Global Markets

• Treasury 10-year notes fell in October for the first time in four months as investors bet the Federal Reserve may begin to signal an increase in interest rates from record lows as the economy shows signs of growth. The 10 year note rose eight basis points for the month, the biggest increase in yields since May’09.
• U.K. mortgage approvals climbed to their highest level for 18 months in September, adding to signs the housing market is recovering from a rout. Lenders granted 56,215 home loans, compared with 52,970 in August.
• Japanese manufacturers increased production for a seventh month in September, extending the longest stretch of gains in 12 years, as spending by governments worldwide helped to revive trade. Output rose 1.4 percent last month from August, when it climbed 1.6 percent.
• European factories increased capacity usage on assembly lines for the first time in two years this quarter as confidence in the economic outlook rose to the highest since Lehman Brothers Holdings Inc. collapsed. Capacity utilization in the 16 nations that use the euro rose to 70.7 percent from 69.6 percent in the third quarter.
• China’s manufacturing expanded at the fastest pace in 18 months. The Purchasing Managers’ Index rose to a seasonally adjusted 55.2 in October from 54.3 in September. An index of export orders climbed to 54.5 from 53.3.
• German unemployment unexpectedly fell in October, adding to signs of an economic recovery. The number of people out of work fell a seasonally adjusted 26,000 to 3.43 million.

Indian Equity Markets

• The market fell in each of the five days of the week on concerns interest rates may rise sooner-than-expected after the Reserve Bank of India sharply raised inflation in its monetary policy review on 27 October 2009. Telecoms, realty and banking stocks led the fall. The BSE Sensex fell below the psychological 16,000 mark. A hectic stock-specific activity was witnessed as the second quarter earnings reporting season was at its peak.
• Exports declined by 13.8% to $13.6 billion in September 2009 over September 2008, preliminary data showed on 29 October 2009. The fall in exports in September 2009 was the lowest in the current financial year, showing gradual signs of recovery in the country's export sector.
• After showing healthy expansion of 7.1 per cent in August, the growth in core infrastructure sector dropped to 4 per cent in September. The coal and cement which had led the chart in August by showing an impressive growth of 12.9 per cent and 17.6 per cent respectively, slipped to 6.5 per cent each in September

Outlook: The week ended 30th October 2009 witnessed huge volatility ahead o the expiry of the October series. Now that the result season is over, the trigger ahead would be the global market as well as the fund activity.

Indian Fixed Income Markets

• The 10 Year government bond surged during the week on account of the outcome of the monetary policy wherein the central bank had kept the policy rates untouched as expected by some of the market participants. However, the government bond ended down on Friday ending a four day rising streak as investors preferred to lock in profits before the long weekend and likely auction announcements.
• In the 2HFY10 review of monetary policy the RBI began the first phase of its exits from expansionary policy by raising the SLR by 1% and ending the special repurchase facility for banks, NBFC, Mutual Funds and Housing Finance Companies. However the RBI left key policy rates unchanged.
• The widely watched wholesale price index rose by 1.51 per cent in the 12 months to October. The RBI has placed its projection for WPI inflation at end March 2010 at 6.5% with an upward bias.

Outlook: The bundling up of state government securities along with incremental government papers accompanied with an increment in SLR requirement could potentially keep the yields ranged.

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