The global risk sentiment and data from US and China HSBC manufacturing PMI will guide the movement of base metals
Volatility in the global markets remained high during the week gone by as investors were eyeing the outcome of the European leaders meeting in Brussels in which European integration plans and ways to soften yields of countries like Spain and Italy were to be discussed.
The pressure was also mounting on German chancellor Angela Merkel to stop opposing the idea of issuing joint euro bonds. In the past four years, advance economies’ central bank assets have risen to 25 per cent of the GDP in the wake of balance sheet policy measures adopted in reaction to the global financial crisis and that suggests that they are now left with limited war chest.
US economy saw an expansion at a rate of 1.9 per cent for the first quarter ending June matching the earlier estimates
In Japan, industrial output fell nearly 3.1 per cent in the month of May from the prior month because of the weakening demand especially from European region and consumer prices decline 0.1 per cent in May. The economic data is making a strong case for some kind of stimulus by the Bank of Japan in the next month meeting.
In China, the slowdown is still getting deeper even after the relaxation in reserve ratio requirements for three times since November last year and quarter percentage cut in interest rates in June this year. The profitability of the companies on the industry side continues to face pressure as they have fallen nearly 2.4 per cent in the first five months compared to last year gains of about 25 per cent.
The government during the week came out with the draft guidelines on the controversial issue of General Anti-Avoidance Rule (GAAR) that stated that it would not be applied retrospectively and would apply to the income of the taxpayers on or after April 1, 2013. RBI in its financial stability report released during the week has stated that the risk to financial stability in India has increased since December 2011 due to dismal global macroeconomic situation and the muted economic performance on the domestic front, widening current-account deficit and structural aspects of food inflation.
The report also indicates that the asset quality concern in the Indian banking system remains elevated. Overall bouts of volatility are expected to rule the markets. Domestic events like progress of monsoon, core sector and industrial growth data next month would drive the sentiments in the markets.
On the commodities front, bullions are expected to remain on highly volatile path, if some constructive and positive steps are taken regarding the euro zone crises it can inject fresh buying sentiments in the market. The meeting last week gave some positive hints regarding that European Council president outlined a proposal for a single supervisory mechanism for Europe's banking system. Last week EU announced a raft of measures designed to alleviate the worst of the current debt crisis gripping the
Meanwhile the sanctions on Iran by EU have started from this week will also give necessary push to the crude oil prices which reeling near to yearly lows. The global risk sentiment and data from US and China HSBC manufacturing PMI will guide the movement of base metals. The oilseeds pack may continue to cheer the delay of monsoon and soya counter will continue remain buoyant. The hike in MSP by the government has also flared the positive sentiments on the agro counter to some extent.