Nifty futures, Asian indices up on QE3 hopes

Markets addicted to liquidity may soon get their ‘fix’, with the US Federal Reserve Board signalling a likely easing of monetary policy. And that had most Asian indices up in early trades this morning. But then came PMI data from China, which was disappointingly at a nine-month low, and markets are giving up some of their gains.

As at 7.30 am IST, Nifty futures were trading up by about two-tenths of 1 percent. Since then, they’ve lost some ground, in line with the rest of Asian markets. Indices are still up, but have given up some of their gains since the morning.

PMI data from China, which measures the heartbeat of the manufacturing economy, came in at 47.8, down from 49.3 earlier, which makes it the lowest level in nine months. It just goes to show how deeply China has been affected by the collapse of its principal export markets, and the failure of domestic economic engines to fire.

But curiously, markets may take away something positive from this too: the fact that things are so bd that the government may step in with some stimulus measures. Yet, the options are as open-and-shut as that. Property prices have rebounded in recent weeks, and policymakers will have to weigh the risk that any stimulus may feed much the same bubbles that they’ve worked so hard to deflate.

On Wall Street overnight, indices were down for much of the day. But then midway through the day, the US Fed signalled that some form of monetary stimulus may be warranted if the economic data doesn’t improve dramatically. Markets read this as a signally of a likely QE3, and recovered some of their ground. The Dow Jones Index still ended in the red, but the more broadbased S&P 500 ended flat, and the tech-heavy Nasdaq finished up a tick.

Back home, the Parliamentary gridlock over the CAG report on the allocation of coal blocks has effectively put paid to any hopes of even tentative efforts at reforms, and with the polity getting even more polarised, analysts are decidedly downbeat. Some of them expect the Nifty to fall by 200-300 points over the next month.

For today, however, we could see a mildly positive start, largely on global cues, which are driven by liquidity hopes.