At a time when there has been uncertainty about outlook on corporate earnings, forecast-beating results of private sector bank Yes Bank announced during trading hours lifted the market on Wednesday, 9 April 2008. Yes Bank also said it had no delinquent derivatives exposures. Fears that banks may take a hit in their balance sheet because of foreign exchange derivative losses have triggered a steep fall in banking shares over the past few weeks. Yes Bank results helped reduce the fear.
Concerns about corporate and bank earnings heightened after recent disclosures from ICICI Bank, India's biggest private sector bank in terms of net profit and Larsen & Toubro, India's biggest engineering & construction firm by revenue. On 4 March 2008, ICICI Bank said it had provided $70 million in Q3 December 2007 and may have to provide another $50 million in Q4 March 2008 for mark-to-market losses on investments. A few days later L&T said one of its subsidiaries L&T International FZE, may incur commodity-hedging-losses of as much as Rs 200 crore in the year ended March 2008.
What added to the gloom regarding corporate earnings was lower-than-expected provisional results announced by Bharat Heavy Electrical (Bhel), India's biggest power equipment firm by revenue, recently. Slower than expected execution rate and project specific delays could be the reasons for the lower-than-expected growth in the top line of Bhel.
Recent government action to rein in inflation has also added to uncertainty about outlook on corporate profits. The government has scrapped import duty on crude edible oil and banned the export of rice and pulses. It also surged steelmakers to cut prices of the alloy.
Asian stocks were mixed today. Key benchmark indices in Hong Kong, Taiwan and South Korea were up by between 0.04% to 1.3%. Key benchmark indices in China, Japan and Singapore were down by between 0.2% to 0.9%.
US stocks fell on Wednesday, 9 April 2008, after United Parcel Service Inc slashed its earnings forecast and oil prices hit a record high above $112 per barrel, darkening the outlook for corporate results. The Dow Jones industrial average was down 49.18 points, or 0.39%, ending the day at 12,527.26. The Standard & Poor's 500 Index was down 11.05 points, or 0.81%, finishing at 1,354.49. The Nasdaq Composite Index was down 26.64 points, or 1.13%, at 2,322.12.
US crude oil futures surged after government data showed a surprising draw on crude stockpiles last week.
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