Morning Market Starter - December 2, 2013

[Rajesh Desai]

---------- Forwarded message ----------
From: <rese...@icicibank.com>
Date: Mon, Dec 2, 2013 at 10:21 AM
Subject: Morning Market Starter - December 2, 2013
To: stock...@gmail.com

Theme of the Day India's Q2 FY2014 GDP grew 4.8% YoY vs. prior print of 4.4%. Agriculture offered strong support to overall growth, while services growth remained muted. View Today DXY: The US Dollar index is hovering lower around 80.56 vs. previous close of 80.68. The weakness came against the backdrop of better than expected Chinese PMI manufacturing data. The Chinese PMI manufacturing data held steady at 51.4 in November. In terms of key data releases, market will look for cues from the ISM manufacturing data, scheduled to release later today. Market is expecting a reading of 55.1 as against previous outturn of 56.4. The intraday trend for DXY is ranged with support and resistance at 80.20 and 80.70 respectively. EUR/USD: Euro is currently trading at close to 1.3595 against USD, slightly stronger than Friday's close of 1.3591. The flash estimates show that inflation in the EZ inched upwards to 0.9% YoY in November, higher than 0.7% in the previous month, which made ECB cut the policy rate last month. The core inflation also edged up from an all-time low level of 0.8% YoY in October to 1.0% in November 2013. Besides, EZ's unemployment rate also eased slightly from its all-time high of 12.2% in the past three months to 12.1% in October 2013. Today, the PMI manufacturing indices for November will be released for Euro members, which will be closely watched. The intraday trend for the Euro is bearish, with support and resistance at 1.3555 and 1.3620 respectively. GBP/USD: Sterling has strengthened sharply last week and is currently trading at 1.6415 against USD, marking its strongest level in the past 27 months (since late August 2011). Although house prices continue to rise in November, British consumer confidence fell for the second consecutive month last month. According to Nationwide, house prices grew 6.5% YoY (0.5% MoM) in November, marking its highest annual growth in the past 40 months. Nevertheless, GfK reported that consumer confidence fell from -11 in October to -12 in November. The survey shows that Britons were more pessimistic about their own finances and less willing to splash out on big-ticket items despite a brighter economic outlook. The manufacturing PMI will be released today, which will help determine the GBP move. The intra day trend for the GBP/USD cross is bullish with support and resistance at 1.6370 and 1.6465 respectively. USD/JPY: Japanese Yen (JPY) continues to remain weak, currently trading at 102.36 against USD, as against Friday's highest level of 102.12. This weak JPY is in line with Mr. Kuroda's, Governor of Bank of Japan, comments that he would not hesitate to adjust policy if risks emerge. He also said that higher corporate profits, partly due to the reversal in JPY's appreciation, are expected to lead to higher wages. All these factors are likely to continue to keep JPY weak. Technically, the intra day trend for USD/JPY cross is ranged with support at 102.00 and resistance at 102.90. USD/CHF: The USD/CHF pair is currently trading lower amidst Dollar-weakness, hovering around 0.9053 vs. Friday's close of 0.9062. Meanwhile, the Franc strengthened against the Euro for the third consecutive trading day as the Swiss KOF leading indicator came at the highest level in over a year. EUR/CHF is currently hovering lower at around 1.2311 compared to Friday's close of 1.2316. Technically, USD/CHF is expected to trade ranged with support at 0.9020 and resistance at 0.9090. AUD/USD: The Australian Dollar is trading stronger for the third consecutive day amidst speculation that the Reserve Bank of Australia, in its policy meeting tomorrow, will refrain from further easing. AUD/USD is trading higher at around 0.9152 compared to Friday's close of 0.9108. Meanwhile, positive PMI prints from China - Australia's largest trading partner - also aided the currency. Technically, we expect AUD/USD to trade ranged with support at 0.9120 and resistance at 0.9162. USD/CAD: The Canadian Dollar is trading weaker against the US Dollar for the second consecutive trading day despite an upbeat GDP report released on Friday. Canada's GDP expanded by 2.7% QoQ (annualised) in Q3, the fastest pace in two years. Nevertheless, markets as yet remain concerned that the Bank of Canada would maintain its dovish stance in its policy meeting on Wednesday, thereby weighing on the currency. USD/CAD is currently trading around 1.0623 vs. 1.0614 on Friday. Technically, we expect USD/CAD to trade bullish with support at 1.0580 and resistance at 1.0660. Sensex: Indian equities are trading in the green this morning, as markets factored in the better than expected Q2 FY2014 GDP print, released post market hours on Friday. Going ahead, markets will eye the manufacturing and services PMI prints, due over the course of this week, for further cues. Technically, the Sensex is expected to trade in the range of 20,600-20,950. USD/INR: The Rupee opened strong this morning at 62.32 levels versus previous close of 62.44 on the back of Dollar weakness. Besides, the better than expected GDP data, released post market close on Friday aided the currency. India's Q2 FY2014 GDP grew by 4.8% YoY as against 4.4% in Q1, better than market expectation. USDINR is expected to trade bearish with support and resistance at 62.10 and 62.65 respectively. G-Sec: The Indian bond yields are trading lower this morning tracking gains in the Rupee. The new benchmark bond yield is trading 2bps lower at 8.72% as against previous close of 8.74%. Though the better than expected GDP data is encouraging, market is likely to remain cautious, given that April-October fiscal deficit has touched 84.4% of the full year target of INR 5.43 tn. Market awaits PMI manufacturing data, scheduled to release later today. Oil: Oil prices are trading higher this morning, after the release of positive manufacturing PMI prints (HSBC and official) from China, aided the oil demand outlook. Going ahead, markets will closely track developments in the meeting of the OPEC nations in Vienna, due December 4th. Currently, Brent is trading at USD 110.25/bbl as against prior close of USD 109.69/bbl. Meanwhile, WTI is trading at USD 93.21/bbl vs. prior close of USD 92.72/bbl. Technically, Brent is expected to trade bearish between USD 109.00 -111.00/bbl. Gold: Gold prices are trading lower today morning on the back of some profit booking, following the 0.7% gain in Friday's session. Meanwhile, holdings in the SPDR Gold Trust held steady for the second-consecutive day at 843.2 tonnes on Friday. Today morning, spot gold is trading at USD 1,248.4/oz vs. Friday's close of USD 1,253.4/oz. Technically gold is expected to trade ranged between USD 1,235-1,255/oz. Please find attached herewith a file containing the detailed analysis. Regards, ICICI Bank : Treasury Research Contact: Samir Tripathi: (+91-22) 2653-7233 Nikhil Gupta: (+91-22) 4259-2180 Pooja Sriram: (+91-22) 2653-1414 (Extn: 2195) Tadit Kundu: (+91-22) 2653-1414 (Extn: 2087)

--
CA. Rajesh Desai