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US non-farm payroll data likely to push global markets higher

US non-farm payroll data likely to push global markets higher
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First Published: Sun, Apr 04 2010. 10 10 PM IST

Updated: Sun, Apr 04 2010. 10 10 PM IST
Last week brought a string of positive data which reinforced optimism that global economies are moving along on the path of recovery. US data on manufacturing, jobless claims and non-farm payrolls boosted investor sentiment and created room for more gains this week. But this will probably be the last week of gains before stock markets enter a phase of consolidation or profit-selling. The fall won’t be sharp; what I am expecting is only a technical correction as the rally that has pushed global stock indices to near 19-month highs. Data has been positive, be it retail sales, auto sales or cement dispatches, spurring expectations of robust corporate earnings, but the numbers have been factored into share prices and Indian markets clearly need new triggers to take the rally forward.
One indicator of Indian corporate earnings, advance tax payment numbers, were mixed. While banks paid heavy taxes, industry was seen lagging, reinforcing the need for caution.
This week, markets, globally, would focus on the release on Tuesday of the minutes of the US Federal Reserve’s most recent policy meeting. Investors would read between the lines for any additional details on the Fed’s plans to unwind its stimulus measures or any change in its stance on interest rates. Apart from this, the Institute for Supply Management’s non-manufacturing index for March would be released on Monday, which is expected to show a moderate rise. Also on Monday, data on February pending home sales is expected to show a decline of 0.2%, improving from January’s 7.6% decline. This could actually be a small trigger for US and global markets as the housing sector has lagged the general economic recovery.
Back home, this week, US treasury secretary Timothy Geithner’s India visit would be in focus. No major economic indicator is due in India this week.
Technically, markets are likely to resume trading with an upward gap and head higher. There is a fundamental reason supporting this as well; world markets will catch up with the strong non-farm payroll data released on Friday in the US.
Photo: Abhijit Bhatlekar/Mint
The markets will likely come under some pressure towards the end of this week. If the key indices fall below their opening levels on heavy trading volumes, it could be the first sign of a technical reversal on the markets.
In terms of the Bombay Stock Exchange’s Sensex, the first resistance level is expected at 17,824 points. This level could attract some consolidation or even profit-selling. If the level is overcome, the next resistance would come at 18,041 points. This would be a moderate resistance level and would be followed by strong resistance at 18,361 points.
On its way down, the first support for the Sensex is expected at 17,651 points followed by 17,488.
The next support at 17,311 would be stronger, but may not be able to withstand selling pressure. Decisive support at 17,021 would dictate the course of the Sensex in the short term.
In terms of the S&P CNX Nifty, the first resistance is expected at 5,331 points, which would be a moderate level. If this level is crossed on good trading volume, the next resistance would come at 5,391, and 5,448.
On its way down, the first support for the Nifty is expected at 5,236 points, which is a moderate level, followed by 5,191, and then 5,056.
Among individual stocks this week, Yes Bank Ltd, Bharat Earth Movers Ltd (BEML) and ABB Ltd look good on the charts. Yes Bank, at its last close of Rs258.05, has a target of Rs266 and a stop-loss of Rs251.
BEML, at its last close of Rs1,059, has a target of Rs1,101 and a stop-loss of Rs1,018. ABB, at its last close of Rs829.50, has a target of Rs845 and a stop-loss of Rs814.
From my previous week’s recommendations, Allahabad Bank missed its target by a whisker and continues to be a valid recommendation. Tata Power Ltd met its target very comfortably while Tata Consultancy Services Ltd triggered its stop-loss.
Vipul Verma is CEO, Moneyvistas.com. Your comments, questions and reactions to this column are welcome at ticker@livemint.com
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First Published: Sun, Apr 04 2010. 10 10 PM IST