Cabinet approves passing of an ordinance for SBI stake

The government is all set to acquire Reserve Bank of India's (RBI) stake in State Bank of India, with the union cabinet today, 15 June 2007, approving an ordinance to the effect. The ordinance route was taken as the State Bank of India (SBI) Amendment Bill, which allows the government to take control of the RBI's 59.7% stake in SBI is still pending in Parliament.

The government wants to complete the process by 30 June 2007, the end of RBI’s financial year.

In his 2007-08 Budget speech, Finance Minister P Chidambaram had announced that the government would buy the 59.7% stake from RBI at an estimated market value of Rs 40000 crore to separate ownership and regulatory functions of the central bank.


Inflation at 4.8% in the year through 2 June 2007

The wholesale price index-based inflation rose 4.8% in the 12 months to the week ended 2 June 2007, lower than the previous week's increase of 4.85%, due to a decline in food and energy prices, data released by the government today, 15 June 2007, showed.

The annual inflation rate was the lowest since end-July last year when it stood at 4.72%. The annual inflation rate was 4.88% during the corresponding week of the previous year.

The central bank is targeting to keep inflation within 4%-4.5% in the mid-term and below 5% in fiscal 2007-08.


Pratibha Patil is UPA-Left nominee for President

Rajasthan Governor Pratibha Patil was on Thursday, 14 June 2007, chosen the UPA-Left consensus nominee for the Presidential election after the Left parties vetoed the Congress’ choice of Home Minister Shivraj Patil.

The ruling coalition’s choice came after feverish activities in the UPA camp, when the Left parties strongly rejected the Congress’ first choice, Shivraj Patil.

Pratibha Patil, a former deputy chairperson of the Rajya Sabha and a Maharashtra minister, has been Governor of Rajasthan for nearly three years. If elected, Patil will be the first female president


Gold drifts lower ahead of US CPI

The yellow metal eases as dollar advances ahead of the key economic data

Gold is showing signs of weakness ahead of the release of the US CPI data as the dollar trades on a frim note against the currency majors. COMEX Gold futures for August is trading at $ 653.90 per ounce, down $ 2. Silver is at 13.080, down 0.085 cents. MCX Gold August expiry has also turned down marginally by Rs 20 at Rs 8743 per 10 grams.

US Core PPI last night registered a modest growth from the preceding month. The Labor Department said its producer price index rose 0.9 percent in May following an unrevised 0.7 percent increase in the previous month. Economists had been expecting the index to increase by a more modest 0.6 percent. The report also showed that the core producer price index, which excludes food and energy prices, edged up 0.2 percent in May after coming in unchanged in the two previous months. The modest increase came in line with economist estimates.

But the worry of sales from the National Banks again became lively when the Swiss National Bank said it would sell 250 tonnes of gold over the next two years and use the money from gold sales to increase its foreign exchange reserves.

Today will be the release of another key economic data from the US. Consumer price index is a closely-watched gauge of consumer inflation, the key consideration for Federal Reserve when it makes its interest rate decisions which will provide decisive triggers for Gold in the coming days.

Rupee recoups day's losses

Rupee recovered intraday losses to end stronger on Friday, as capital inflows offset dollar demand from oil refiners and suspected intervention from RBI.

The rupee ended at 40.86/87 per dollar, up from Thursday's close of 40.94/95 and an intraday low of 41.01.


FIIs in buying mode in equities

Foreign institutional investors (FIIs) bought shares worth a net Rs 211.80 crore on Thursday 14 June 2007. They had sold shares worth Rs 307.80 crore on 13 June 2007.

The net FII inflow of Rs 211.80 crore on 14 June 2007 was a result of gross purchases Rs 2716.70 crore and gross sales Rs 2505 crore. The Sensex registered a 200.69 point rally to settle at 14,203.72 on that day.

FII purchases by the first few days this month (till 14 June 2007) totaled Rs 143.20 crore

FII inflow totaled Rs 3959.70 crore in May 2007. The inflow was much higher at Rs 6679.20 crore in April 2007.

FII inflow for the calendar year 2007 stands at Rs 17432 crore, till 14 June 2007. There are a total of 1044 FIIs registered with Securities & Exchange Board of India (Sebi).


Call money remains stable

Call money rates remains unchanged to settle at 3-3.25% on Friday (June 15, 2007) as against the previous close of 3-3.25% on Thursday.

During the day, it touched a high of 3.50% and a low of 2.75%.


Crude shoots up

Crude oil futures rose today at their highest levels since September 2006 and gasoline futures finished near a two-week high. Violence in the oil-rich Middle East, particularly with Hamas fighters reportedly seizing control of almost all of the Gaza Strip, contributed to oil's rally. Yesterday’s weekly inventory report also contributed to some extent.

For the day ending 14 June, Thursday, crude-oil futures for light sweet crude for July delivery closed at $67.65/barrel (higher by $1.39/barrel or 2.1%) on the New York Mercantile Exchange.

It was reported that Hamas militants have claimed military victories over rivals Fatah, taking control of almost all of the Gaza Strip.

Today, natural gas surged in New York after the government report showed inventories rose less than analysts expected and below the average increase for the period. Gas in storage expanded 92 billion cubic feet last week. Gas for July delivery soared 20 cents (2.6%) to $7.808 per million British thermal units. Earlier it climbed as high as $7.825, a 2.9% rise.

Against this backdrop, July reformulated gasoline gained 6.94 cents (3.2%) to close at $2.2247 a gallon. July heating oil reflected the gains as well, closing 5.41 cents higher at $2.0161 a gallon.

As per yesterday’s weekly inventory report, crude supplies climbed by a smaller-than-expected 100,000 barrels to 342.4 million for the week ended 8 June and they are 0.8% above the year-ago level. But refinery utilization fell to 89.2% of capacity last week, from 89.6% a week earlier.

Motor gasoline supplies were unchanged at 201.5 million barrels for the week ended 8 June. Supplies had climbed more than 8 million barrels over the course of five weeks. Distillate inventories added 300,000 barrels for the week to stand at 122.6 million.

Last month Motor gasoline demand 1.4% higher on a yearly basis

Concern that the dispute over Iran's nuclear program might disrupt shipments from the country has supported prices over the past year. Attacks on oil facilities in Nigeria have curtailed shipments and tight supplies from OPEC have also bolstered prices.

OPEC currently said that high prices alone aren't enough to warrant an increase in production because there's ample supply of crude oil for refiners. The group is due to meet in Vienna on 11 September to review its production ceiling for the winter season, when consumption of heating fuel increases in the Northern Hemisphere.

Yesterday, IEA revised higher its outlook for worldwide demand of oil products, citing new data it's received from Nigeria, Indonesia and other countries. Global demand is expected to increase by 2% to 86.1 million barrels a day from a revised 84.5 million barrels a day in 2006. That's 420,000 barrels more than the IEA projected in May. In May, it had predicted a 1.8% rise in 2007.

As per the Energy Department, Motor gasoline demand averaged almost 9.5 million barrels per day over the past four-week period. That's 1.4% above the same time a year ago.


Bank of Japan keeps rates steady at 0.5%

The Bank of Japan (BoJ) left its assessment of the economy unchanged in a monthly report on Friday, 15 June 2007. The central bank also maintained its outlook that the economy will continue expanding moderately.

In the long term the consumer prices will remain in an upward trend, as the nation's output gap moves towards positive territory, the report said.

The central bank's Policy Board kept interest rates unchanged at 0.5% at a meeting that ended on Friday, 15 June 2007.


US market rallies for second consecutive day

Stocks rise in spite of higher crude, above expected inflation figures and disappointing earning reports

US stocks rallied for the second consecutive day today, Thursday, 14 June, 2007. Investors were thrilled when bond yields did not rise much even as producer price index for May went up beyond expectation. Stocks ended higher in spite of crude settling at $67.65 per barrel though this gave Exxon Mobil shares a good boost.

Total PPI rose a larger than expected 0.9% in May boosted by a big 4.1% increase in energy costs. But the core rate (excluding food and energy) rose 0.2%. The yield on the 10-year note today closed slightly higher at 5.21%

Twenty-four out of the 30 Dow stocks closed higher for the day. The Dow Jones Industrial Average closed higher by 71.38 points at 13553.73. Nasdaq rose 17.1 points to close at 2599.41 and S&P 500 went up by 7.3 points to close at 1522.97.

GM, Caterpillar and Exxon Mobil were the major Dow winners today. Du-Pont, Wal-Mart, AIG and Merck remained the four Dow laggards.

On the earnings front, after Lehman Brothers kicked off earlier this week, Goldman Scahs and Bear Sterns reported their Q2 earnings today. Goldman Sachs handily beat analysts' expectations. However, given Goldman's first quarter results, investors were disappointed with the paltry 1% y-o-y rise in Q2 profits. Bear Stearns missed expectations. While Goldman shares dropped almost 3.5%, Bear Sterns was up marginally.

With today’s gain, Dow is up 258 points over two days, its biggest such advance since last July. But it is still about 120 points below the record close it hit on 4 June, 2007.

GM gains 4.7% on news of “deal” with United Auto Workers

When the market opened in the morning, bond yields coming off their highs helped equities gain some traction. The indices extended their reach to the upside as the strength across the board in technology acted as a source of notable support. A 3.5% advance in Intel shares gave semiconductors a lift. Financials sector also provided some influential leadership.

GM shares gained gained 4.7%. It was reported that Delphi and former parent GM are "very close" to reaching a deal with the United Auto Workers that would provide a cash payout to Delphi workers in exchange for lower hourly wages.

Bonds earlier advanced, sending yields lower, as yields in Europe seemed to stabilize in the wake of tame eurozone consumer prices. PPI rising a bigger-than-expected 0.9% in May failed to lift yields further. After trading higher earlier, the bond finished down 4/32 at 94 16/32, while its yield, which moves inversely, rose to 5.216%.

Of the eight sectors attracting buyers and providing a floor of support today, energy paced the way.

Traders to focus on tomorrow’s CPI report

Crude oil futures rose today at their highest levels since September 2006 and gasoline futures finished near a two-week high. Violence in the oil-rich Middle East, particularly with Hamas fighters reportedly seizing control of almost all of the Gaza Strip, contributed to oil's rally. Yesterday’s weekly inventory report also contributed to some extent.

Crude-oil futures for light sweet crude for July delivery closed at $67.65/barrel (higher by $1.39/barrel or 2.1%) on the New York Mercantile Exchange. July reformulated gasoline gained 6.94 cents (3.2%) to close at $2.2247 a gallon. Natural gas for July delivery soared 20 cents (2.6%) to $7.808 per million British thermal units.

Trading volumes showed 1.4 billion shares trading on the New York Stock Exchange and 1.9 billion trading on the Nasdaq stock market. Advancing issues topped decliners by 21 to 11 on the NYSE and by 17 to 11 on the Nasdaq.

Tomorrow, traders will focus on the CPI report, given its influence on the market's outlook for the economy. Other than that, before market opens will be the NY Empire State Index, Q1 current account deficit and industrial production. A preliminary read on sentiment, compiled by the University of Michigan, will be released at 10:00 ET.