In a surprise move, Donald Trump called for the Federal Reserve to push for negative interest rates like in much of Northern Europe and Japan. According to Trump, it could be America’s best bet to give a boost to consumer demand and for economic growth. Most nations have taken rates into negative territory rather unwillingly because negative rates punish savers in the economy. Over the last few months, the Fed and the US President have been at a divergence on the subject of rates. Fed has been cautious about rates whereas Trump had been calling for aggressive rate cuts.
High air ticket prices may be back to hit Indian travellers. Air fares expected to spike by 9% on capacity squeeze created by Jet Airways. Domestic passenger traffic for the fiscal 2019-20 is likely to come down to 7% from 19% in the previous year. According to a report in the Business Standard, this fall in growth has been largely driven by the shutdown of Jet Airways, since other airlines have not been able to compensate for the capacity shortfall. With other airlines unable to compensate for the 14% market share gap created by Jet, the obvious impact been a sharp rise in air fares.
Even as equity indices have been struggling, the Mutual funds inflows grew in August although credit risk funds remain under pressure in the light of the FMP fiasco earlier this year. For the month of August, the liquid funds collections were up by nearly 80% over July this year. However, credit risk funds continued to see outflows, albeit at a slower rate. Even equity funds saw steady inflows of Rs.9090 crore in August but monthly SIP collections fell marginally to Rs.8230 crore. Overall mutual fund AUM at Rs.25.47 trillion was almost flat over the previous month. Overall AUMs have not really grown.
After the spurt in crude prices, came the sharp fall. Brent Crude cracks 265 bps to $60.73/bbl on proposed easing of Iranian sanctions. Brent crude, which had crossed $63/bbl earlier in the day, fell sharply after Trump hinted at easing of sanctions on Iran. Sanctions were imposed on Iran early this year and most countries including India had been asked not to deal with Iran. Even as oil started higher on falling US stockpiles and hopes of a resolution to the Chinese trade war, Trump surprised the street with his Iran feelers, although the actual implementation remains to be seen.
The first 100 days of Modi 2.0 have been extremely eventful. Stock markets gave up their gains post the Union Budget on July 05th. PSU banks lost 25% in these 100 days while auto stocks lost nearly 15% during the same period. The only sector to decisively gain during the 100 days of Modi 2.0 was the Information Technology sector; largely supported by a weak rupee. Meanwhile, auto inventories with dealers are up seven-fold ahead of festive season, largely driven by two wheeler manufacturers pushing inventories to dealers ahead of the festive season. With auto sales drastically down in the last 1 year, manufacturers are trying their best to leverage on the festive season. However demand is weak and bank funding for dealers have been under pressure for quite some time in the auto sector.
Scottish Court strikes down suspension of British Parliament from mid-October. In a setback for Boris Johnson, the proposal to prorogue parliament from October 14th has been struck down by the Scottish Court of Appeals. Johnson wanted to push through BREXIT on October 31st with or without a deal and hence had recommended suspension of the house. The decision puts Johnson in a tight spot as BREXIT deadline may now have to be postponed till 2020. This largely limits the options for Boris Johnson but gives a thumbs-up for the Labour leader, Jeremy Corbyn.
