Market Monitoring – 13 November 2013

Edited by Vani Rao

The U.S markets closed flat to lower over conflicting signals on the subject of withdrawal of stimulus measures and disappointing earnings announced by a few companies.

The Dow Jones Industrial average was down by 0.2% to 15,750.67 while the S&P 500 closed 0.2% low at 1,767.69. The Nasdaq Composite inched up 0.13 % to 3,919.92

The Asian markets fell sharply after China’s leaders failed to outline measures to decrease the governments influence on the economy. Investors were hoping to have better clarity on the economic and business policies for the coming decade. The Shanghai Composite was down -2.22% at 2,288, while Nikkei witnessed a slump of 0.15% to 14,576. Following the downwards trend, the Hangseng dropped 1.91% to 22,463 and the Sensex ended at 20,494, down by 0.43%.

To add to this swing of negativity in the Asian markets, Japanese machinery orders surprisingly fell 2.1% in October after strong results in September.

Top Stories

Starbucks to Pay $2.76 billion in Damages

Starbucks (NASDAQ: SBUX) has been told the Arbitrary Tribunal to pay $2.76 billion in damages to settle the three-year-long dispute with Kraft Foods (NASDAQ: KRFT) over its coffee distribution.

Kraft has been exclusively marketing Starbucks coffee in stores since 1998. Nonetheless, Starbucks cancelled the agreement back in November 2010, stating Kraft’s failure to work closely with the company on key decisions. This lead to Kraft taking matters to the Arbitrary Tribunal. Starbucks has to pay $2.23 billion in damages and another $527 million for legal expenses to Deerfield, Illinois-based Mondelez International Inc., which spun off Kraft Foods Group in October 2012.

Shares of Starbucks fell $1.20 or 1.5% to $79.41 in after trading hours on Tuesday, while Mondelez stocks rose 97 cents, or 3% to $33.40.

Inflation numbers reported across Europe

Consumer Price Index reports from Germany, Italy and the U.K. showed inflation dropping at lower level, providing optimism that the central bank policy would continue to be accommodative. The German CPI, dropped to its lowest rate since August 2010 coming at +1.2% Y/Y from +1.4%. Inflation in Italy edged down to +0.8% Y/Y from +0.9%. Consumer price Index has decreased month on month basis in both countries. Looking at the U.K. CPI came down at +2.2% from +2.7%, which is closer to the Bank of England’s target of 2%.

Data Releases/Event- Next 24 hours

Federal Budget

The U.S Treasury will release its monthly account of surplus or deficit of the Federal Government on Wednesday, 14 November, 2013.The budget data is an important indicator of the balance between budget deficit and supply of Treasury securities. The Federal Government borrows money from the market by issuing Treasury securities. An increase in deficit forces the government to sell more bonds and Treasury notes and borrow money at higher rate. This in turn impacts other interest–bearing securities, thereby creating a higher interest rate environment.

The budgetary deficit in FY 2013 was significantly lower than that of the previous year due to an increase in tax receipts and decline in outlays. October data starting FY 2014 is expected to be better, however the Government shutdown is likely to have an impact on both sides of the balance sheets, especially on outlays.

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