The indices of the Developed markets of the US, Germany and India from the pack of emerging markets are expected to show strong growth in comparison to other markets as the economic conditions continue to remain comparatively favourable in the near term.
The Dow Jones Industrial Average, the NASDAQ and the S&P 500 indices have risen 15.08%, 35.74% and 21.70% respectively on a year on year basis and 2.37%, 3.95% and 2.79% respectively on a month on month basis for the month ended February 2014. The major benchmark indices rallied as a result of the taper in the bond purchases that comes on the back of sustained positive economic data that was reported for the US economy. The US unemployment rate hit a new five-year low of 6.6 percent in the month of January of 2014. The Unemployment rate was reported at 7.9% in the month of February 2013. Initial Jobless Claims decreased to 3,36,000 in the week ending February 15th, 2014 from 3,39,000 in the week ending February 8th, 2014. The jobless claims averaged 3,60,000 in the month of February 2013. The inflation rate has remained at 1.6% on a year on year basis for data reported in the month of February 2014 but has grown from 1% that was reported in the month of November 2013. Manufacturing Purchasing Managers Index (PMI) in the United States increased to 56.70 in February of 2014 from 53.70 in January of 2014.
The data shows a slow but sustained recovery in the economic conditions of the US economy and it is expected that it would continue to recover further in the New Year as the new Fed Chief remains optimistic about further reduction in the bond purchases every month from the current USD 65 billion. The Interest rates are however slated to remain low at 0.25% to stimulate the economy till the next year according to the Federal Reserve.
The German DAX and the UK FTSE indices have risen 25.87% and 7.48% respectively on a year on year basis and 3.08% and 3.99% respectively on a month on month basis for the month ended February 2014. The GDP in the Euro Area expanded 0.50% in the fourth quarter of 2013 over the same quarter of the previous year. The GDP had declined for the first three quarters of 2013 and has shown recovery in the last quarter sending the benchmark indices to record highs in the month of December 2013. The Unemployment rate however continues to remain high at 12% in the month of February 2014 same as that reported in the month of February 2013. Inflation at 0.8% in the month of February 2014 continues to be just about positive. The Euro Area would be expected to improve at a snail’s pace on account of slow recovery in the weak countries.
The Sensex and the Nifty have risen 9.58% and 7.62% respectively on a year on year basis and 2.39% and 2.72% respectively on a month on month basis for the month ended February 2014. The Indian benchmark indices are expected to grow in the near future on account of positive economic data that was reported for the economy in the second half of the FY 2013-14. The trade balance has narrowed down, the inflation has come off from double digit levels from 11.2% to 8.79% for Consumer Price Index (CPI), the current account deficit has shown a declining trend and the fiscal deficit has been controlled to levels below 4.8% of GDP. GDP growth is seen recovering from lows of 4.5% witnessed in the first half to above 5% expected in the second half of FY 2013-14. Manufacturing and Services growth continue to remain tepid on account of hardened interest rates. The RBI has raised the key repo rate from levels of 7.25% in March 2013 to 8% in January 2014 due to inflation being sticky for the entire year of 2013. The Indian benchmark indices are expected to deliver strong growth in comparison to other emerging market economies in the immediate and near future. Positive election results are expected to have a significant impact on the benchmark indices depending on the outcome of results in May 2014.
The Hang Seng, the Shanghai Composite and the KOSPI indices have declined 0.63%, 11.37% and 1.3% respectively on a year on year basis and have risen 3.1%, 0.84% and 1.91% respectively on a month on month basis for the month ended February 2014. China recorded a GDP growth of 7.7% for the year of 2013 a number that was last seen in the year of 1999 according to the economic data. Most of the industrial parameters have shown tepid growth in case of the Chinese economy in the last one year along with the phenomenon of shadow banking crisis. The Manufacturing and the Non-Manufacturing PMI continue to remain subdued at 50.5 and 53.4 reported in the month of February 2014 which is lower in comparison to the same period in the previous year.
The Nikkei 225 has risen 32.6% on a year on year basis and has remained flat on a month on month basis for the month ended February 2014. The Gross Domestic Product expanded 2.40% in the third quarter of 2013 over the same quarter of the previous year. The inflation rate has turned positive from -0.7% that was seen in February 2013 to 1.6% in January 2014. The stock market index of Nikkei has increased on account of higher inflation and growth seen in the year of 2013 for the Japanese economy.