US Data, UK EU Referendum, and Concerns for Global Growth...". Click here!