Market Overtones:

Today with favourable news coming from the US markets and good data on inflation from the Indian front, the markets are expected to remain buoyant throughout the day. Wall Street will get back to work on Tuesday after two weeks of light summer trading, and the US investors encouraged by recent economic data are expected to shift money into the stock markets. The major US indices ended last week higher, despite days of erratic intraday trading. The Dow rose 1.60 %, the S&P 500 added 1.23 % while the Nasdaq gained 2.47 %. In the US the portfolio managers and traders will end their vacations and actually come back to a pretty decent market. Stocks have inched their way up leading into September, both in the US and in the Indian bourses. The major indexes are at three month highs in the US and in India the Sensex has highest closing in the last 3 and half months, as investors remain confident about their respective economies. The good news is that Oil price is receding….. The oil for most part of the last week was trading below $70 per barrel. There are indications that OPEC is unlikely to change production targets for the immediate future, due to high prices., though the supply is outstripping the demand. The decrease in international economic growth and the increase in non-OPEC countries' production, has led to less demand for OPEC oil. The 11-member cartel is producing close to its full capacity, with only Saudi Arabia holding back spare volumes. "Concerning the current prices, it seems that the policy of (OPEC) supplying more than demand to the market will continue to avoid (OPEC) being accused of causing prices to increase," OPEC governor Hossein Kazempour Ardebili told reporters. Oil prices eased below $70 a barrel on Friday on expectations of a long delay before the United Nations decides on sanctions against Iran, the world's fourth-largest oil exporter. Tehran has failed to meet a U.N. Security Council demand to halt uranium enrichment; a process the West says, Iran is using to build atomic bombs, which Tehran has constantly denied, but now faces the threat of sanctions from the UN and the US. "With energy on the sidelines, corporate earnings staying strong, and the Federal Reserve on the back burner, you're going to see a lot of reluctant money chasing returns during the week," said Peter Dunay, an investment strategist with New York-based Leeb Capital Management. In India also better than expected corporate earnings in the last quarter has increased the investors’ confidence and this has been amply reflected in the last month’s rally in the bourses. Last week, Wall Street absorbed a number of new economic readings that provided further evidence the economy has moderated enough to ward off future interest rate hikes. The Federal Reserve's 17 straight interest rate hikes, before it paused on Aug. 8, were designed to help slow the economy down from its expansion over the past three years. Now with energy on the sidelines, corporate earnings staying strong, and the Federal Reserve on the back burner we might see a lot of reluctant money chasing good stocks during the week. In the US, consumer confidence, home sales, and other recent reports have indicated the central bank's campaign appears to be working. As fears about inflation receding, the strength of the economy subsides, and with very little data due this week, oil prices are seen as the market's main driver in this week. Crude prices tumbled as Tropical Storm Ernesto missed oil rigs in the Gulf of Mexico. Prices for the most part have stayed at these low levels despite new jitters about Iran's nuclear program. One area money managers in both the US and India, might siphon cash away from is, the Treasury market. Bonds staged a sharp summer rally as investors moved out of stocks in May, 2006; then slowly began building back their equities positions in late July, 2006. In the US, the 10-year Treasury note has seen its yield, which moves in the opposite direction of prices, tumble from a late-June peak of 5.24 % to a five-month low of 4.73 % on Friday. This is a welcome sign for the Stock markets world-wide. "You've got a lot of people who are just waiting to get back from Labor Day to start taking positions," said David Sowerby, chief market analyst at Loomis, Sayles & Co. "Things will pick up (this week), but don't look for there to be any major swings." September traditionally was considered a barometer for how the stock markets of both the US and India, would finish the year.

An important observation:

On the day after Labor Day, the Dow has risen nine out of the last 11 years, according to the Stock Traders Almanac in the US. But, because the markets have made small, incremental gains ahead of Labor Day, Wall Street might continue that trend until more economic data and corporate profit reports begin coming out in a few weeks. For now, there's very little on tap this week seen, having the power to jolt the rise in stocks in both the US and the Indian bourses. US ECONOMIC DATA: On Wednesday, investors might get a little more of an idea about what the Fed is thinking. The central bank will release its Beige Book, which summarizes regional economic activity. The day also sees the release of the Labor Department's preliminary second-quarter productivity numbers, the Institute for Supply Management's August services figures, and crude inventories for September. There's also little in the way of corporate earnings. Hovnanian Enterprises Inc. might give Wall Street a better idea how home builders have weathered tougher market conditions. Meanwhile here in India, the ICICI Bank, the second largest lender, hinted the possibility of taking over the struggling United Western Bank. The central bank(Read RBI) on Saturday placed United Western Bank under moratorium till December 1 2006, to protect its depositors and said the aim was to merge the bank with a stronger one. "The board will meet on Sept. 4 to consider whether an expression of interest should be submitted to the Reserve Bank of India (RBI) for amalgamation of United Western with ICICI Bank," ICICI said in a statement on Sunday. If the New York-listed bank takes United over, it would be its second major acquisition, having bought the Bank of Madura a few years ago which established its presence in Southern India. United Western Bank has thousands of depositors with aggregate deposits of 64.8 billion rupees ($1.39 billion) and outstanding loans worth 40.06 billion rupees, the central bank said. But "inefficient management" allowed its capital to risk weighted assets ratio (CRAR) to turn negative and increase in bad loans much above the levels of its peers, the RBI said. The Central Bank has historically placed weak banks under moratorium before finding a right partner to merge them with, usually a state-run bank. In the past it merged Global Trust Bank with the state-run Oriental Bank of Commerce and the Nedungadi bank with the state-run Punjab National Bank. This time also the central bank is favouring a state-run bank to acquire United Western. Recent moratoria and subsequent mergers include Ganesh Bank of Kurundwad Ltd., with the Federal Bank. Although United Western is struggling financially with its bad loan ratio running at 5.66 % compared with its peers' 1.97 %, it has the right infrastructure -- 230 branches in nine states -- to fuel strong growth for ICICI Bank. In addition United Western's reach in Western India could help ICICI access funds at lower costs in smaller towns than in cities where it is strong. ICICI, along with many other banks, has been paying higher interest rates on deposits to feed the strong loans growth in Asia's fourth largest economy as the central bank has been raising short term rates to contain inflation. In the most part of the globe the markets are trading in GREEN, when this report was being prepared. After the US, Canda—TSE 300 was up 0.59%, FTSE 100 was up 0.73%, FTSE All Shares was also up by a whopping 0.76%. Besides the markets in Europe was up 0.39% (DJ Stoxx). Australian Markets were also up 0.44%( ASX 100) and with Australian Mid-cap stealing the gains ( ASX Mid-cap 50 up 0.48%). Here in Asia most of the market opened in green. Hong Kong’s Hang Sang was up 0.31 % to 17, 423. 72. The Nikkei average rose 1.42 % in the morning trade to its highest level in more than three months, after U.S. stocks rose on a report showing U.S. job growth slightly stronger than expected. Analysts said the report suggested strength in the U.S. economy, a key market for Japanese products, defying worries about consumer spending there; after data showing weak housing sales. The biggest worry for the markets world-wide has been the health of the U.S. economy. Also, the news on Capital Account Convertibility, which I mentioned in my earlier posting, could also give the necessary push to the Indian bourses to move ahead. It is worth Mentioning that much awaited report on Fuller Capital Account Convertibility was released by RBI on last Friday evening. Hence you will see the markets today opening in green and ending in green…..next I will post mini research reports on Haldyn Glass and Gujarat Hotels Ltd (the reputed company ITC Ltd is one of the promoters). Book some partial profits on Tilaknagar Industries Ltd at the current price of Rs.57. Best wishes, Suman Mukherjee India. http://finance.groups.yahoo.com/group/SumanSpeaks/