Mumbai: All eyes will be on the credit policy on Friday. A CNBC-TV18 poll suggests 70 per cent believe the RBI will go ahead with a 25 bps hike. Goldman Sachs, however, differs and says there could be a pause. It feels there are no longer massive inflationary pressures and growth is more important.
Meanwhile, the US markets log in fourth day of sharp gains with the S&P 500 above 1200 levels, closing at high point of trade following news that major central banks have agreed to lend US dollars to European banks, taking pressure off funding issues across European banks.
On economic data front, the weekly initial jobless claims came in at 428,000, with the initial claims up 11,000 from the prior week. The overall consumer prices for August increased by 0.4 per cent the empire state manufacturing survey for September fell to minus 8.8. The second quarter current account deficit totaled $ 118.0 billion. The industrial production for August increased by 0.2 per cent.
And in economic data to watch out for is - consumer sentiment data for September is expected to come out on Friday. Consensus figures indicate a slight rise in the sentiment to 56 from 55.7. Also the treasury international capital, that is the treasury data that tracks the flow of financial instruments into and out of the US, comes out on Friday.
In Europe, markets ended higher though well off day's highs, as four of the world's central banks decided on coordinated action to increase dollar liquidity. The effort is launched by the European Central Bank, in coordination with the Federal Reserve, the Bank of England, the Bank of Japan and the Swiss National Bank.
All eyes would be on Poland on Friday as the 17 finance ministers of the Eurozone and for the first time US treasury secretary Timothy Geithner will be meeting. Sources suggest that Geithner will urge the EU ministers to amend the EFSF, that’s the Eurozone's bail out fund. Washington wants the fund changed to a leveraged vehicle similar to the US TARP programme that will see the EFSF offer credit protection to the ECB.
In the currency space, the euro rose against the dollar the most in a month after the European Central Bank said it will lend dollars to euro-area banks, damping liquidity concern related to the region's sovereign debt crisis.
In commodities, Brent crude surged 2 per cent above $ 115 levels boosted by reports of fresh liquidity injections by central banks in the fourth quarter, a weaker dollar and short covering ahead of the Brent contract's expiration. However, Brent prices shed 2 per cent in Asia trade this morning.
Meanwhile, gold shredded more than 2 per cent gains, to the lowest in almost three weeks on signs that European banks will have enough cash through year-end, ignited investor appetite for riskier assets at the expense of perceived safe havens.
And back home, stock markets rallied for the second day in a row. The Nifty gained 60 points, while Sensex closed the session at 16,876, up 167 points.
RBI has raised interest rates 11 times in the last 18 months. Growth has slowed while inflation has inched closer to double-digit.
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