Mumbai: It is mid-week and things are falling apart in Europe. Italy is on the brink as bond yields topped 7%, nearing the level of other European countries which were forced to bail out. Adding to this, Euro zone break up talks once again hit headlines. Lastly, to make matters worse, a deal on the new Greece Prime Minister also fell through as leaders’ stormed out of coalition talks.
On Tuesday, world markets cheered presuming Italy would be able to handle the debt crisis once Prime Minister Berlusconi offered to resign, but it is increasingly evident now that any positive development in Europe just turns out be a false dawn. Investors revolted on Wednesday fearing the new leadership in Italy may not be able to contain the financial problems and spur the ailing economy. After Ireland, Portugal and Greece, Italy may soon need a bailout.
Headlines claiming Italy may be forced out of the Euro-zone also weighed on the financial markets in the US and Europe. The International Monetary Fund may not have the firepower to bail out the world’s eighth largest economy from its £1.5?trillion debt. If Italian finances collapse, countries which have outstanding loans to Italy may also be hit.
A file photo of a man walking past the Reserve Bank of India office
Moving on to Greece, which has a taken a back seat for now, negotiations for a new PM also dragged as officials bickered over who would lead the country through its $179 billion aid package. Latest reports suggest that besides the European Central Bank vice president Lucas Papademos, parliament speaker and former justice and public order minister Philippos Petsalnikos is also in the running for the PM’s post.
Overnight, US markets were roiled over worsening European debt mess. The Dow Jones Industrial Average finished with a loss of 3.2%, at 11,781.Standard & Poor’s 500 Index declined 3.7%, to 1,229 with financial shares getting hammered and the Nasdaq Composite also lost 3.9%, to 2,622. The S&P and Nasdaq posted their biggest single day drop since August 18.
Asian markets also joined Italian sell-off. Japan’s Nikkei Stock Average plunged over 2%, Hong Kong’s Hang Seng dived almost 5% and the Shanghai Composite slipped 1% in opening trades.
In India, markets are shut on account of Guru Nanak jayanti, but will play catch up on Friday. Following are the stocks which are making news:
Hindustan Construction Co Ltd may rally on Friday after the Environment Ministry cleared the first phase of the Lavasa hill town project, but several riders were attached to curb damage to the environment. Earlier last year, construction was halted in Lavasa as the project violated environmental norms.
DLF will be on the radar after The Competition Appellate Tribunal on Wednesday stayed the Rs 630 crore penalty imposed by the Competition Commission of India over abusing the dominant market position. Furthermore the tribunal clarified that if DLF loses the case, it will also have to deposit the entire penalty amount, along with 9% interest.
Kingfisher Airlines is once again in the news after it canceled several flights earlier this week. The beleaguered airlines is seeking capital to stay afloat. The airline has sought banks’ help to return cash worth $170 million which is kept in deposits in return for bank guarantees.
Among companies that reported second quarter results, Indian Oil posted its second consecutive quarter of net loss as the government did not compensate the company for selling diesel and cooking fuels at government determined prices. The company reported net loss of Rs 7,486 crore, as compared to a net profit of Rs 5,294 crore a year earlier.
Lastly, we may see less BMWs and Merecedes on Indian streets as demand for premium cars has contracted by 11% between April to October this year according to the SIAM data. Both companies started the year with a sales target of 10,000 cars but may fall short.