Brent spent another volatile week as it grappled between the twin forces of a global trade war and rising tensions in the Middle East. Brent crude closes higher on Friday at $61.89/bbl but ends with weekly losses. Despite the dead cat bounce in oil prices on Friday, the undertone was clearly bearish. Brent crude prices had crashed by 7% on Thursday after Trump had announced tariffs of 10% on Chinese imports to the tune of $300 billion. Escalating trade tensions could signal a further slowdown in the world economies and that could depress oil demand and keep prices under pressure.
The Jet deal may just be getting a lot more complicated with little hopes of coming up with anything worthwhile in terms of recoveries. Jet Airways extended the date for initial bid submission from 03rd August to 10th August. According to the Jet resolution professional, the additional time was warranted as the bidders had asked for more time to submit their bids. Jet had shut operations on April 17th and has now been referred to the NCLT after SBI failed to get any interested buyers for its stake in Jet. Etihad, which holds 24% in Jet had expressed interest, but with a much bigger haircut on the bank loans.
As business sentiment is dipping globally, one big gainer appears to be gold. October gold futures on the MCX crossed Rs.36,000 after Trump announced fresh tariffs on China. Global gold prices have been on an uptick on rising uncertainty in the global markets and higher demand from central banks and ETFs. Indian gold prices also moved up in tandem. Last week, Trump had announced 10% tariffs on imports worth $300 billion from China and that led to a rise in macro risk and also fears that the resultant economic slowdown would be favorable for gold prices, as part of a rush for safety.
RBI appears to be wielding the baton as it penalizes 9 banks for delays in the reporting of frauds. Leading PSU banks like SBI, PNB and BOB were penalized by the RBI for delays in reporting the Kingfisher Airlines fraud. Similarly, OBC, Allahabad Bank and Bank of Maharashtra were also penalized for such delayed reporting. The total penalties levied on all the PSU banks put together were in excess of Rs.20 crore and is being viewed as deterrent action by the RBI. This could become a precedent going ahead and many more banks could find themselves on the wrong side of such penalties from the RBI.
The equity markets recovered late on Friday on hopes that the FPI tax would be either reversed or at least Section 119 of the Income Tax Act will be invoked to give a special relief to the foreign portfolio investors to keep them interested in the Indian markets. Of course, the foreign investors continued to remain heavy sellers in the first two session of August selling more than $0.50 billion. Meanwhile, with the US Fed cutting the Fed rates by 25 bps to the range of 2.00-2.25%, the Indian markets are building in expectations of a minimum rate cut of 25 bps when the MPC meet concludes on the 07th of August. MPC had cut rates by 25 bps in the June policy and had also hinted at a more dovish rate stance to boost the GDP growth which had fallen to as low as 5.8% in the March quarter.
The debate on Gun Laws in the US is likely to be back after a 21 year old white American went on a rampage in a Wal-Mart store in El Paso, Texas killing at least 20 people. This follows another fatal shooting in a Wal-Mart store earlier this week and a major shootout in California in the week before that. There were more than 1000 customers in the Wal-Mart store at the time of the shooting. Ironically, this was shortly followed by another shootout in Dayton, Ohio on the same day resulting in another 10 deaths. Gun laws surely need a rethink in the US.
