Broker's Notes: India posts strong GDP numbers; gold trading firm

Indian economy

India's economy grew at its fastest clip in nearly three years in the quarter through June on strong manufacturing growth and farm output that may keep the central bank on its policy tightening path. The 8.8 percent expansion compares with a median market consensus of an annual rise of 8.7 percent and an 8.6 percent expansion in the previous quarter. The data underscores continued growth momentum in Asia's third-largest economy amid growing uncertainty over global recovery. The strong growth may allow the Reserve Bank of India (RBI) to focus more on containing near double-digit inflation. The RBI has raised interest rates four times since mid-March to stamp down inflationary pressures and has said it may have to give precedence to containing inflation over other policy objectives.

Global reports due this week

This week is a very important week for the global financial markets with key events such as the minutes from the most recent Fed meeting out on Tuesday, a monetary policy announcement from the Eurozone on Thursday and the non-farm payrolls report on Friday. Canada, Australia and the Eurozone also have second quarter GDP reports due for release during the week. The US economy is expected to report another month of net job losses due to culmination of the Census. It is also expected that private sector payrolls will only increase by a smaller amount which would mean that US corporations have toned down their pace of hiring.

Gold

Gold continued to trade firm and seems to be set for the biggest monthly advance since April as signs that the global economic recovery may be faltering prompt investors to boost their holdings to try to preserve their wealth. US data yesterday showed that personal incomes climbed 0.2 percent in July, less than projected, reinforcing concern that the world’s largest economy may be slowing. Market are awaiting today’s release by the Federal Reserve of the minutes of the US central bank’s Aug. 10 meeting for hints on where the economy is headed. The Fed’s minutes may show increased concerns over the strength of the economic recovery and lowered growth forecasts for 2010.

Euro

In the Euro zone, economic data was surprisingly neutral with business confidence edging slightly lower while consumer, services and economic confidence edged higher in the month of August. However Euro failed to surge higher and the weakness of the euro suggests this concern about the global economic outlook is overshadowing current activity. The recent rises in spreads of sovereign CDS in some euro zone countries, such as Ireland and Italy, are rekindling fears about the euro zone's debt problems.

Yen

The yen continued to trade firm near a 15-year high against the dollar on Tuesday as traders looked to test Japanese authorities' resolve on intervention after the Bank of Japan's easing steps the previous day failed to scare investors from betting on it rising further. With mounting US economic worries seen keeping investors shunning risk assets such as high-yielding currencies, the market is likely to push up the low-yielding yen, which could eventually prompt Japan to sell the yen in currency markets for the first time in more than six years.   Japanese Finance Minister Yoshihiko Noda repeated on Tuesday

that the government would take decisive action on currencies - usually seen as a code for intervention - when necessary.

US crude futures

US crude futures fell $1 on Tuesday, extending losses for a second day, as expectations of higher crude inventories compounded concerns that a slowdown in global economic growth was hitting demand.

Source: Richcomm Global, Dubai; www.richcommglobal.com