Dollar Takes Centre Stage as Data Looms, Greek Worries Fester

 The dollar stayed bid early in Asia on Thursday as the market geared up for a deluge of U.S. data that could back expectations for the Federal Reserve to lift interest rates sooner rather than later.

The euro, meanwhile, remained under a cloud with Greece's debt crisis unlikely to be resolved before Sunday's referendum. Prime Minister Alexis Tsipras on Wednesday urged Greeks to reject an international bailout deal, souring hopes of any breakthrough.

The dollar index came within a whisker of a three-week peak set on Monday. It last stood at 96.321, following a 0.8 per cent gain on Wednesday.

Against the yen, the greenback fetched 123.22, pulling further away from a five-week trough of 121.93. The euro slipped to $1.1044, continuing to retreat from Monday's high of $1.1279.

Investors will be fed a heavy diet of U.S. data from durable goods to nonfarm payrolls ahead of a holiday on Friday, in observance of the July 4 Independence Day.

As a preview of the all-important payrolls data, the ADP National Employment Report on Wednesday showed private employers added 237,000 jobs in June, the biggest gain since December and ahead of the 218,000 forecast.

"A further improvement in the labour market may boost bets for a Fed rate hike in 2015," said David Song, currency analyst at DailyFX. "However, a dismal development risks a further delay in the Fed's normalisation cycle."

The dollar notched up solid gains against commodity currencies, particularly the New Zealand dollar which fell as far as $0.6708, a low not seen since June 2010.

Not helping the kiwi dollar, international dairy prices slumped to a six-year low as demand for milk powder continued to fall just as supply is expected to grow.

Also under fire, the Canadian dollar slid to its lowest in over two months at C$1.2598 per U.S. dollar in thin holiday trade. Canadian markets were closed on Wednesday for a public holiday.

The loonie was already in the crosshairs of sellers after the Canadian economy unexpectedly shrank in April. Data on Tuesday showed gross domestic product fell 0.1 per cent from March, confounding forecasts for a gain of 0.1 per cent.

It was the fourth consecutive monthly decrease that bodes poorly for a second-quarter pick-up in growth that the Bank of Canada is looking for.

Strides Arcolab Gains; RBI Removes Restriction on FII Buying

Strides Arcolab shares gained as much as 2.5 per cent to hit intraday high of Rs 1,171.50 on Thursday after the Reserve Bank of India removed restriction on Foreign Institutional Investors (FII) buying the stock.


Strides Arcolab was in the restricted list of FIIs after foreign holding in the stock touched 49 per cent of total outstanding shares in 2013. As of July 1, 2015 FIIs holding in Strides Arcolab was reduced to 32.4 per cent.


Post this removal of restriction, foreign investors can now buy shares of Strides Arcolab from the secondary market.


As of 10.38 a.m. Strides Arcolab shares traded 1.35 per cent higher at Rs 1,159 apiece, outperforming the Nifty, which was up 0.16 per cent.

A Bankrupt Greece Struggles as Government Heads Toward Default

 This is what it looks like when a country goes bankrupt.

The Greek government, which Tuesday missed a payment to the International Monetary Fund, is scrambling to come up with the money to pay pensions and other bills. And Greece's banks, closed since Monday, have all but exhausted an emergency credit line provided by the European Central Bank.

Greece is effectively out of money, analysts said Wednesday. And there appears to be little prospect of resuming bailout negotiations with the IMF, the European Central Bank and the other eurozone nations until at least after a referendum vote on a bailout offer set for Sunday. The European Central Bank has shown no sign of advancing additional money while Greece's financial future is clouded by so much uncertainty.

Without a lifeline, analysts say, Athens may be forced within a month to resort to issuing IOUs, scrips or an ersatz currency to pay its pensioners and other domestic obligations.

"Greece is de facto insolvent now," said Mujtaba Rahman, the chief eurozone and Greece analyst at Eurasia Group, a political risk analysis firm based in New York. "They have not paid the IMF, they are barely paying domestic pensions, and there is no framework to suggest Greece will have recourse to external financing quickly."

Oxygen is being gradually cut off to the Greek economy by the capital controls that have been imposed on the banks. To conserve funds, ATM withdrawals have been limited to 60 euros a day, among other measures.

While there is little hard data on how much financial leeway the banks have left, by some estimates they have less than 2 billion euros, or about $2.2 billion, in unused central bank credit. That would be enough money to last perhaps until early next week.

Greek banks are supposed to be closed until next Tuesday following the European Central Bank's decision Sunday to cap an emergency credit line at 89 billion euros. At a meeting Wednesday, the central bank left the cap at that level, a spokesman said.

But even if the central bank were to lift that cap - which is unlikely unless Greece reaches an agreement with its creditors - the Greek banks probably have less than 30 billion euros worth of collateral available to use against further loans, according to an estimate by Barclays.

That sum could be exhausted swiftly if depositors continue to withdraw their money. And there is a chance that the European Central Bank could tighten collateral requirements after Greece missed its 1.5 billion euros IMF payment Tuesday. Such a decision would only further constrain Greek banks' access to emergency cash, perhaps causing some to fail.

What all this means is that any new bailout that Greece might discuss with its creditors would now have to be based on new, even worse economic growth forecasts than before. Unless international creditors have a change of heart and decide to grant Greece's request for relief from some of its staggering debt, the terms of any new bailout would probably require even tougher austerity measures than the ones that Prime Minister Alexis Tsipras has been trying to avoid.

"They may have backed themselves into a corner of more austerity because the economy has gotten weaker," said Zsolt Darvas, a senior fellow at Bruegel, a policy research group in Brussels.

"Now the government realizes that if they want to stay in the euro, they need a new program, and the terms will depend on whether the countries want to teach Greece a hard lesson and demand harder conditions, or say, 'OK, let's go easier and try to save the country.'"

The Greek state does not provide overall figures for how much money it has, so economists, as well as Greece's creditors, are left with best-guess estimates. Greece made its last two international payments by tapping its reserves at the IMF and calling in funds from other government departments within the country.

"Functionally, they are out of money now and living on borrowed money," said Carl B. Weinberg, chief economist of High Frequency Economics in Valhalla, New York.

Although at the end of May Greece reported a small primary surplus of 1.5 billion euros - the amount of cash on hand minus expenses and interest payments on the debt - analysts said that in reality the money had probably already been consumed by international and domestic payments that Greece was scrambling to make.

And some of that primary surplus accumulated only because Athens had not been paying arrears owed to the nation's hospitals, state institutions and private companies with state contracts.

Tax receipts, which had started to rise at the end of last year, very likely plunged in the past couple of months as people and businesses refrained from making payments over concern that Greece might exit the euro. Greece had a shortfall in tax revenues of more than 1.7 billion euros at the end of May.

Corporate and income tax receipts have no doubt declined further since then, as have value-added tax payments, said Wolfango Piccoli, a managing director of Teneo Intelligence in London.

"Why would you pay now," he said, "when one month down the line the country could be in default or God knows where?"

The Greek central bank itself is facing a sizable shortfall: Not only did Tsipras' government not make its loan payment to the IMF on Tuesday, it also failed to make a 472 million euros payment to the central bank for a loan it extended to the Greek government back in 1994.

"It tells you just how precarious the situation is," said Jens Bastian, an economics consultant based in Athens and a former member of the European Commission's task force on Greece. "You weren't even able to pay your own central bank."

Bastian estimated the state had enough cash to pay state salaries and pensions for at least this month. But unless Greece and its creditors can strike a deal for a new bailout, Greece risks defaulting on the European Central Bank on July 20 when a 3.5 billion euros repayment is due.

The European Central Bank might be forced to take severe measures if the Greeks vote "no" on the referendum on whether to accept the most recent conditions set by creditors in return for more financial aid. And if Greece cannot make that July 20 payment, the governing council of the central bank might see little choice but to cut off aid altogether.

According to its own rules, the European Central Bank may lend only to banks that are solvent. And the Greek banks will be insolvent if the government cannot pay its bills. The banks own large quantities of government bonds, and they face huge losses now that the value of those bonds is seriously in doubt. If the banks fail, the European Central Bank would lose some or all of the 89 billion euros it has provided in emergency cash.

The restrictions on bank transactions that the government imposed this week do not prevent electronic money transfers within Greece, which means that companies can still pay salaries and Greeks can still use debit cards to make purchases.

But the Greek economy still runs largely on cash, and many people do not have debit cards or credit cards. Those people, disproportionately poor and elderly, could have trouble making everyday purchases. And their plight would become even worse if banks ran out of euro notes altogether, which could happen within days.

"We are probably almost there," said Antonio Garcia Pascual, an analyst with Barclays in London.

Jaypee group receives approval to sell power projects

The government has decided to allow the transfer of Karcham Wangtoo (1000 MW) and Baspa II (300 MW) hydro projects after the two had signed a pact in November 2014.

The Himachal Pradesh Government has given the permission to permit the transfer of two major hydro power projects operated by Jaypee group to another private company JSW Energy Ltd, according to reports.

A report says that the government has decided to allow the transfer of Karcham Wangtoo (1000 MW) and Baspa II (300 MW) hydro projects after the two had signed a pact in November 2014. 

The power deal was signed between the two companies for Rs.9,700 crore in November last year.

 

JSW Energy would have 100 per cent stake in the two hydro power projects with a combined capacity of around 1,391 MW, says report.

Top economy news of the day - July 2, 2015

UK's food regulator Food Standards Agency (FSA) gave a clean chit to Nestle for Maggi manufactured in India saying levels of lead in the product are well within the EU permissible levels.

UK's food regulator Food Standards Agency (FSA) gave a clean chit to Nestle for Maggi manufactured in India saying levels of lead in the product are well within the EU permissible levels.

Country's largest lender State Bank of India is moderating pace of opening brick and mortar branches as it steps up thrust on improving access for customers through digital platform and electronics channels.

Dr Reddy's Laboratories announced the launch of its new visual identify and brand with a heart symbol, that the company expects to guide its all actions.

Rashtriya Ispat Nigam Limited (RINL), the corporate entity of Vizag Steel, will expand capacity to 16m tonnes per annum (mtpa) by 2025 with an investment of Rs350bn, a top official said.

Pharmaceuticals major Zydus Group announced receipt of approval to sell chronic pain reliever morphine sulfate tablets from the US Food and Drug Administration (USFDA)

State-owned power equipment maker Bhel said it has commissioned Sudan's largest power plant

Mahindra Group, one of India's largest utility vehicle manufacturer, has called on the government to allocate budgets for setting up infrastructure required to boost eco-friendly electric car usage in India. 

Regulator asked Financial Technologies to sell its stake in Indian Energy Exchange by 20th July failing which regulator will sale that stake while another authority (Company Law Board) has asked the company not to sell any assets until 2nd September.

The fourth largest private sector lender Kotak Mahindra Bank cut its base rate by 0.10% to 9.75, joining its larger rivals which have announced such downward revisions in the recent past.

Gillette India will stop selling Duracell batteries from December after parent company Procter & Gamble divested the brand globally.

Infrastructure major Punj Lloyd received shareholders’ approval for taking term loans up to Rs. 15 bn with the condition that the lenders can get the debt converted into equity shares in case of a default. 

Wind turbine manufacturer, Suzlon Group announced it has installed its 10,000th turbine. Since its commencement of operations in 1995, the Group has installed 14,000MW of turbines.

Top corporate news of the day- July 2, 2015

Based on sales data from six companies, sale of passenger vehicles (cars, utility vehicle and vans) is estimated to have grown by 2.41% in June, against an industry growth of 15.83% and 4.67% in April and May, respectively.

In what could turn out to be a major boost for fresh investments in the City Gas Distribution (CGD) sector and allow companies to fix prices, the Supreme Court held that the downstream regulator Petroleum and Natural Gas Regulatory Board (PNGRB) has no power to fix or regulate network tariffs.

Based on sales data from six companies, sale of passenger vehicles (cars, utility vehicle and vans) is estimated to have grown by 2.41% in June, against an industry growth of 15.83% and 4.67% in April and May, respectively.

The government reduced marginally the import tariff value of gold to US$382 per 10g and of silver to US$516 per kg considering weak global price trend in the wake of Greece crisis.

Growth in the country's manufacturing activities slowed down in June as compared to May as new business orders were not as forthcoming, showed a widely tracked purchasing managers' index (PMI).  

Uttar Pradesh sugar mills have again hinted at suspending operations in the coming cane crushing season, for the same reason, the high price of the latter as compared to the return from sale of sugar. 

The central government said it's currently examining the funds requirement of public sector banks over the next 3 years and promised required capital support as part of a comprehensive package to strengthen them.

Greece made last-minute overtures to its international creditors for financial aid, but it was not enough to save the country from becoming the first developed economy to default on a loan with the International Monetary Fund. 

Sensex, Nifty to open on a flat note

The Nifty moved towards the 8,400 zone on four occasions in last three months. The action may now shift to the mid-cap and small-cap segments in the coming day. Global cues are mixed. US market managed to end positively. Asian markets too are in the green.

The creditors and euro zone finance ministers feel it is now late for any negotiations with Greece and any further steps would be taken only after the referendum. The sirens of destruction are blackmailing you to say yes to everything without any prospect of exiting the crisis, Greek Prime Minister Alexis Tsipras earlier said adding that the EU leaders were extremist conservative forces who had forced the shutdown of Greece’s banks because the country had dared to call the referendum. For now, Tsipras maintains that Athens could accept the bailout offer, if some conditions were altered. 

Indices may move into a range-bound trade as action could shift to side counters. The Nifty moved towards the 8,400 zone on four occasions in last three months. The action may now shift to the mid-cap and small-cap segments in the coming day. Global cues are mixed. US market managed to end positively. Asian markets too are in the green.

Public Sector Banks fired up on the likelihood of Government infusing significant additional capital in them over and above the amount earmarked in Budget FY16. Many PSU banks are expecting to receive the capital aid in ensuing months. Recent commentary from the FM and his ministry has also been empathetic towards the capital needs of public banks.”

The Supreme Court dismissed the special leave petition filed by the downstream regulator Petroleum & Natural Gas Regulatory Board (PNGRB). The petition was against the Delhi High Court order of June 2012 which quashed the regulator’s directions to IGL to slash tariffs and charges. PNGRB had, in April 2012, issued a directive to IGL to slash network tariff and compression charge by about 60 per cent — with retrospective effect from April 2008

The Securities and Exchange Board of India is contemplating introduction of a lock-in period for algo and high-frequency trading orders to help check manipulation by traders, said SEBI sources, according to a report in BL. However, according to market experts, the introduction of a lock-in period for algorithmic or high-frequency orders would not be a plausible solution, the report added.

The Central Government has notified the 30th day of September, 2015, as the date on or before which a person may make a declaration in respect of an undisclosed asset located outside India under the compliance provisions of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (‘Black Money Act’).

Prime Minister launched the Digital India Week on 1st of July with a view to empower the people of the country through the Digital India Programme.  Wipro Chairman Azim Premji reportedly said that the vision of PM for Digital India is a powerful One. The Digital India Will help Democratising Access to information, says Azim Premji.

Reliance Industries will make an investment of over Rs. 250,000 crore in the digital space, including rollout of wireless broadband infrastructure and manufacturing of mobile handsets, its chairman Mukesh Ambani said. Speaking at the launch of Digital India Week here, Ambani, whose $ 16 billion Reliance Jio Infocomm Ltd is set to launch telephony and broadband services by December, said the firm’s investments in digital space will create employment for over 5 lakh people.

Cyrus Mistry also stated that Govt's Policies must evolve rapidly to bring a change in Society, according to reports. Tata Group continues to invest in Digital Space, says Cyrus Mistry.

The health of the Indian manufacturing economy improved further in June, but output growth eased on the back of a weaker rise in new business inflows. India HSBC

Manufacturing PMI fell from 52.6 in May to 51.3 in June.

Fitch has cut its long-term rating on Greece to 'CC' from 'CCC' amid turmoil over the country's debt negotiations which resulted in fears that the nation could make an exit from the euro zone.

CRISIL expects the loans against property (LAP) business to grow at 22 per cent annually in the next four years, and double to Rs.5 lakh crore by March 2019.

Oil Prices Drop as Greece Defaults And Output Soars

 Oil prices fell on Wednesday after Greece became the first developed economy to default on a loan with the International Monetary Fund and as both U.S. and OPEC production hit new records.

Greece, as expected, was not able to repay 1.6 billion euros it owed to the IMF, in what was the largest missed payment in the Fund's history.

Greece's default pushed up the dollar versus the euro, with the stronger greenback pressuring crude prices as it increases dollar-denominated oil import prices for countries using different currencies.

Front-month Brent crude futures were trading at $63.09 per barrel at 0116 GMT, down 50 cents from their last settlement. U.S. crude futures fell 65 cents at $58.82 per barrel.

Analysts said rising production from the Organization of Petroleum Exporting Countries (OPEC) as well as in the United States also weighing on prices.

"Iraqi crude production climbed to a record level this month, with OPEC crude oil output estimated to have reached 32.1 million barrels per day against a target of 30 million barrels per day," ANZ said in a morning note.

Overall OPEC supply rose to a three-year high of 31.60 million barrels per day (bpd) in June, up from 31.30 million bpd in May, according to a Reuters survey.

The group has raised output by more than 1.3 million bpd since it decided in November 2014 to defend market share rather than prices.

A final deal between world powers and Iran over Tehran's nuclear work could add to supplies. A June 30 deadline for a nuclear deal that could let Iran export more crude into an oversupplied market has been extended by a week to July 7.

In the United States, crude production rose 9,000 barrels a day to 9.701 million barrels a day in April, the highest since May 1971, the U.S. Energy Information Administration said in monthly data released Tuesday.

Crude inventories rose by 1.9 million barrels in the week to 468.9 million, compared with analyst expectations for a decrease of 2.000 million barrels.

However, demand was also up with refinery crude runs rising by 77,000 barrels per day, API data showed.

Asia Steadies, Euro Bears Greek Burden

 Asian share markets were in a guarded mood on Wednesday as Greece became the first developed economy to default on a loan with the IMF, setting the scene for another day of uneasy action.

While an unwelcome milestone for Athens, it came as no surprise to investors after weeks of stop-start talks and the euro only faded a little to $1.1135.

"There is so much uncertainty, speculation, truth and partial truth that many markets are in stasis; waiting to see which way this goes," said Emma Lawson, senior currency strategist at National Australia Bank.

Calming after two days of wild swings, MSCI's broadest index of Asia-Pacific shares outside Japan inched up 0.1 per cent.

Japan's Nikkei firmed 0.2 percent, a second day of small gains as it stabilises after Monday's steep fall.

There was unexpectedly upbeat news from the Bank of Japan's latest survey of manufacturers which improved in the three months to June, supporting the bank's view that growth is gathering momentum.

On Wall Street, the Dow had edged up 0.1 per cent on Tuesday, while the S&P 500 gained 0.3 per cent and the Nasdaq 0.6 per cent.

There was little immediate reaction when the International Monetary Fund confirmed Greece had missed a payment on its debt, perhaps taking it a step closer to an exit from the euro.

The IMF said Greece had asked for a last-minute repayment extension earlier on Tuesday, which the Fund's board would consider "in due course."

European finance ministers will confer later on Wednesday over Greek Prime Minister Alexis Tsipras' request for a new two-year loan to pay debts that amount to nearly 30 billion euros.

Investors still cling to hopes that a deal will be done at some stage to keep Greece in the euro, keeping currency markets relatively range bound. The U.S. dollar index was up 0.07 percent at 95.550, having bounced from Tuesday's low of 94.847.

Against the yen, the dollar stood at 122.45, up from a five-week low of 121.93 plumbed overnight.

Investors were again warily eying markets in China where there were tentative signs that Beijing's efforts to stem the recent selloff were starting to work.

A combination of cuts in interest rates, allowing local government pension funds buy stocks for the first time and talk of behind-the-scenes "window guidance" to institutional investors, triggered a sharp rebound on Tuesday.

The CSI300 index rallied 6.7 percent, while the Shanghai Composite jumped 5.6 percent.

Yet volatility has been so high that few were confident that the market had truly found its footing.

In commodities, oil eased back a touch after bouncing strongly on Tuesday to end the quarter with hefty gains. Brent was quoted down 46 cents at $63.59 a barrel, while U.S. crude eased 49 cents to $59.47.

RIL, HDFC Bank, DRL in Barclays' Global Stock Picks

 Reliance Industries Ltd (RIL), HDFC Bank and Dr Reddy's Laboratories are the only three Indian firms to figure in Barclays' top 111 stock picks from across the world for 2015.

In its 'Global Top Picks' report, Barclays has said more than six years into the recovery, the key drivers of the market rally - low inflation, moderate growth and unprecedented monetary support - are set to have a reduced impetus.

"We are entering the next phase of the business cycle where valuations in equities and fixed income are relatively expensive and evidence is accumulating that the recovery is becoming self-sustaining, suggesting that monetary policy will be less supportive going forward," it said.

RIL was the only stock pick in energy segment in Asia, while HDFC Bank is featured with China Taiping and China Resources Land in the Financial Services sector. Dr Reddy's Laboratories also is the only stock pick in healthcare segment in Asia.

On RIL, it said it expects earnings to grow 47 per cent over 2015-18 even if oil prices remain low and volatile, helped by the completion of $16 billion in downstream projects that are all slated to come online over the next 6-15 months.

"We believe this provides one of the strongest growth outlooks among the global energy stocks Barclays covers," it said.

Higher output from select offshore India gas projects that raises upstream production and a credible path to profitability in its ambitious data-centric telecom project (launch expected in December 2015) should drive earnings growth thereafter.

On HDFC Bank, Barclays said the bank was ideally placed to benefit from a macro recovery, owing to its strong low-cost deposit (CASA) franchise, clean balance sheet and increased investment in the network.

"It remains a leader in key retail lending segments and is strong in transaction processing, giving it access to float (CA income).

"The recent pickup in network investments and its focus on digital transactions should help it maintain its leadership position in CASA and grow loans 3-6 per cent faster than the system," it said.

Dr Reddy's (DRL), Barclays said, was a strong play on niche therapeutic areas (injectables and oncology) driven by a robust Para-IV pipeline in the near term and a significantly differentiated R&D strategy for Proprietary products and Biosimilars.

"We forecast revenue and earnings CAGR of 15 per cent and 20 per cent, respectively, over FY15 to FY17 along with a 440 basis points increase in ROIC. DRL is the least expensive large-cap stock in our Asia ex-Japan Healthcare & Pharma coverage," it said.