Crude is still hovering dangerously at those levels. It's a murky trade environment during settlement week. The markets have been spooked by by higher than expected inflation numbers. A rate could be around the corner.
It is Monday morning but not much respite to the bad news. Last week was disastrous for the market - we went away on Friday feeling really low because important levels got broken that inflation shock led to a massive sell off out here. But as we come into trade this Monday morning, the US has given us another sell off to deal with; Asia has not picked up completely - it is down but not quite out, but crude more importantly is still hovering dangerously close to USD 136 per barrel. So that has not cooled down yet. On and all, murky environment that we step into trade on settlement week for this current series.
I do not think much will happen from Fed meeting this time. I doubt whether there will be any interest rate hikes in this current environment. So that will probably come and go. But global markets are not looking comforting at all; see the way which the Dow has been breaking down over the last few days. It’s not good and that is been one of the stronger markets out there. Asia, sort of lost its way, crude is not cooling down, flows are extremely sticky and we have got our own problems with interest rates, expectations, inflation, and politics. So it’s not a great environment; one cannot pick out too many positives. So at best one will have some short covering pullbacks as we have seen from time to time. But broadly speaking I am afraid the nose is pointing down as we start trade this week.
The global cues are not great but Asia is not completely collapsed this morning. The Nikkei is down but just about a 100 points, China 1.5% down, Korea is down about 1%, the Hang Seng has recovered from the lows of the day and is down 0.5% as is the Taiwan Index. So they are down but not quite out this morning.
Q: Meanwhile everything is done and dusted we still have that big crude problem on our hands, every week as we step into trade?
A: Yes and there was some hope that this weekend something would happen from the meetings in Jeddah, US, Saudi Arabia and crude would cool down but there is so much hope in this market that it will cool down. I do not think the guys who managed the supply are very keen to cool it down. Sometimes there is a thing called the market and everything cannot be determined by politicians saying okay, I do not like this - so fix the price of this at that level; that does not matter what distortions we create in demand and supply.
I think the big distortions are on the demand side right now. The more reluctant-most countries are to pass down these oil prices, which lead to some amount of demand slowdown, which will cool down prices eventually. As long as that does not happen and we keep waiting for The Organization of the Petroleum Exporting Countries (OPEC) and the Saudi Arabian countries to release more supply to cool this problem, I do not think we are going anywhere towards cooling crude.
It has to come from the demand side, demand has to be destroyed and the only way to do that is to pass down oil prices, which we seem very reluctant to do mostso in our country. So it still remains very disturbing the fact that despite all the attention that crude has got, participants in that market are just not letting up and you are very much within the striking distance of an all time high.
So it is the biggest fear that one of these mornings will wake up and see crude at hitting an all time high and the markets will then have to deal with it. For the moment, it remains very disconcerting.
Q: Still seems rough on global sentiment as well but does the situation seem anywhere near climactic sort of place?
A: No, we have just started seeing a break down on the US markets and that is disturbing because at least there was an expectation that market is showing you some strength. So everybody was looking at the US as an outperformer but all that has changed. The Dow Jones index is barely 300-points away from its 2008 low and you see the kind of voices which are now coming in from the financial players out there - Merrill Lynch, Citi almost without exception; you are not getting a good feeling at the pit of your stomach. Crude remains a big problem and flows is something that just does not improve, even the last figure is a 1,000 crore sell, Friday on the cash market 1,400 crore of shorts on the Nifty futures that is not a great situation.
-Udayan Mukherjee, Executive Editor, TV18 |
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