Key benchmark indices edged lower in volatile trade on speculation a US budget agreement will boost prospects for the US Federal Reserve to start tapering its monetary stimulus for the US economy. The US central bank currently buys bonds worth $85 billion a month in a bid to hold interest rates low and encourage economic growth in the world's biggest economy. Fed's bond-buying program has been a source of liquidity for most Asian and emerging markets this year. The barometer index, the S&P BSE Sensex, fell below the psychological 21,000 mark. The Sensex and the 50-unit CNX Nifty, both, settled at their lowest level in more than a week. The Sensex lost 245.80 points or 1.16%, off 178.19 points from the day's high and up 24.24 points from the day's low. The market breadth, indicating the overall health of the market, was negative. In the foreign exchange market, the rupee edged lower against the dollar.
Indian stocks fell for the third day in a row today, 12 December 2013. The Sensex has lost 400.81 points or 1.88% in three trading sessions from a recent high of 21,326.42 on 9 December 2013. The Sensex has gained 133.68 points, or 0.64% in this month so far (till 12 December 2013). The Sensex has garnered 1,498.90 points or 7.72% in calendar 2013 so far (till 12 December 2013). From a 52-week low of 17,448.71 on 28 August 2013, the Sensex has risen 3,476.90 points or 19.93%. From a record high of 21,483.74 hit on Monday, 9 December 2013, the Sensex is off 558.13 points or 2.6%.
Coming back to today's trade, index heavyweight and cigarette major ITC edged lower in choppy trade. Another index heavyweight Reliance Industries (RIL) also declined. ONGC dropped for the third day in a row. Auto stocks edged lower. IT stocks dropped. Metal and mining stocks dropped for the second day in a row. Bank stocks declined ahead of data on consumer price inflation. Tata Motors tumbled on reports that its British luxury car unit Jaguar Land Rover (JLR) has increased its capital expenditure and R&D spends guidance for the year ending 31 March 2015 (FY 2015).
Cadila Healthcare rose after the company said it has settled a patent litigation with US-based Warner Chilcott Company LLC. Lupin rose after the company said its US subsidiary -- Lupin Pharmaceuticals, Inc. (LPI) -- has launched its Duloxetine Hydrochloride Delayed-release (HCI DR) Capsules 20 mg, 30 mg and 60 mg strengths in the US.
The S&P BSE Sensex lost 245.80 points or 1.16% to settle at 20,925.61, its lowest closing level since 4 December 2013. The index lost 269.94 points at the day's low of 20,901.47 in late trade. The index declined 67.61 points at the day's high of 21,103.80 in early trade.
The CNX Nifty lost 70.85 points or 1.12% to settle at 6,237.05, its lowest closing level since 4 December 2013. The index hit a low of 6,230.55 in intraday trade. The index hit a high of 6,286.85 in intraday trade.
The total turnover on BSE amounted to Rs 1773 crore, higher than Rs 1748.76 crore on Wednesday, 11 December 2013.
The market breadth, indicating the overall health of the market, was negative. On BSE, 1,429 shares fell and 1,040 shares rose. A total of 173 shares were unchanged.
The BSE Mid-Cap fell 0.21% and the BSE Small-Cap index declined 0.32%. Both these indices outperformed the Sensex.
The S&P BSE Power index (up 0.41%), the S&P BSE Realty index (down 0.32%), the S&P BSE FMCG index (down 0.66%), the S&P BSE IT index (down 0.72%), the S&P BSE Consumer Durables index (down 0.73%), the S&P BSE Teck index (down 0.75%), the S&P BSE Healthcare index (down 0.88%) and the S&P BSE Capital Goods index (down 1.02%) outperformed the BSE Sensex.
The S&P BSE PSU index (down 1.29%), the S&P BSE Oil & Gas index (down 1.3%), the S&P BSE Metal index (down 1.37%), the S&P BSE Bankex (down 1.42%) and the S&P BSE Auto index (down 2.2%) underperformed the BSE Sensex.
From the 30-share Sensex pack, 26 stocks fell and rest rose.
Index heavyweight and cigarette major ITC dropped 1.54% to Rs 315.95. The stock hit a high of Rs 322 and low of Rs 315.75.
Index heavyweight Reliance Industries (RIL) shed 1.21% at Rs 870.30. The scrip hit high of Rs 879.95 and low of Rs 868.80. Bharti Airtel fell 1.69%. Shares of Bharti Airtel's telecom tower infrastructure subsidiary -- Bharti Infratel -- dropped 3.19%. Reliance Jio Infocomm, a subsidiary of Reliance Industries and Bharti Airtel early this week announced a comprehensive telecom infrastructure sharing arrangement under which they will share infrastructure created by both parties. This will include optic fibre network - inter and intra city, submarine cable networks, towers and internet broadband services and other such opportunities identified in the future, Reliance Jio Infocomm and Bharti Airtel said in a joint statement issued after trading hours on Tuesday, 10 December 2013.
The cooperation is aimed at avoiding duplication of infrastructure, wherever possible, and to preserve capital and the environment, the two companies said. This will also provide redundancy in order to ensure seamless services to customers of the respective parties, they said. The arrangement could, in future, be extended to roaming on 2G, 3G and 4G, and any other mutually benefiting areas relating to telecommunication, including but not limited to jointly laying optic fibre or other forms of infrastructure services. The pricing would be at 'arm's length', based on the prevailing market rates. As part of this arrangement, Bharti and Reliance Jio have already announced an agreement under which Bharti has provided capacity on its i2i submarine cable to Reliance Jio.
ONGC dropped 2.79%, with the stock falling for the third day in a row. ONGC early this week said the Gujarat High Court vide its order dated 30 November 2013 has decided that royalty on crude oil is to be paid on pre-discount price. The court has directed ONGC to make payment towards shortfall royalty for the period from April 2008 till this date, within a period of two months. ONGC said that the company is in the process of filing an appeal in the Supreme Court of India against the order of the Gujarat High Court and making the Union Government as party. The company's management has already directed Corporate Legal to engage best possible advocate for the case, ONGC said.
Meanwhile, it has been conveyed to the Ministry of Petroleum and Natural Gas from CMD, ONGC to Secretary, Petroleum and Natural Gas that in case the decision goes against the company and if ONGC is directed to deposit the royalty on pre-discount price, ONGC should be compensated by the Government of India for the differential royalty. ONGC said that it will not be in a position of bearing such a huge burden, particularly when it is of recurring nature.
Giving a background about the issue, ONGC said that the company started making payment of royalty on crude oil from 1 April 2008 at post discount price to state governments in India, in line with royalty payment to the Central Government and taking into account the provisions of Oilfields (Regulation and Development) Act, 1948 (ORDA). ONGC further said that the company paid excess royalty to the tune of Rs 3419 crore to the Gujarat state government for the period 2003-04 to 2007-08.
ONGC said that the latest ruling of the Gujarat High Court to direct ONGC to pay royalty on onshore crude production at the pre-discount price instead of the post-discount price works out to about Rs 10000 crore for the period April 2008 to September 2013 in respect of crude oil production in Gujarat alone and hence will have significant adverse impact on ONGC's financials. Further, the payment of royalty on pre-discount price is of recurring nature. Similar implications would also arise in other states like Assam, Andhra Pradesh and Tamil Nadu, where ONGC is producing crude from onshore fields.
ONGC also said that in a separate but related issue, ONGC has been asked to pay VAT on pre-discount price from 2004-05 onwards by Gujarat VAT Tribunal, against which ONGC is in the process of filing appeal in Gujarat High Court. Assam VAT authorities have also raised demand for payment of VAT on pre-discount price, which is also being addressed by ONGC, the company said in a statement.
In a separate announcement, ONGC on 10 December 2013 said that a memorandum of understanding (MOU) was signed between the Co-ordinating Ministry for Strategic Sectors (MICSE) of the Republic of Ecuador and ONGC Videsh on 9 December 2013 in New Delhi. ONGC Videsh has been evaluating E&P opportunities in Ecuador for last one year. Latin America is a focus area of ONGC Videsh. The MOU provides that MICSE would make available to ONGC Videsh information regarding oil and gas projects in Ecuador, which ONGC Videsh would evaluate to identify the project/projects of its interests and could propose participation in such project/projects through specific definitive agreements.
ONGC Videsh is a wholly-owned subsidiary of ONGC.
Coal India (CIL) shed 2.65%. The Competition Commission of India (CCI) has imposed a penalty of Rs 1773.05 crore on CIL for abusing its dominant position. CCI passed the final order on 9 December 2013 on a batch of information filed by Maharashtra State Power Generation Company and Gujarat State Electricity Corporation against Coal India and its subsidiaries viz. Mahanadi Coalfields, Western Coalfields, South Eastern Coalfields, the Ministry of Corporate Affairs said on 10 December 2013. CIL after market hours on Wednesday, 11 December 2013, said that that the company is seized of the matter and that the company will initiate appropriate legal action after the receipt of the copy of the order by post.
The CCI held that CIL through its subsidiaries operates independently of market forces and enjoys undisputed dominance in the relevant market of production and supply of non-coking coal in India. The Commission inter alia also held CIL and its subsidiaries in contravention of the provisions of section 4(2)(a)(i) of the Competition Act, 2002 for imposing unfair/discriminatory conditions in Fuel Supply Agreements (FSAs) with the power producers for supply of non-coking coal. Apart from issuing a cease and desist order against CIL and its subsidiaries, the CCI directed modification of FSAs in light of the findings and observations recorded in the order. The impugned clauses related to sampling and testing procedure, charging transportation and other expenses for supply of ungraded coal from the buyers, capping compensation for supply of stones etc.
Further, for effecting these modifications in the agreements, CIL was ordered to consult all the stakeholders, CCI said. CIL was also directed to ensure parity between old and new power producers as well as between private and PSU power producers, as far as practicable, CCI said.
Metal and mining stocks dropped for the second day in a row. Jindal Steel & Power (down 1.59%), Sail (down 1.49%), Sesa Sterlite (down 0.94%), JSW Steel (down 1.24%), Tata Steel (down 1.33%), Hindalco Industries (down 1.91%), Hindustan Zinc (down 2.51%), NMDC (down 0.68%) and Hindustan Copper (down 1.29%) declined. National Aluminum Company rose 1.84%.
Bank stocks declined ahead of data on consumer price inflation. AXIS Bank (down 1.9%), ICICI Bank (down 2.37%), HDFC Bank (down 0.37%), and Yes Bank (down 2.34%), dropped.
State Bank of India (SBI) lost 1.02%. The state-run bank early this week said that the Government of India (GoI) has accorded its approval to the bank to raise Rs 9576 crore of equity during the current financial from the market by way of Qualified Institutions Placement (QIP) as per law with the condition that the Gol holding shall not come down below 58%. The GoI has also accorded its approval to SBI to increase its "Issued Capital" by Rs 11576 crore in accordance with Section 5(2) of SBI Act, 1955, subject to requisite approvals.
Among other PSU bank stocks, Canara Bank, Union Bank of India, Bank of India, Bank of Baroda and Punjab National Bank dropped 0.58% to 2.16%.
Central Bank of India lost 0.38% to Rs 51.90. The state-run bank before trading hours today, 12 December 2013, said that the Capital Raising Committee of the board of directors of the Bank at its meeting held on Wednesday, 11 December 2013, has allotted 30.58 crore equity shares to President of India (Government of India) at a price of Rs 58.85 per share aggregating Rs 1800 crore. With this allotment, the shareholding of President of India (Government of India) in Central Bank of India has increased to 88.63% from 85.31%.
Auto stocks declined. Maruti Suzuki India dropped 1.99%
Mahindra & Mahindra (M&M) fell 0.58%. The company after market hours today, 12 December 2013, announced that it would be raising the prices of its passenger as well as its commercial vehicles by up to 2%. The price hike will be effective from 1 January 2014. The price increase is primarily due to rising materials, input and freight costs, M&M said.
Commenting on the price hike, Pravin Shah, Chief Executive, Automotive Division, M&M, said: "We have been holding back prices for a while but now it has become necessary to raise them to partly compensate the increase in materials, input and freight costs. As always, Mahindra remains committed to its customers".
Tata Motors tumbled on reports that its British luxury car unit Jaguar Land Rover (JLR) has increased its capital expenditure and R&D spends guidance for the year ending 31 March 2015 (FY 2015). The stock lost 4.71%. JLR has reportedly indicated investment of 3.5 to 3.7 billion pounds in R&D and capital expenditure for FY 2015, which is substantially higher than the company's guidance of investment of 2.7 billion pounds for the current financial year. The increased capital investment would be towards development of new products in new and existing segments and investment in new powertrains and technologies to meet customer and regulatory requirements.
JLR on Wednesday, 11 December 2013, said its retail sales jumped 25% to 37,403 units in November 2013 over November 2012. Retail sales of the Jaguar brand jumped 55% to 6,244 units in November 2013 over November 2012. Retail sales of the Land Rover brand rose 20% to 31,159 units in November 2013 over November 2012. JLR announced the retail sales data on Wednesday, 11 December 2013.
Commenting on the November performance Andy Goss, JLR Group Sales Operations Director said: "November has been another solid month in what has so far, been a great year for Jaguar Land Rover. Our continued sales success is a testament to our sustained investment in new and exciting products which are driving growth internationally and attracting new customers to our brands".
Shares of two wheeler makers also declined. Bajaj Auto (down 2.21%) and Hero MotoCorp (down 1.77%) declined.
MRF rose 2.46% on market rumours that the company may declare stock split and bonus issue.
IT stocks dropped. Infosys fell 0.48%.
Wipro fell 1.59% to Rs 510 on profit booking after gaining 10.04% in prior eight trading days to Rs 518.25 on 11 December 2013 from a recent low of Rs 470.95 on 29 November 2013.
TCS shed 1.53% at Rs 2,025.10. The company announced during market hours that it has been selected by the Improvement Service to implement a Citizen Account Service for Scottish citizens, allowing them to access numerous digital public services from a single user profile. The project is TCS's first public sector win in Scotland.
HCL Technologies rose 0.14% to Rs 1,177.70. The stock was volatile. The stock hit a high of Rs 1188.10, which is a record high for the counter. The scrip hit low of Rs 1,157.30 in intraday trade. Index compiler FTSE has raised the 'investability weight' in its global equity index series of HCL Technologies to 38% from 30%.
Tech Mahindra shed 0.74%. FTSE has raised 'investability weight' in its global equity index series of Tech Mahindra to 45% from 24%.
Many pharmaceutical shares edged lower. Cipla (down 1.42%), Dr Reddy's Laboratories (down 1.55%), Glenmark Pharmaceuticals (down 0.88%) and Wockhardt (down 2%) declined. Ranbaxy Laboratories gained 1.28%.
Sun Pharmaceutical Industries fell 1.18%. The company after market hours today, 12 December 2013, announced that the US FDA has granted its subsidiary final approval for its Abbreviated New Drug Application (ANDA) to market a generic version of Cymbalta, Duloxetine Delayed-Release Capsules USP, 20 mg, 30 mg and 60 mg. Duloxetine Delayed-Release Capsules USP, 20 mg, 30 mg and 60 mg are therapeutic equivalents of Eli Lilly & Company's Cymbalta Delayed-Release Capsules. These Capsules have annual sales of approximately $5.5 billion in the US. Duloxetine Delayed-Release Capsules USP are indicated for the treatment of major depressive disorder (MDD), generalized anxiety disorder (GAD) and diabetic peripheral neuropathic pain (DPNP).
Sun Pharma's subsidiary, being one of the first-to-file ANDAs for generic Cymbalta with a para IV certification, is eligible for shared 180-day marketing exclusivity in the US.
Cadila Healthcare rose 2.65% after the company said it has settled a patent litigation with US-based Warner Chilcott Company LLC. The announcement was made after market hours on Wednesday, 11 December 2013.
Cadila Healthcare said it along with Zydus Pharmaceuticals (USA) Inc, have entered into an agreement with Warner Chilcott Company to settle all outstanding patent litigation related to Asacol HD (mesalamine) delayed-release tablets. The agreement remains subject to preparation and execution of definitive documentation, Cadila Healthcare said in a statement.
As part of the agreement, Warner Chilcott will grant Cadila and Zydus a royalty-bearing license to market a generic version of Asacol HD beginning on 15 November 2015 or earlier under certain circumstances, following receipt by Zydus of final approval from the USFDA of its ANDA for generic Asacol HD, the company said.
Alternatively, if Zydus does not receive FDA approval of its generic Asacol HD by 1 July 2016, Zydus will be permitted to launch an authorised generic version of Asacol HD beginning on 1 July 2016, it added. Asacol is used to treat ulcerative colitis, proctitis and proctosigmoiditis.
Lupin rose after the company said its US subsidiary -- Lupin Pharmaceuticals, Inc. (LPI) -- has launched its Duloxetine Hydrochloride Delayed-release (HCI DR) Capsules 20 mg, 30 mg and 60 mg strengths in the US. The stock rose 0.41%. LPI on Wednesday, 11 December 2013, received final approval from the United States Food and Drugs Administration to market Duloxetine HCI DR Capsules USP, 20 mg, 30 mg, 40 mg and 60 mg strengths in the US.
Duloxetine HCI DR Capsules 20 mg, 30 mg and 60 mg strengths are the generic equivalent of Eli Lilly & Company's, Cymbalta Delayed-release Capsules 20 mg, 30 mg and 60 mg. which are indicated for the treatment of major depressive disorders, generalized anxiety disorders and management of neuropathic pain associated with diabetic peripheral neuropathy. Cymbalta Delayed Release Capsules 20 mg, 30 mg and 60 mg strengths had annual US sales of approximately $5.43 billion, as per IMS MAT September 2013 data.
Titan Company declined 1.18% to Rs 222.30 after 0.09% equity changed hands in a bulk deal on BSE today, 12 December 2013. A bulk deal of 7.88 lakh shares was executed on the Titan Industries counter at Rs 224 per share at 13:26 IST on BSE today, 12 December 2013.
Crompton Greaves declined 1.46%. The company after market hours on Wednesday, 11 December 2013, in a clarification issued with regard to a media reports said that the company is taking several actions to stabilize operations of the Canadian plant. Presently, the plant is fully operational and continues to do normal business, the company said.
Realty stocks edged lower. DLF (down 0.8%), HDIL (down 0.7%), Sobha Developers (down 1.83%), and Indiabulls Real Estate (down 1.37%), D B Realty (down 2.39%) declined. Unitech was unchanged at Rs 15.60.
Shares of local search engine Just Dial gained 0.93% after index compiler FTSE said it will include the stock in its FTSE AllCap index, effective from the start of trading on 23 December 2013.
Wheels India rose 1.98% after the company's board of directors proposed to issue shares to public shareholders on rights basis to comply with the minimum public shareholding requirements. The announcement was made after market hours on Wednesday, 11 December 2013.
Wheels India said that the company's board of directors proposes to pass a resolution(s) by Circulation on 16 December 2013, inter alia, to consider the issue of equity shares on rights basis to comply with the minimum public shareholding requirements applicable to the company, by way of a rights offering to the public shareholders of the company with the promoters and promoter group shareholders of the company foregoing their rights entitlement, as permitted by the Sebi.
Promoters own 91.44% stake in Wheels India (as per the shareholding pattern as on 30 September 2013). Promoter shareholding in private companies is not allowed to exceed 75% i.e. minimum public shareholding of 25% to comply with Sebi norms.
United Breweries rose 2.85% to Rs 813.80, with the stock extending Wednesday's gains triggered by Heineken hiking its stake in the company. Dutch beer maker Heineken International BV, on Tuesday, 10 December 2013, hiked its stake in United Breweries for an estimated Rs 275 crore. According to the information available with the bourses, Heineken International BV acquired a total of 35.58 lakh shares, amounting to 1.35% stake, of United Breweries through open market. The shares were purchased, from Citicorp Finance (India) on an average price of Rs 772.90, valuing the transaction at Rs 275 crore.
Gujarat Pipavav Port surged 4.14% to Rs 61.70 after 0.14% equity changed hands in two bulk deals executed on the counter on BSE today, 12 December 2013. A bulk deal of 1.70 lakh shares was executed on the Gujarat Pipavav Port counter at Rs 59.20 per share at 12:25 IST on BSE today, 12 December 2013. Another bulk deal of 5 lakh shares was executed on the counter at Rs 59.20 per share at 12:36 IST on BSE today, 12 December 2013.
HeidelbergCement India rose 0.81% to Rs 37.30 after the company said a meeting of the board of directors of the company will be held on 16 December 2013, inter alia, to consider issue and allotment of non-convertible debentures aggregating to Rs 370 crore on private placement basis to its non-resident parent/group companies.
SKS Microfinance rose 2.8% after the company announced the second microfinance securitization during the current financial year of Rs 80.81 crore. The announcement was made after market hours on Wednesday, 11 December 2013.
According to a press release issued by SKS Microfinance, the securitization deal involved downloading receivables from micro loans extended to 100,850 rural women entrepreneurs through a special purpose vehicle whose pass through certificates (PTCs) have been purchased by a major private sector bank.
The entire pool qualifies for priority sector treatment as per the Reserve Bank of India's (RBI) priority sector lending guidelines, the company said in a statement.
Notably, 30% of the pool is from scheduled caste and scheduled tribe entrepreneurs, 16% from minorities, 37% from backward caste and the remaining 17% from women belonging to the other castes. The entire pool comprises receivables from women entrepreneurs from weaker sections, the company added.
SKS Microfinance said that the pool is rated AA (SO) signifying 'high degree of safety regarding timely servicing of financial obligation' by one of the leading rating agencies. The pool is structured with geographical diversity as it comprises receivables from 12 non-Andhra Pradesh states and subjected to a minimum seasoning of three months, the company said in a statement.
The Securities and Exchange Board of India (SEBI) unveiled new proposals on Wednesday, 11 December 2013, broadening the scope of who can be held liable for insider trading violations, as it steps up its fight against securities fraud. India's financial market regulator plans to include company employees, directors and their immediate relatives and other stakeholders such as founders, handling market sensitive information under its purview. Under current rules only senior executives are liable for trading violations.
Officials with access to sensitive information will also be required to submit planned trades in company shares ahead of time to resolve any potential conflict of interest. The new proposals also mandate that every listed company and market intermediary formulate a code of conduct to regulate, monitor and report trading in securities by its employees or connected persons. Trades by stakeholders, employees, directors and their immediate relatives would need to be disclosed internally to the company.
In the foreign exchange market, the rupee edged lower against the dollar on speculation a US budget agreement will boost prospects for the Federal Reserve to start tapering its monetary stimulus for the US economy. The partially convertible rupee was hovering at 61.83, compared with its close of 61.245/255 on Wednesday, 11 December 2013.
The Reserve Bank of India on Wednesday, 11 December 2013, said it has decided to provide additional liquidity of Rs 10000 crore through the 14-day term repo scheduled to be conducted on Friday, 13 December 2013. Accordingly, the notified amount for the 14-day term repo auction to be conducted on that day will be adjusted upwards by Rs 10000 crore. The RBI said it has announced this additional liquidity support for the banking sector so as to ensure that adequate liquidity is available to support the flow of credit to the productive sectors of the economy. The RBI said that the liquidity conditions are expected to tighten in the immediate future on account of advance tax payments commencing from mid-December 2013.
The government will unveil industrial production data for October 2013 after trading hours today, 12 December 2013. Industrial output is estimated to fall 1.5% in October 2013, as per the median estimate of a poll of economists carried out by Capital Market. Industrial production rose 2% in September 2013, showing increase in growth from 0.4% growth recorded in August 2013.
Data on inflation based on the general consumer price index (CPI) for November 2013 will also be unveiled after trading hours today, 12 December 2013. CPI (combined) for November 2013 is estimated at 10%, as per the median estimate of a poll of economists carried out by Capital Market. The CPI inflation (combined) for October 2013 stood at 10.09% (y-o-y), higher than 9.84% (y-o-y) seen in September 2013.
The government will unveil data on inflation based on the wholesale price index (WPI) for November 2013 on 16 December 2013. WPI is seen easing a bit at 6.9% in November 2013, from 7% in October 2013, as per the median estimate of a poll of economists carried out by Capital Market.
The Reserve Bank of India (RBI) announces next Mid-Quarter Review of Monetary Policy for 2013-14 on 18 December 2013. The Third Quarter Review of Monetary Policy for 2013-14 is scheduled 28 January 2014.
President Pranab Mukherjee has given the Andhra Pradesh Assembly six weeks to decide on Telangana. The President had on Wednesday sent the Telangana Bill to the Andhra Pradesh Assembly for consideration. Earlier, Pranab Mukherjee held consultations with legal experts on various provisions of the draft Telangana Bill proposing splitting of Andhra Pradesh.
European stocks edged lower on Thursday, 12 December 2013, as investors awaited US retail-sales and jobless-claims data to gauge whether the Federal Reserve will decide next week to reduce monthly bond purchases. Key benchmark indices in France, Germany and UK were off 0.21% to 0.63%.
The European Central Bank (ECB) has signaled that its easy-money policies will continue far into the future amid downside risks to the euro zone economy, echoing comments last week by ECB President Mario Draghi. The monetary policy stance will remain accommodative for as long as necessary, and will thereby continue to assist the gradual economic recovery in the euro area, the ECB said in its monthly bulletin. Last week the ECB kept its key policy rates unchanged at record lows and reaffirmed the forward guidance it has had in place since July, that interest rates would stay at present or lower levels for an "extended" period.
The ECB expects gross domestic product in the euro zone to decline 0.4% this year and pick up to 1.1% growth next year and 1.5% in 2015. It expects annual inflation to average 1.1% in 2014 and 1.3% in 2015, which is significantly below the bank's target of just under 2% over the medium term. Economic risks are tilted to the downside, the ECB said in its monthly bulletin, while risks to its consumer-price outlook are broadly balanced.
Asian shares dropped on Thursday, 12 December 2013, on heightened expectations the Federal Reserve may act sooner than later to unwind its stimulus after a provisional budget deal in Washington eased some of the fiscal drag on the US economy. Key benchmark indices in China, Taiwan, South Korea, Indonesia, Singapore, Japan and Hong Kong were off 0.06% to 1.39%.
South Korea's central bank on Thursday kept its benchmark interest rate steady at 2.5%, standing pat for a seventh straight month amid a tentative economic recovery. The last rate move was a surprise quarter-percentage-point rate cut in May. At that time, the government also introduced a $16 billion extra budget, seeking to revive the economy that grew just 2% in 2012, the slowest in three years.
Chinese policy makers are meeting this week to set economic growth targets for 2014. China's central economic work conference, which is expected to end today or tomorrow, will set the tone for macroeconomic policy and decide major targets for 2014.
Trading in US index futures indicated a flat opening of US stocks on Thursday, 12 December 2013. US stocks posted their biggest drop in a month on Wednesday as traders locked in recent gains after Congress announced the provisional budget deal. The bipartisan budget agreement reached late on Tuesday, though modest in spending cuts, would end three years of political squabbling in Washington that climaxed in October with a two-week partial government shutdown. The US House of Representatives could vote on the deal tomorrow, 13 December 2013.
The Federal Open Market Committee (FOMC) holds a two-day policy meeting on interest rates in the United States on 17-18 December 2013. The US central bank currently buys bonds worth $85 billion a month in a bid to hold interest rates low and encourage economic growth in the world's biggest economy. Minutes of the Fed's October meeting released on 20 November 2013 showed officials may reduce their $85 billion a month of bond buying if the economy improves as anticipated.
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