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K.S. Badri Narayanan

AFTER witnessing a sharp surge during April-June quarter, global stock markets maintained their upward momentum to end July in a positive territory. With the earnings season set to get into top gear during the ensuing days, upbeat clues on corporate profits, particularly from Wall Street, kept the momentum going for the global equities, which were a bit volatile during July.

US markets: The US markets opened the month on a weak note owing to profit-bookings and on a weak data from Institute of Supply Management's index of manufacturing activity. But equities regained strength after the release of better-than-expected factory orders for May. Investor confidence got further fillip after a case against Merrill Lynch (its third legal victory), the largest US brokerage firm, was rejected by a US court saying there was no evidence that brokerages' actions caused investors to lose money after the stock market collapsed.

Reports that Microsoft is considering a special dividend of more than $10-billion to its shareholders also strengthened the bull-run. (Microsoft, however, later announced that it would stop giving employees stock options starting September and instead will award stock).

Goldman Sachs' IT spending survey indicating that the intentions of corporate tech buyers have showed improvement for the first time since the survey began in 2001 triggered the rally, especially for infotech counters. A weekly Japanese technology publication report saying that the number of personal computers sold at big Japanese electronic stores jumped 20 per cent for the week ended June 22, up from the same week a year-ago, also cheered the investors further.

Meanwhile, reports of the US unemployment rate, which jumped to a new nine-year high in May, failed to rein in the forward stride of the US markets.

The US earnings season got off to a sedate start with Alcoa, the global leading aluminium maker, announcing lower second-quarter profits. Logitech International, the maker of computer peripherals, and IT major, Lucent Technologies, also issued profit-warnings, unsettling investors. Boeing, the US aerospace and defence giant, also revised its earnings estimates downwards for 2004 by about 17 per cent, affecting the market mood. AOL Time Warner's better financial performance was overshadowed by its accounting policies.

However, corporate players such as Helen of Troy, the maker of hair care products and NCR, automated teller machine manufacturer, brightened the mood with good news from their earnings reports.

Internet portal, Yahoo also announced a 42-per cent jump in second-quarter revenues and raised its full-year guidance thanks to stronger advertising sales. Yahoo's announcement that it was acquiring Overture, a search engine, for $1.63 billion in stock and cash deal, also imparted a positive influence. Intel, Citigroup and Bank of America, Coco-Cola and AT&T also posted impressive financial performances.

The sentiment also got further boost after fibre-optic cable major, Corning, reported a better-than-expected financial performance and lifted spirits for the telecom sector with its outlook

In the midst, Mr Alan Greenspan, Chairman of the US Federal Reserve, while expressing optimism that economic recovery would gather momentum, he warned that "a pervasive sense of caution" following America's rash of corporate scandals which had held back investment and employment.

Europe: Insurers and carmakers drove European shares higher. Among the standouts was, Swedish-Swiss Engineering group, ABB, as the market breathed a sigh of relief after a US judge approved a $1.3-billion asbestos settlement, paving the way for an asset sale to lighten ABB's heavy debt load. Earlier, ABB had plunged on concerns over the company's liquidity. A better-than-expected ZEW Institute indicator for July and an impressive second quarter numbers from Philips also improved the sentiment.

Asia: Japan led the rally after the Bank of Japan Tankan survey of business sentiment, showed the perceived outlook for the economy among bid manufacturing companies improved by more than analysts had expected over the April-June quarter. Tankan figures showed large manufacturers plan to increase capital expenditure by almost 5 per cent. Following the report, the Japan's Nikkei average surged closed to the crucial 10,000-mark. However, the Nikkei suffered after investors dumped techs and other blue chips that had powered the markets rally on worries the gains had been overdone. In Sydney, stocks closed steady, supported by fresh takeover activity among hot but defensive listed property trusts and hopes for upbeat clues on corporate profits from Wall Street.

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