financial markets Archives

Fed keeps rates steady, toughens policy stance as ‘soft landing’ hopes grow

But a ‘solid’ economy with still ‘strong’ job growth, Powell said

The US Federal Reserve held interest rates steady on Wednesday but stiffened a hawkish monetary policy stance that its officials increasingly believe can succeed in lowering inflation without wrecking the economy or leading to large job losses.

The Fed’s benchmark overnight interest rate may still be lifted one more time this year to a peak 5.50 per cent-5.75 per cent range, according to updated quarterly projections released by the U.S. central bank, and rates kept significantly tighter through 2024 than previously expected.

“People hate inflation. Hate it,” Fed Chair Jerome Powell said in a press conference after the end of a two-day policy meeting at which central bank officials held the benchmark overnight interest rate in the current 5.25 per cent -5.50 per cent range, but sketched a stricter policy path moving forward in an inflation fight they now see lasting into 2026.

But a “solid” economy with still “strong” job growth, Powell said, will allow the central bank to keep that additional pressure on financial conditions through 2025 with much less of a cost to the economy and labor market than in previous U.S. inflation battles.

Source : https://www.deccanherald.com/business/markets/fed-keeps-rates-steady-toughens-policy-stance-as-soft-landing-hopes-grow-2694733

European Central Bank raises rates to all-time high of 4%, signals end of tightening

The central bank for the 20 countries that use the euro lifted its deposit rate to 4% from 3.75%, taking it to an all-time-high. Markets and economists expect the policy tightening move to be the ECB’s last and now anticipate a lengthy pause, followed by rate cuts in the second half of next year.

European Central Bank raises interest rates to 4%

Markets had seen unchanged rates as the most likely outcome of Thursday’s meeting only days ago but expectations shifted towards a hike after a source close to the discussions said the ECB would raise its 2024 inflation projection in new forecasts.

“Based on its current assessment, the Governing Council considers that the key ECB interest rates have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to the target,” the ECB said in a statement.

Policymakers have been pulled in opposing directions by stubbornly high price growth figures and rising recession fears.

Inflation is still stuck above 5% and markets do not see it falling back to the ECB’s 2% target even in the longer term as an exceptionally tight labour market pushes up wages and high energy costs keep the pressure on prices.

But growth prospects are fading quickly, partly due to higher interest rates, and even services – long the bloc’s bright spot – have started to weaken, raising the risk the economy will slip into recession.

Source: https://economictimes.indiatimes.com/markets/stocks/news/ecb-raises-rates-but-signals-end-of-policy-tightening/articleshow/103666224.cms?from=mdr

Nifty scales Summit 20,000: 10 best bets for double-digit returns as bulls keep up the rally

The next targets for the Nifty50 to watch out for would be 20,500-21,000 in the short term, considering the strong momentum sustained through the last seven sessions with participation from bank and IT stocks

The Nifty50 finally scaled the much-awaited psychological level of 20,000 points on September 11 with most of the sectors joining the rally after the G20 Summit boosted the confidence of market participants.

The next target for the index to watch out for would be 20,500-21,000 level in the short term, considering the strong momentum sustained through the last seven sessions with participation by banks and IT stocks, while support is expected to be at the 19,900-19,800 levels, experts said.

The Nifty50 jumped 176 points to 19,996 on Monday, taking the total seven-day gains to 3.85 percent, while the broader markets remained on the buyers’ radar as the Nifty Midcap 100 and Smallcap 100 indices rallied over a percent each on Monday.

“The Nifty has now reached to the uncharted territory. The band of 19,800-19,900 now becomes the strong support for the Nifty in the short term,” Vinay Rajani, CMT, senior technical and derivative analyst at HDFC Securities.

As far as the upside target is concerned, he feels the index is now headed for the level of 20,924, which happens to be the 100 percent Fibonacci extension resistance of the entire swing seen from June 2022 (15,183) bottom to December 2022 (18,887) top, and from December 2022 (18,887) top to March 2023 bottom (16,828).

Breadth of the market is very strong as more than 91 percent of the stocks are trading above their 200 DMA in the NSE500 index. This reading is obviously overbought, he said.

Rahul Sharma, Director, Head- Technical & Derivative Research at JM Financial Services said the good thing was that the new leadership was coming from IT, capital goods and PSEs. BFSI, which remained pressured for some time, is also back in the positive territory.

The Nifty50, therefore, seems to be on track to hit 20,432 this month and 21,000 by Diwali.

Let’s take a look at the top 10 trading ideas by experts for the next three-four weeks. Returns are based on the September 11 closing prices:

Source: https://www.moneycontrol.com/news/business/markets/nifty-scales-summit-20000-10-best-bets-for-double-digit-returns-as-bulls-keep-up-the-rally-11350851.html

Morning Buzz: Nifty hits all-time high of 20,000, Byju’s to sell Epic, Great Learning to pay loan

Nifty hits all-time high of 20,000
The Nifty hit an all-time high of 20,000 taking 51 trading sessions to get there after breaching the 19,000 mark on June 28. The move was on account of both local and FPI flows. FPI flows have been constrained in their China investments on account of the dire outlook for its economy. A portion of those flows have come to India. Year to date FPIs have invested $15.9 billion.
(Economic Times, Mint, Business Standard, BusinessLine)

Kotak pulls mid- and small-cap recommendations
Kotak Institutional Equites has dropped recommendations on midcaps that it covers as it cannot see too many opportunities for upside beyond the BFSI space. The brokerage has removed its favourite stocks in capital goods, healthcare, QSR and real estate sectors as it says it would be incorrect to recommend stocks with low conviction and potential downside to their fair values.
(BusinessLine)

Source: https://www.forbesindia.com/article/news/morning-buzz-nifty-hits-alltime-high-of-20000-byjus-to-sell-epic-great-learning-to-pay-loan/88163/1

‘Russia likely to invest trapped rupees in India’: Sergei Lavrov says. Top Points

Russia’s Foreign Minister Lavrov says India will propose options for investing the billions of rupees it has accumulated for exports. Lavrov also stated that Russian arms contracts with India remain in force.

Russian Foreign Minister Sergei Lavrov speaks at a press conference, during the G20 summit, in New Delhi, India (REUTERS)

Russia’s Foreign minister Sergei Lavrov on Sunday informed that India will offer Moscow options to invest the billions in rupees it has accumulated for exports. Lavrov who addressed a press conference in New Delhi after the 18th G20 Summit meet on Sunday.

“Our Indian friends said they would propose promising areas they can be invested in,” Lavrov told reporters, citing talks with Indian counterpart Subrahmanyam Jaishankar in Jakarta, Indonesia, on the side lines of the East Asia summit prior to his arrival to India. “Right now our governments are talking how to use and invest them to mutual benefit.”, Bloomberg quoted Russia’s Foreign Minister.

With imports from India stagnating, Russia is ending up with an excess of rupees, which its companies have trouble repatriating because of local currency restrictions.

Notably, Sergei Lavrov attended the 18th G20 Summit in place of Russia’s President Vladimir Putin.

On Arms Contract with India
Lavrov also said Russian arms contracts with India remain in force, despite difficulties with payments caused by sanctions imposed by the US and its allies over Russia’s invasion of Ukraine.

Notably, Russia has emerged as the top supplier of oil to India over the past year, thereby settling a greater share of trade in national currencies and redirecting shipments east as traditional customers in Europe shunned purchases after President Vladimir Putin invaded Ukraine.

On Russia-Ukraine Conflict
Russian Foreign Minister Sergei Lavrov claimed diplomatic victory on Sunday, declaring a G20 summit in India a “success” after the bloc shied away from direct criticism of Moscow’s invasion of Ukraine.

“We were able to prevent the West’s attempts to ‘Ukrainize’ the summit agenda,” Lavrov said as the two-day meeting of leaders closed.

“The text doesn’t mention Russia at all” Russia’s veteran diplomat said.

“The Kyiv regime destroyed the territorial integrity of its country with its own hand…I believe that some of our Western colleagues understand it too but you know very well that they are placing their bets on Russia’s strategic defeat…” Lavrov said at the press conference.

Source: https://www.livemint.com/news/world/russia-likely-to-invest-trapped-rupees-in-india-ukrainize-g20-summit-key-takeaways-from-sergei-lavrov-11694341081496.html

Why do the rich get richer — even during global crises?

Every 30 hours, the pandemic spawned a new billionaire, while pushing a million people into poverty. Here’s why.

Death and devastation are not the only calling cards COVID-19 will be remembered by. The pandemic has also drastically widened inequalities across the globe over the past three years.

According to the Bloomberg Billionaires Index, 131 billionaires more than doubled their net worth during the pandemic. The world’s richest person, Louis Vuitton chief Bernard Arnault, was worth $159bn on December 27, 2022, up by around $60bn compared with early 2020. Elon Musk, the planet’s second-wealthiest man, boasted a $139bn fortune — it was less than $50bn before the pandemic. And India’s Gautam Adani, third on the index, has seen his wealth increase more than tenfold in this period, from approximately $10bn at the start of 2020 to $110bn at the end of 2022.

At the same time, close to 97 million people — more than the population of any European nation — were pushed into extreme poverty in just 2020, earning less than $1.90 a day (the World Bank-defined poverty line). The global poverty rate is estimated to have gone up from 7.8 percent to 9.1 percent by late 2021. Now, skyrocketing inflation is affecting real wage growth, eating into the disposable incomes of people around the world.

To curb rising prices, central banks are reducing the flow of money into the economy by increasing interest rates and withdrawing excess liquidity. But that has again boomeranged on workers, with companies — from tech firms like Amazon, Twitter and Meta to banks like Goldman Sachs — announcing layoffs at the end of an already tumultuous 2022.

Al Jazeera spoke to economists to understand why the rich keep getting richer even amid crises and whether that is inevitable each time there is an economic slowdown.

The short answer: Many countries adopt policies such as tax breaks and financial incentives for businesses to boost economies amid crises like the pandemic. Central banks flood the economy with money to make it easier to lend and spend. This helps the wealthy grow their money through financial market investments. But widening inequality is not unavoidable.

Stock market boom

When the pandemic began, central banks across the world swung into action to protect financial markets that took a severe beating as governments started imposing lockdown restrictions.

To save the economy from collapsing, central banks slashed interest rates, thereby lowering borrowing costs and increasing the supply of money. They also pumped trillions of dollars into financial markets with the aim of encouraging companies to invest in the economy. Major central banks have infused more than $11 trillion into the global economy since 2020.

These interventions triggered a boom in the value of stocks, bonds and other financial instruments — but the rise in asset prices wasn’t accompanied by an increase in economic production.

“Instead of leading to more economic output, a bulk of the sudden infusion of money into the financial system led to a dramatic rise in asset prices, including stocks, which benefitted the rich,” Francisco Ferreira, director of the International Inequalities Institute at the London School of Economics (LSE), told Al Jazeera.

A year into the pandemic, capital markets had risen $14 trillion, with 25 companies — mostly in the technology, electric vehicles and semiconductors segment — accounting for 40 percent of the total gains, according to an analysis of stock performance of 5,000 companies by consulting firm McKinsey.

“The result is that this pandemic period has seen the biggest surge in billionaire wealth since the records began,” Oxfam America’s Director of Economic Justice Nabil Ahmed told Al Jazeera. “And we are still coming to terms about how extraordinary that rise has been.”

Billionaires saw their fortunes increase as much in 24 months as they did in 23 years, according to Oxfam’s “Profiting from Pain” report released in May this year. Every 30 hours, while COVID-19 and rising food prices are pushing nearly one million more people into extreme poverty, the global economy is also spawning a new billionaire.

India’s Gautam Adani, centre, is today the world’s third-richest man, and his wealth has multiplied more than tenfold since the start of the pandemic [Rajesh Kumar Singh/AP Photo]

Pre-pandemic factors

To be sure, both income and wealth inequalities have been on the rise since the 1980s when governments across the world began deregulating and liberalising the economy to allow more private sector participation. Income inequality refers to the gulf in the disposable income of the rich and the poor whereas wealth inequality deals with the distribution of financial and real assets, such as stocks or housing, between the two groups.

Among other things, the post-liberalisation period also resulted in declining bargaining power of workers. At the same time, companies increasingly started turning to financial markets to borrow money for their investments, Yannis Dafermos, a senior lecturer in economics at SOAS University of London, told Al Jazeera.

“It is the financialisation of the economy in particular that generated a lot of income for the rich, who invest in financial assets,” Dafermos said. “And whenever an economic crisis strikes, the central banks’ response is to save the financial market from collapsing because it is so much interlinked with the real economy. This helps stock and bond markets to thrive creating more wealth and inequality.”

This is what major central banks did during the global financial crisis in 2008-09 — injecting liquidity into the market through various tools and lowering interest rates to encourage companies to borrow and invest.

“The easy money policy that began after the global financial crisis led to really low to negative interest rates and big liquidity in the financial system,” Jayati Ghosh, professor of economics at the University of Massachusetts Amherst, told Al Jazeera. “So, in the past 15 years, corporations chose to reinvest the money into buying more financial assets chasing high returns, rather than increasing their production.”

Source: https://www.aljazeera.com/features/2022/12/27/why-do-the-rich-get-richer-even-during-global