JAPAN LOWERS ECONOMIC ASSESSMENT ON GLOBAL SLOWDOWN

The Government of Japan lowered its expectations of the performance of its economy on the effects of the global economic crisis. The government cited lower demand in overseas markets and volatility in the capital markets for the lower assessment.

Slowdown in personal consumption, home construction, exports and imports and lower industrial output could lower the GDP. (Bloomberg)

ITALY’S 2Q12 (Q/Q) GDP -0.7% vs exp -0.6% vs prv -0.8%

Italy’s GDP for the 2Q12 period ended June 30, contracted 0.7 percent vs expectations of a decline of 0.6 percent. The disappointing data means the country is plunged further into a recession causing further problems to the Mario Monti’s technocrat government in terms of stabilizing the economy. 1Q12 GDP declined 0.8 percent and on a y.y basis, GDP declined 2.5 percent on a decline of 1.4 percent in 2Q11. (CNBC)

MARKETS TRADE FLAT ON INACTION BY THE FED; ALL EYES ON ECB NOW

Markets in Asia and India are trading flat ahead of the ECB meet today where the ECB President Mario Draghi is expected to announce his intentions for propping up the slowing Eurozone. With rates at 0.75 percent, a 25 bps cut could send the markets higher but if rates are steady and nothing notable is announced in the policy meet, then there could be high chances of the markets trading flat or lower.

All eyes were on the U.S Federal Reserve’s Chairman Ben Bernanke yesterday for if he would announce a cut in the benchmark interest rates. Although he stated that the Fed could continue asset and bond buying activity, a rate cut did not happen. He stated that the slowdown in the economy was noticeable with a raft of disappointing data. This made Bernanke’s statement a total non-event.

UK would also be announcing its decision on benchmark interest rates today. Rates are at 0.50 percent and there could be news on asset purchasing. But all eyes will be focused more  on Draghi than the Bank of England, but no doubt , we view both these events are very important.

(RsquaredAnalytics)

SOUTH KOREA 2Q12 GDP AT 2.4% vs exp 2.5% vs prv 0.4%

South Korea’s 2Q12 GDP growth rose 2.4 percent vs 0.4 percent on a y/y basis. Expectations came in at a growth of 2.5 percent. Slowdown in exports  on account of Europe and US economies experiencing slowing growth hampered South Korean trade. Further asset purchases and easing programmes would be conducted by the government. (Bloomberg)

U.S ECONOMIC RECOVERY SLOW; MORE MEASURES NEEDED: GEITHNER

U.S Treasury Secretary Timothy Geithner stated that the economic recovery was slow but stated that aggressive steps would have to be taken to prop up the economy.

One of the Congress’s plans on tackling slowing growth is to continue with its payroll tax cuts for 98 percent of American workers. Making mortgage refinancing easily available was one of the measures proposed. (CNBC)

BANK OF JAPAN KEEPS POLICY RATES UNCHANGED AT 0.1%

Bank of Japan kept its policy rate unchanged at 0.1 percent, voted on unanimously. The central bank expects domestic demand to rise and would kickstart the recovery in their economy.

The central bank narrowed down its asset purchasing programme as it pledged to purchase about JPY 70 t (USD 879 b) worth of bonds. (CNBC)

EQUITY UPDATE – 11 JULY 2012

GEO-POLITICAL

Iran’s oil output for June came in at 3.2 m barrels, leading to record 20-yr low output. Sanctions imposed on the country have adversely impacted its output. (Financial Times)

ASIA

China’s trade surplus rose of USD 31.7 b in June, nearly twice as that in May. Exports increased 11.3 percent on a y/y basis  but was lower than May’s number by 15.3 percent. Imports increased 6.3 percent on a y/y basis and 12.7 percent on a m/m basis. Lower imports would be a cause of concern for investors as a slowdown in the Chinese economy could further dent global recovery. (Financial Times)

Superior Aviation Beijing – Co. is in talks to acquire  airplane manufacturer Hawker Beechcraft for around USD 1.79 b. (Financial Times)

INDIA

Non-resident Indian, or Indians living abroad infused a total of USD 4.753 b in Indian banks in the form of deposits during the April – May 2012 period. The amount was almost 7 times in excess of the amount invested a year ago for the same period. The weakening rupee and India’s high domestic interest rates contributed to the inflow. (Economic Times)

Direct tax collections incl. refunds rose 47.2 percent to INR 84,273 cr for the April-June 2012 period vs INR 57,267 cr a year ago.  (Business Standard)

Renault India – Co. launched its brand Renault Duster in Kerala and aims to sell a total of 30,000 vehicles of the brand in India by 2012. The co. is also keen on introducing smaller cars costing below INR 450,000. (Economic Times)

FII’s were net buyers in today’s trade at INR 606.54 cr on gross purchases of INR 2170.26 cr and gross sales at INR 1563.72 cr. Domestic institutional investors were net sellers at INR 488.33 cr. They made gross purchases of INR 830.16 cr and sold INR 1318.49 cr in trade. (Business Standard)

Vehicle sales in India for the June 2012 period  rose by 8.2 percent under tough market conditions. Sales totaled 155,763 units with domestic ca sales at 143,851 units. Maruti Suzuki led the sales by recording a 23 percent m/m rise at 70,977 units.  Tata Motors saw a decline in sales of around 26 percent at 13,595 units vs 18,522 units in the previous month. (Economic Times)

Automobile industry body Society of Indian Automobiles Manufacturers (SIAM) stated that forecasts for March 2013 would be lower than expected on higher costs,  slower economic expansion and fuel prices affecting consumers. The body also stated that demand would revive by the second half of the year.  Rise in excise duty also pushed up vehicle prices. (Economic Times)

Gujarat State Petroleum Corporation (GSPC): Co. plans to invest a total of INR 25,000 cr with INR 13,704 cr outlined for two gas transmission projects.  The firm is also in talks to acquire a 65 percent stake in BG Group for INR 2500 cr. (Business Standard)

EUROPE

UK trade manufacturing data for May exceeded expectations of median forecasts, which was taken as a positive signal in today’s trade. Factory output rose 1.2 percent in May vs -0.8 percent in April. Median forecasts came in at a decline of 0.1 percent. (Bloomberg)

Italian Industrial Output data rose 0.8 percent in may vs a fall of 1.9 percent in April. (Bloomberg)

NORTH AMERICA

Job openings in the US rose by 195,000 to touch 3.64 m for May vs a 294,000 decline in April. Hiring picked up marginally as co.’s expanded sales and operations at a moderate pace while layoffs also increased. Employment rose by 148,000 to 4.36 m in May, driving the hiring rate to 3.3 percent vs 3.2 percent in April. Layoffs, excl. retirements rose  to 1.89 m in May vs 1.74 m in April. (Bloomberg)

The National Federation of Independent Business’s index of investor confidence in the US declined to 91.4 from 94.4 for May 2012 period. (Bloomberg)

OECD WARNS ON HIGH UNEMPLOYMENT LEVELS TILL 2013

According to the Organization for Economic Co-operation and Development (OECD), unemployment would remain at a higher level in developed countries with the youth and low-skilled people affected the most. OECD predicts that its unemployment rate for 34 countries would remain at 7.7 percent by end of 2012 vs 7.9 percent recorded in May 2012.

It stated that governments of various nations would have to undertake measures to stimulate activity and employment. Nations in the European region would also have to take steps to stabilize Europe’s banking system.

Long-term unemployment rose to 35 percent  from 27 percent before the crisis. Temporary employment activity rose strongly because firm were still reluctant to re-hire workers on the uncertainty in the economy. (Reuters)

 

FY13 TO AFFECT EMERGING & BRIC’s MARKETS : JULIUS BAER

Research firm Julius Baer stated that FY13 period would see suboptimal performance in the markets for BRIC nations. The firm cited lower economic numbers from China and North America and skeptical attitude of investors to the ongoing crisis in the eurozone.

The rally in the markets would soon end in the emerging markets to trade in a range. The markets are currently in the upper end of the range of 7 – 8 percent and could continue to decline.