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THE WEEK GONE BY AND THE WEEK AHEAD .

May 31, 2013

10 year US treasury had the 4th largest % increase in yields over the last 50 years. The Federal Reserve has said it plans to continue its epic bond-buying program, but has hinted at factors that could lead the central bank to pull back. Early May readings on US manufacturing activity suggest further weakness in the next few months. A combination of weak global growth, strengthening US dollar and limited spending on capex paints dampened outlook for the manufacturing sector. Manufacturing was the early beneficiary of the recovery and was a signify cant source of job growth. The S&P Case-Shiller home price index rose 1.4% compared to the expected 1&. Also, Americans confidence in their economy jumped in may to a five year high. The week was volatile for India due few global cues as well as the GDP data & fiscal data as well as rupee depreciation. India GDP grew at 4.8%, more or less in line with expectations. RBI governor commented on Thursday that inflation still remains high which has resulted in speculation that the chance of a rate cut in the next RBI credit policy meeting is low. The benchmark indices were mostly flat in the week to May 31st.

28 Dec 2012 The key events of last week:

USD-JPY is being pressured by ongoing dollar supply and front running by interbank names anticipating large fixing flows today. A large 100.80 expiry weighed into the European open and there was follow through selling as European stocks started on a weaker footing amid month-end window dressing. The pair is looking vulnerable on the downside and if support is filled in at 100.50 to 100.35 there could be an extended bout of repositioning into the psychological 100.00 level. U.S. orders for long-lasting manufactured goods rebounded in April, buoyed by more demand for aircraft and stronger business investment. The gains suggest economic growth may be holding steady this spring. Orders for durable goods, items expected to last at least three years, rose 3.3 percent last month from March, the Commerce Department said Friday. That followed a 5.9 decline in March. Members of the Bank of Japan's monetary policy board said that it was appropriate to extend the monetary easing that has been put in place, minutes from the board's meeting on April 26 revealed on Monday. The board intends to continue with the easing until inflation reaches the desired target of 2 percent, the minutes showed - hopefully within a period of two years as other global economies continue to recover.

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U.S. Home Prices See Strong Gains in the First Quarter of 2013 According to the S&P/Case-Shiller Home Price Indices.

The Consumer Confidence Index, which gauges how consumers feel about the economy each month, rose to 76.2 in May -- its highest reading since February 2008, according to research firm The Conference Board. Consumer confidence has been on the rise for the past two months after plummeting in March when Americans worried about the effects of automatic government budget cuts.
U.S. May State Street Investor Confidence Index: 94.8 vs. 93.6 in April. The euro zone's M3 money supply grew more-than-expected in April, while private loans declined for the 11th consecutive month, official data showed on Wednesday. In a report, the European Central Bank said M3 money supply in the single currency bloc rose at annualized rate of 3.2% in April, above expectations for a 2.9% increase. Worries the Federal Reserve may begin to slow its stimulus efforts sent U.S. mortgage rates last week to their highest level in a year, a surge that could be a headwind to the nascent housing recovery should they march much higher. Indeed, the MBA's gauge of loan requests for home purchases rose 2.6 percent last week, even as refinancing applications tumbled 12.3 percent. The overall index of mortgage application activity was down 8.8 percent. The International Council of Shopping Centers and Goldman Sachs Retail Chain Store Sales Index edged down 0.9% in the week ended Saturday from the week before on a seasonally adjusted, comparable-store basis. ICSC Chief Economist Michael Niemira said demand was stronger at department, apparel and electronic stores, but considerably softer at discounters and wholesale clubs. Weather as a catalyst for spending was mixed as destructive tornadoes tore through Oklahoma, the West was cool and the East was warm and humid. National chain store sales rose 0.6% in the first three weeks of May from April, according to Redbook Research's latest indicator, released Wednesday. The index's rise matched the targeted gain. The Johnson Redbook Index also showed seasonally adjusted sales for the period were up 2.6% from last year, compared with a 2.7% targeted gain. In May the Economic Sentiment Indicator (ESI) picked up again. The indicator's recovery starting in autumn last year had been interrupted by flat developments in March and deteriorations in April. May brought increases of 0.8 points in the euro area (to 89.4) and 1.1 points in the EU (to 90.8).

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Applications for jobless benefits in U.S. increased 10,000 to 354,000 in the week ended May 25, Labor Department figures showed today in Washington. Economists called for 340,000 claims, according to the median forecast in a Bloomberg survey. Two states, Virginia and Wyoming, provided their own estimates last week, and the Labor Department issued projections for Hawaii, Minnesota and Oregon, a government spokesman said. Contracts to buy previously owned U.S. homes rose to their highest level in three years in April, but a shortage of properties for sale could slow down the momentum. The U.S. Federal Reserve's balance sheet shrank in the latest week on lower holdings of mortgage-backed securities and agency debt, Fed data released on Thursday showed. The Fed's balance sheet, which is a broad gauge of its lending to the financial system, stood at $3.342 trillion on May 29, compared to $3.356 trillion on May 22. The euro area unemployment rate grew to 12.2% in April 2013, up from 12.1% in March, according to the European Union's statistics office Eurostat. Among European Union countries the rate remains at 11%.
Greece has the highest rate of unemployment: 27% (as of February) Spain follows closely behind with 26.8% of people out of work Portugal's unemployment rate stands at 17.8%

Personal income for March came in a little softer than expected while spending posted marginally higher. Personal income rose 0.2 percent after a 1.1 percent boost the month before. The important wages and salaries component advanced 0.2 percent, following a 0.7 percent gain in February. Large monthly swings in income growth continued in March from fiscal cliff effects.

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And closer home.

The Reserve Bank of India (RBI) said on Friday last week it will conduct the auction of 91-day
Government of India Treasury Bills for notified amount of Rs 70 billion on Wednesday, May 29, 2013.The auction will be conducted using Multiple Price Auction method. The allocation to the non-competitive bidders will be outside the notified amount at the discretion of the bank.

Gilt auction offer for 8.97%-2030(R) Rs 30B (cut-off yld). Foreign Investment Promotion Board( FIPB) cleared 8 Foreign Direct Investment proposals worth Rs. 692 cr on Friday.
The rupee fell against the American currency for the fourth consecutive day on Friday, slipping another 15 paise to 56.53 per dollar on month-end dollar demand from importers despite weakness of the US unit in overseas markets. The rupee resumed lower at 56.50 per dollar as against the last closing level of 56.38 at the Interbank Foreign Exchange (Forex) market. It hovered in a range of 56.39 and 56.60 before quoting at 56.53 per dollar at 10.50 hrs (IST).

Important upcoming International events to be tracked:

1/6/2013 3/6/2013 3/6/2013 3/6/2013 3/6/2013 4/6/2013 4/6/2013 4/6/2013 4/6/2013 4/6/2013 5/6/2013 5/6/2013 5/6/2013 6/6/2013 6/6/2013 6/6/2013 6/6/2013 6/6/2013 6/6/2013 6/6/2013 00:30 IST 13:30 IST 19:30 IST 19:30 IST 19:30 IST 05:30 IST 14:30 IST 17:15 IST 18:00 IST 18:25 IST 14:30 IST 14:30 IST 16:30 IST 05:30 IST 17:00 IST 17:15 IST 18:00 IST 19:15 IST 19:30 IST 20:00 IST US European Monetary Union US US US US European Monetary Union US US US European Monetary Union European Monetary Union US US US European Monetary Union US US US US Farm Prices PMI Manufacturing Index Construction Spending (Construction Spending - M/M change) ISM Mfg Index (ISM Mfg Index - Level) Construction Spending (Construction Spending - Y/Y change) Motor Vehicle Sales (Domestic Vehicle Sales) PPI ICSC-Goldman Store Sales International Trade (Trade Balance Level) Redbook Retail Sales Retail Sales (Year over Year) MBA Purchase Applications Chain Store Sales Challenger Job-Cut Report (Announced Layoffs - Level) ECB Announcement (Change) Jobless Claims (New Claims - Change) Bloomberg Consumer Comfort Index (Level) Quarterly Services Survey (Information Revenue - Y/Y change) EIA Natural Gas Report

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7/6/2013 7/6/2013

02:00 IST 02:00 IST

US US

Money Supply Fed Balance Sheet

Important upcoming Domestic Events:

1/6/2013 3/6/2013 5/6/2013 5/6/2013 5/6/2013 5/6/2013 5/6/2013 6/6/2013 7/6/2013 7/6/2013 7/6/2013 10:30 IST 10:30 IST 17:00 IST 17:00 IST 17:00 IST 10:30 IST India India India India India India India India India India India Power generation HSBC India manufacturing PMI 91 day T- Bills auction of Rs 70 bln (cut-off yld) Reserve Money (change on year) 182 days T- Bills auction of Rs 50 bln (cut-off yld) HSBC India Services PMI HSBC India composite PMI Foreign tourist arrivals (YoY Chg) WMA (ways and means advance) - to central govt WMA (ways and means advance) - to state govts FX reserve (change on wk)

TECHNICAL VIEW
The rupee fell against the USD for the fourth consecutive day on Friday, slipping another 15 paise to 56.53 per dollar on month-end dollar demand from importers despite weakness of the US unit in overseas markets. The rupee resumed lower at 56.50 per dollar as against the last closing level of 56.38 at the Interbank Foreign Exchange (Forex) market. It hovered in a range of 56.39 and 56.60 before quoting at 56.53 per dollar at 10.50 hrs (IST). Long term technical indicators still point rupee weakness while short term and medium term indicators are slightly turning bullish for rupee which may cause rupee to appreciate a little bit but prevailing rupee weakness seems to continue going forward.

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