An escalation of Middle East tensions resulted in Brent Crude crossing $73/bbl in the second half of Thursday. With Saudi Arabia openly accusing Iran of attacking its vessels and the Aramco oil facilities, the situation in the Middle East appears to be worsening. It started with Iran threatening to block the Strait of Hormuz, which moves nearly 30% of the world’s sea-bound crude. The geopolitical tensions have overshadowed higher production and the rising inventories in the US. The sanctions on Iran and Venezuela are also constricting the supply of oil in the global oil markets.
RBI has taken its first step to exercising greater control on the functioning of the NBFCs by instructing NBFCs with over Rs.5,000 crore assets to appoint Chief Risk Officers (CRO). The appointment of a Chief Risk Officer is the first step taken by the RBI to tighten regulation of NBFCs after a series of defaults was triggered by IL&FS. The CRO will do a real-time assessment of risk including the risk of maturity mismatch, which has been a major problem for most NBFCs and HFCs in the last one year. CRO cannot be removed without approval of the Board and will be appointed for a fixed tenure.
Wall Street and the Indian indices almost appeared to move in tandem. Wall Street gained on earnings boost and better macroeconomic data. With better than expected earnings coming in from Wal-Mart and Cisco, the Dow Jones opened almost 1% higher on Thursday. This is on the back of positive movements on Tuesday and Wednesday. With the Chinese sanctions, Wal-Mart will have better pricing power on its retail sales. Meanwhile, US homebuilding data improved raising hopes of a rate cut by the Fed. That could be a short term boost to the US markets and also to global equities.
The days of big discounts on online buying may be finally over as big e-commerce players are drawing the curtains on big discounts. Some of the biggest e-commerce players in India like Flipkart and Amazon are giving up on big discounts which used to be their USP for a long time. Both the e-commerce giants hinted that they are not selling below cost any longer. E-commerce players like Wal-Mart (which owns Flipkart) and Amazon are treading carefully in the light of new e-commerce regulations. The new regulations put the higher effective cost in terms of operations and also in terms of data maintenance.
Even as Trump and Xi have promised to talk to each other during the G-20 Summit in June, the trade war took a new turn after the US blacklisted Chinese telecom giant, Huawei for monopolistic practices. In fact, it appears like the US is putting pressure on China in trade negotiations by resorting to such Track-2 strategies of blacklisting Huawei. This blacklisting amounts to barring Huawei from selling its products in the US markets. China has promised to take adequate safeguards to protect the rights of Chinese companies. Trump has blacklisted Huawei as a national security threat. Trade analysts point out that the ban on Huawei will force US customers to opt for higher cost products. China also hinted that it holds $3.65 trillion of foreign reserves and can surely swing dollar treasuries.
With elections almost completed, the government seems to have front-ended its wheat procurement to benefit farmers. In fact, the government has procured 29.26 million tonnes of wheat to honor MSP promise. These wheat stocks were procured through Food Corporation of India (FCI) at the MSP price of Rs.1840/quintal. This is nearly 80% of the full fiscal year target. More than 21 million tonnes were procured from Punjab and Haryana and the balance from other states. In the previous fiscal year the government had procured 36 million tonnes; well above the target.
