Here's why there could be a mini-Santa clause rally today

Moneycontrol Bureau

The US markets rallied driving stocks up from December closing to their best single-session gain of the month following positive data from US and Europe. The Dow ended up over 300 points, back above the 12,000-mark. Meanwhile, the CBOE volatility index tumbles nearly 7% to 23.

And on economic data front, housing starts surged to a one and a half year high in November and permits for future construction were the highest since March 2010 as demand for rental apartments rose. Housing starts jumped 9.3% to a seasonally adjusted annual rate of 685,000 units.

In key data to watch out for in US today, existing home sales are expected to rise to 5.080 million annual rate for November. Also watch out for weekly mortgage applications data.

European markets closed higher following successful bond auction in Spain and as consumer confidence in Germany improved.

Onto the positive data from Europe:

• German business and consumer confidence improved in December. This means that Europe's largest economy may avoid slipping into recession early next year when it is expected to feel a fallout from slowing global growth.
• Germany's IFO business confidence index rose in December to 107.2 points from 106.6 in November beating analysts forecasting a decline of 106. The GFK consumer sentiment index is set to come in at 5.6 points for January, unchanged from an unrevised 5.6 points in December, but beating economists' forecast for a reading of 5.5 points.

The other positive news was that Spain's short-term yields plummeted. Spain sold 3.7 billion euros in 3-month bills at 1.735% and 1.9 billion euros of 6 month debt was sold at 2.435%

The European Central Bank (ECB) has launched its new 3 year lending facility today to help banks.

The idea is that the European banks can buy high yielding sovereign debt which they can pledge as collateral to borrow cheap cash from the ECB. Banks can then buy more sovereign debt and pocket the difference in the borrowing costs.

Meanwhile, sources suggest that more than 10 Italian banks have obtained state guarantees on bank bonds under new treasury scheme. The banks then plan to use the state guarantees as collateral for the new ECB facility.

In the currency space, the euro traded near one- week high before the European Central Bank announces results of its first tranche of unlimited three-year loans.

In commodities, Brent crude gains for a third day, up over 3% to 107 dollar levels as investors speculate that signs of an economic recovery and shrinking stockpiles in the US would indicate that fuel demand may increase.

From the precious metals space, gold gains, back above the USD 1600 levels as a weakening dollar boosted demand for the metal as an alternative asset.

ONTO SOME STOCK SPECIFIC ACTION

Ranbaxy announces a consent decree with US FDA setting aside USD 500 million dollars in connection with the investigation by the US department of justice. Ranbaxy says it has committed to further strengthen procedures and policies to ensure data integrity

CDR lenders have approved the restructuring package for GTL and its group companies. CNBC-TV18 learns that the promoter has agreed to bring personal guarantees worth Rs 2,500 crore.

November telecom data shows that India added 6.67 million versus 7.12 million users sequentially. Bharti Airtel added 960,083 users while Idea Cellular added 2.17 million users

Oswal Greentech acquires 14% stake in NDTV . Oswal buys stake from Merrill Lynch Capital and Nomura Mauritius. The stake was held by Merrill Lynch Capital & Nomura Mauritius via P-note

Tata Motors to up Pantnagar output by 90,000 unit per year from Jan-Feb

Sagar Salvi
sagar.salvi@network18online.com