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K. S. Badri Narayanan

IT was the best ever quarter for the global stock market in nearly five years amid growing hopes that the global economy will improve (particularly after the Iraq war). While the end of the Iraq conflict imparted a positive sentiment, markets consolidated further after global corporate majors issued improved profit guidances (particularly Corporate America).

Apart from these factors, the WHO clearance of Hong Kong as a SARS-free country strengthened the confidence further, particularly in Asian countries.

US markets: Equities soared in June, right from the first day of trading, following better-than-expected manufacturing data for May. Then came the better-than-expected data on productivity and service sector from the Institute of Supply Management.

The sentiment got another fillip after the Federal Reserve cut the short-term interest to the lowest level in 45 years and announced a $350-billion package of federal tax cuts to spur spending by consumers and businesses.

Biotech stocks initiated the rally in June after Genetech issued a positive statement on its colonic cancer drug, Avastin. For tech stocks, the initial trigger came from BellSouth, when it announced a tie-up with Cisco and Lucent Technologies. The decision of Smith Barney's analyst to raise the rating of Intel Corp to `outperform' from `in-line' on hopes that the chipmaker may post better profit margins in 2004 and declare higher dividends further bolstered sentiment.

Retailers advanced after Wal-Mart Stores Inc said sales at the US stores opened over the last year are rising, as shoppers bought more toys, swimwear and Harry Potter's latest book.

The broad Standard & Poor's 500 index was up 15.7 per cent for the quarter ended June 2003, its best quarterly performance since a 20.9 per cent gain in the fourth quarter of 1998.

The blue-chip Dow Jones industrial average that was up 13.3 per cent almost equalled its performance in the last three months of 2001. The Nasdaq, up 21.8 per cent, recorded its best quarter since late 2001 when the technology-laden index climbed 30.1 per cent.

Europe/Asia: Apart from the rub-off effect due to the US markets rebound, the European Central Bank's decision to cut the interest rate by 50 basis points seemed to have enthused market players. As a number of Asian companies derive substantial revenues from the US market, the signs of economic recovery in the US buoyed the Asian bourses.

In addition to this, for Japan, factors such as better-than-expected GDP and the Bank of Japan's initiative to help small companies (by buying asset-backed securities) pushed the Nikkei 225 average to a six-month high by breaching the crucial 9,000 mark.

The Hang Seng index also rose to a year high amid hopes that Hong Kong's agreement with China for free-trade would encourage a rebound in the economy. In Manila, the Philippines Stock Exchange surged along with market heavyweight Philippine Long Distance Telephone, which had forecast strong profits growth.

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