by Pavas Gupta
Last week brought with it a medley of sharp turns in the economy, right from expected highs for Indian banks to unforeseen lows for subsidized LPG users. On the global front, there still seems to be residual implication from the Trade War, which the US and China are now attempting to sort out. Read on to find yourself more aware of how the world’s economy has been functioning:
Good news for Indian banks: a turn-around might be around the corner
Global rating agency Standard and Poor’s (S&P), on Tuesday, said that debt-ridden Indian banks are likely to see a turn-around in their financial situations starting from 2019-20.
“Another year of high provisioning is likely as public sector banks clean up their balance sheets and provide for losses on their stressed assets. Other drags on earnings include lower treasury income amid rising interest rates,” the agency said in a report.
The good news, however, came with its fair share of warning: the agency warned that recovery in the banks’ earning performances could take a further blow if large, unexpected, bad loans materialized in the agriculture centre. It further provided caution against the loan-against-property segment, which is vulnerable in itself.
S&P credited its stable outlook on books to expectations of high government support, further stating that the current recapitalisation of Rs 2.1 lakh crore may not be sufficient.
Talks to defuse the Trade War make the rounds
The United States and China are involved in an effort to defuse tensions between them, so as to avoid a full-fledged trade war that could affect the global economy more than it already has.
With prospects of easing trade tensions looming, there have been reports of industrial shares lifting. The next wave of U.S. tariffs is set to kick in as soon as Wednesday, with the possible imposition of duties on another $16 billion worth of Chinese imports. However, this could be delayed as the administration figures out which products to target. Officials in Beijing, meanwhile, plan pre-emptive retaliatory measures.
One person familiar with the internal deliberations said the U.S. was trying to secure certain concessions and if China agrees, it is possible the U.S. would back off additional tariffs.
Apple now world’s first trillion-dollar company
On Thursday, the computing and mobile phone giant beat all records to become the world’s first trillion-dollar publicly-traded company, after its shares hit a all-time-high of $207.05. this comes as a landmark for the tech giant as it overtakes Amazon’s market valuation. To put it in perspective, It means Apple’s stock market value is more than a third the size of the UK economy and larger than the economies of Turkey and Switzerland put together.
Apple’s share price has grown fourfold since Tim Cook replaced Jobs as chief executive in 2011. This week’s rise in Apple’s share price was powered by quarterly financial results released on Tuesday that were better than Wall Street had expected.
Japan dethrones China as world’s second-largest stock market
After the United States, the stock market valuation of which is just over $31 trillion, Japan is now the second-biggest competitor at $6.17 trillion. According to data compiled by Bloomberg, Chinese equities were stuck at $6.09 trillion after a slump on Thursday.
Chinese equities and the nation’s currency have taken a beating this year amid a trade spat with the U.S., a government-led campaign to cut debt, and a slowing economy.
“The market will likely continue to hover at low levels for the next couple of months,” said Linus Yip, Hong Kong-based strategist with First Shanghai Securities Ltd. “But there’s still a chance that China’s stock market will recover with total capitalization ascending to the world’s No. 2 place again. After all, the economic fundamentals are still stable and growth momentum will resume after a short-term downturn.”
LPG rates to be hiked
On Tuesday, the rates of subsidized cooking gas (LPG) were hiked by Rs 1.76 per cylinder. This was a result of tax impact on change in base price. LPG will now cost Rs 498.02 per cylinder in Delhi compared to Rs 496.26 currently, a statement issued by Indian Oil Corporation (IOC), the nation’s largest fuel retailer, said.
In part, an increase in price is due to the Goods and Services Tax (GST), which is calculated at the market rate of the fuel. “The increase is mainly on account of GST on the revised price of domestic non-subsidised LPG,” the statement said.
Oil firms revise LPG prices on the 1st of every month based on average benchmark rates and the foreign exchange rates of the previous month.
Higher import duties to be levied on US products
The Finance Ministry has issued notification to defer the retaliatory duty on import of over two dozen products till September 18. Earlier, higher duty was scheduled to come into effect from August 4.
In an effort to resolve differences, the Commerce Ministry has requested the Finance Ministry to extend the implementation of higher duty by 45 days.
The Government, on June 21, had decided to hike import duties after the Trump administration’s decision to unilaterally raise import levies on certain steel and aluminium products earlier in 2018, which had a tariff implication of ₹241 million for India. India’s retaliatory measures are expected to have an equal impact on the US.
Pavas Gupta is a writing analyst at Qrius.