Morning Market Starter- February 20, 2014

[Rajesh Desai]

 

Central Bank Watch Minutes of the Fed's January FOMC meeting showed most policy makers deemed it appropriate to revise the interest rate guidance based on the unemployment threshold, as the decline in unemployment rate is occurring faster than expected. Several policy makers also said that in the absence of an "appreciable change" in economic outlook, QE tapering should continue at the current pace. Global Market Developments China's HSBC flash manufacturing PMI for February declined more than expected to 48.3 vs. prior print of 49.5. This is the lowest reading in seven months. The IMF, in a staff report said that global growth is still weak and "significant downside risks remain." It cited risks of prolonged turmoil in emerging markets and a new risk of deflation in the Euroarea. US benchmark equity indices ended lower yesterday, after the FOMC minutes indicated that QE tapering is likely to continue at the current pace. Losses were led by financials and consumer goods stocks. Dow Jones ended lower by 0.6% and S&P 500 fell by 0.7%. Asian stocks are trading largely lower this morning, weighed by a lower than expected (flash) manufacturing PMI print from China. Hang Seng and Kospi are down 1.2% and 0.5% respectively. Nikkei is trading lower by 1.7% after data showed trade deficit widened more than expected in January. Australia's ASX is trading flat. Shanghai Composite, however, is trading higher by 0.6% led by gains in oil and gas stocks. US Treasuries are trading higher today morning, as weaker than expected manufacturing data from China and warnings from IMF of further risks to global growth boosted safe-haven demand. The 10-year benchmark yield is hovering around 2.71% vs. yesterday's close of 2.74%. Domestic Market Developments Indian Rupee is trading weaker at 62.42 against the US Dollar vs. prior close of 62.22, tracking losses in EM currency peers. Indian equities are trading lower this morning amid negative overseas cues. Regards, ICICI Bank Contact: Sunandan Chaudhuri (+91-22) 4008-7525

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CA. Rajesh Desai