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Trump proposes $2 trillion infrastructure fund, govt set to miss FY21 borrowing target, bonds and gold beat other assets, and more

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Indian markets are closed today on account of Ram Navami celebrations.

The numbers coming in from other Asian markets, however, suggest that the coronavirus pandemic continues to rattle investors.

Meanwhile, the domestic auto industry seems to be rattled by the lockdown with some companies reporting a 90% fall in sales.

Oil producers find new ways to store excess oil

Lisa Abramowicz@lisaabramowicz1

Oil producers are getting creative about where to store the stuff they're pumping. https://finance.yahoo.com/news/overflowing-oil-tanks-traders-eyeing-100000489.html …

Overflowing Oil Tanks Have Traders Eyeing Rail Cars for Storage

(Bloomberg) -- Oil companies are turning to rail cars to stash the crude they can’t sell, as the world runs out of places to store a growing glut of cheap barrels.North American producers, refiners...

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Aurobindo Pharma, Novartis call off $1 billion deal on Sandoz
Aurobindo Pharma and Novartis have called off their nearly $1 billion deal pertaining to US generic oral solids and dermatology businesses of Sandoz.

“This decision was taken as approval from the U.S. Federal Trade Commission for the transaction was not obtained within anticipated timelines,” Aurobindo Pharma and Novartis said in separate statements on Thursday.

As part of the proposed transaction, for which a definitive agreement was announced in September 2018, Aurobindo was to acquire commercial operations and three manufacturing facilities in the U.S. from Sandoz Inc., a Novartis division.

The Hyderabad-headquartered drugmaker had proposed to undertake the transaction through its wholly owned subsidiary, Aurobindo Pharma USA Inc.

In its statement on Thursday, Aurobindo Pharma said it was announcing the mutual agreement with Sandoz Inc to terminate the agreement to buy the Sandoz US generic oral solids and dermatology businesses.


Govt set to miss borrowing target for FY21 over COVID 19 expenditure
As the government ramps up stimulus spending to ease the sharp pain imposed by the economic lockdown, its borrowing targets for the current fiscal year are likely to be breached.

IANS reports: "The government is unlikely to stick to the targeted levels of borrowings in current fiscal as additional expenditure and funding needs of stimulus measures would push for higher government debt in the second quarter period, Motilal Oswal Institutional Equities has said in its ecoscope report.

”...the government plans to stick to its budgeted target of gross market borrowings for FY21 (BE). This is very difficult to comprehend because of three reasons: tight fiscal position of the central government, additional burden of Rs 1.7 lakh crore welfare package and severely impacted government receipts (especially indirect taxes) due to loss of economic activity at least till mid—April,” the brokerage said.

The government has budgeted to borrow Rs 4.88 lakh crore in first half of FY 21. This is 63 per cent of annual borrowings budgeted for the current fiscal, similar to the ratio last year. The borrowing calendar of the government also suggests that, as of now, it plans to stick to its budgeted target.

However, resources to finance additional expenditure on account of measures to contain the adverse impact of COVID—19 pandemic would constrain the government to increase its borrowing later.

“If this is the case, we expect the government to revise its borrowing calendar towards second quarter of FY21 or go for some other means of financing the additional gap,” Motilal Oswal report said."


What sectors are most vulnerable to the coronavirus pandemic?
Here are some estimates coming from Moody's about the degree of credit risk faced by companies in various sectors.

PTI reports: "Only 20 per cent of the non-financial companies in the Asia Pacific (APAC) region face high exposure to coronavirus disruptions and the resultant credit risks, Moody’s Investors Service said on Thursday.

It noted that while these 20 per cent companies face high risks from the pandemic as they are sensitive to shifting consumer demand and global travel restrictions, 36 per cent face moderate exposure and 27 per cent of them stare at refinancing risks.

“We have identified six sectors as the most affected by the coronavirus outbreak, namely airlines, auto OEMS and auto parts supply, oil & gas producers, gaming, global shipping, discretionary retail and hospitality,” the report said.

Most companies with moderate exposure operate in sectors closely linked to consumer and industrial activity such as realty, mining, steel, chemicals, refining and marketing."


Property prices could fall steeply due to coronavirus impact, say insiders
The Indian real estate market, which has seen prices refuse to fall to clear the massive number of unsold homes, may finally see prices getting slashed, according to insiders.

Reuters reports: "India's real estate market is likely to see a significant price correction for the first time in a decade as the coronavirus pandemic stalls businesses across the country, according to a half-dozen industry insiders.

“Property prices may come down by 10-20% across geographies, while land prices could see an even higher reduction of 30%,” said Pankaj Kapoor, chief executive of real estate consultancy firm Liases Foras, adding there hasn't been such a correction since the global financial crisis.

Since then, prices in most markets have held steady despite lending and shadow banking crises.

The situation now is so severe that there is four to five years' worth of real estate inventory across India - an all time high. The country's nine major residential markets have unsold units worth some 6 trillion rupees ($80 billion), according to a report in January by PropTiger, an online real-estate portal.

Banks are also worried that if developers can't liquidate their stocks, it could lead to defaults and add to a $140 billion pile of bad loans."
India’s manufacturing activity weakens in March: PMI
The country’s manufacturing sector activity grew at the slowest rate in four months during March, hampered by softer rises in new business as international demand faltered owing to the coronavirus pandemic, a monthly survey said on Thursday.

The headline seasonally adjusted IHS Markit India Manufacturing PMI fell to 51.8 in March, from 54.5 in February, signalling the slowest improvement in business conditions since November 2019.

This is the 32nd consecutive month that the manufacturing PMI has remained above the 50-point mark. In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction.


Oil rallies as Trump talks up truce hopes for Saudi-Russia price war
Oil futures have rallied 10% today after increasing hopes of a truce between Saudi Arabia and Russia. The two major oil producers had entered a price war a few weeks ago after disagreement over supply cuts to shore up oil prices.

US President Donald Trump has been concerned about the price war owing to the negative impact it has on US shale companies with high production costs.

Reuters reports: "Crude oil futures jumped 10% on Thursday after U.S. President Donald Trump said he expected Saudi Arabia and Russia to reach a deal soon to end their oil price war and Russian President Vladimir Putin called for a solution to “challenging” oil markets.

Brent crude futures rose 11.36%, or $2.81, to $27.55 as of 0701 GMT, while U.S. West Texas Intermediate (WTI) crude futures increased 10.0% or $2.03, at $22.34.

Trump said he had talked recently with the leaders of both Russia and Saudi Arabia and believed the two countries would make a deal to end their price war within a “few days” - lowering production and bringing prices back up.

Trump also said he has invited U.S. oil executives to the White House to discuss ways to help the industry “ravaged” by slumping energy demand during the coronavirus outbreak and a price war between Saudi Arabia and Russia."

Bloomberg Economics@economics

China will start buying oil for its emergency reserves after an epic price crash https://trib.al/75wIfwN 

China Starts Buying Oil for State Reserves After Price Crash

China is moving forward with plans to buy up oil for its emergency reserves after an epic price crash, according to people with knowledge of the matter.

bloomberg.com

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US dollar gains, Asian currencies fall as investors seek to avoid risk
The rising intensity of the coronavirus pandemic in the US is surprisingly working to the favour of the US dollar as investors seek to convert their wealth into dollars.

Reuters reports: "Most Asian currencies inched lower on Thursday as a warning from U.S. President Donald Trump about the coronavirus death toll heightened fears of a global recession and soured risk appetite.

Trump warned Americans on Tuesday of a “painful” two weeks ahead in fighting the coronavirus and urged the population to follow social distancing guidelines for the next 30 days. That prompted a rush to the safety of the dollar, while yields on the benchmark 10-year

U.S. Treasuries dropped to its lowest since March 10.

“It is hard to see a recovery in growth/risk assets if the U.S. is not able to get the coronavirus outbreak under control,” said Fiona Lim, senior FX strategist at Maybank, Global Markets Singapore. “Given the fact that the U.S. is now the new epicentre, we see a possibility that the USD's safe-haven allure may eventually dull.”"

March GST revenue drops below ₹1 lakh crore
Goods and Services Tax (GST) collections for March 2020 stood at ₹97,597 crore, dropping below the ₹1 lakh-crore mark after four months.

Gross GST revenue for the month was 8% lower than that of March 2019, according to Finance Ministry data released on Wednesday.

For the full financial year 2019-20, gross GST collections grew 4% in comparison to the previous year.

As the March revenue collections are based on the business conducted in February, these figures do not take into account the full impact of COVID-19 and the consequent shutdown of many business sectors in India. Analysts warn that next month’s revenues are likely to dip much further.


Trump proposes $2 trillion infrastructure fund
US President Donald Trump wants to go big on government spending to boost his country's economy which has been hit hard by the coronavirus pandemic.

Mr. Trump's huge spending plans could cause the dollar to weaken under threat of inflation.

PTI reports: "US President Donald Trump has proposed a massive USD 2 trillion infrastructure plan, along with several other measures like corporate deductibility for restaurants and entertainment facilities to stimulate the American economy ravaged by the coronavirus pandemic.

Trump’s proposal comes days after he passed a USD 2.2 trillion stimulus package that gives USD 3,200 on an average to an American family of four and massive financial assistance to small and medium enterprises, big corporations and the country’s travel and tourism industry.

If US can spend USD 8 trillion on wars in the Middle East, Trump argued that USD 2 trillion is needed to be spent on roads, bridges and tunnels, which are in bad shape."


Supply chains could collapse due to lockdowns, says researcher
The forced shutdown of economies has been justified as a necessary step to prevent the spread of the coronavirus pandemic.

But shutdowns, which stop people from carrying out tasks that are crucial to the production and delivery of essential goods, can huge costs.

Nikkei Asian Review@NAR

The pandemic could "collapse" the global supply chain, says a researcher.
Read more here: https://s.nikkei.com/2WVppQF 

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Moody’s changes outlook on Indian banks to negative
The likely long-term economic effects of the nation-wide lockdown to deal with the coronavirus pandemic is now beginning to show up in the assessments of ratings agencies.

PTI reports: "Moody’s Investors Service on Thursday changed the outlook for Indian banking system to negative from stable, as it expects deterioration in banks’ asset quality due to disruption in economic activity from the coronavirus outbreak.

It said Banks’ asset quality will deteriorate across the corporate, small and medium enterprises and retail segments, leading to pressure on profitability and capital.

Stating that asset quality will deteriorate, Moody’s said a sharp decline in economic activity and a rise in unemployment will lead to a deterioration of household and corporate finances, which in turn will result in increases in delinquencies."

Bonds and gold beat other assets so far in 2020

Tracy Alloway@tracyalloway

Not much is working in 2020. Via Goldman:

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Coronavirus | IndiaNivesh shuts down broking services

IndiaNivesh Shares and Securities has shut down all its broking operations on account of the liquidity crunch caused due to the ongoing coronavirus pandemic.

In a statement issued to the stock exchanges late on Wednesday, IndiaNivesh said its broking subsidiary, which has been in business for more than 14 years, is unable to raise funds due to the credit freeze and hence it has decide to voluntary disable it’s stock broking operations.

“... the ongoing global pandemic called the novel coronavirus [COVID-19] has led to an unprecedented fall in the markets coupled with the present lockdown. This has brought economic activity to a grinding halt. These extraordinary events have exacerbated an economic slowdown and led to an unprecedented and unanticipated liquidity crunch,” the stock exchange notification said.
Wall Street tanks as virus concerns persist
The Indian markets will remain closed today owing to Ram Navami celebrations. Indian stocks fell around 4% yesterday with investors continuing to sell into rallies.

Yesterday also saw a slew of numbers come in from the auto industry indicating a massive fall in vehicle sales.

Overnight though, there was bloodbath on Wall Street with the Dow Jones falling over 4% due to coronavirus concerns.

IANS reports: "Wall Street’s major averages tumbled on Wednesday amid deepening concerns over the rapid spread of COVID-19 in the country.

The Dow Jones Industrial Average slumped 973.65 points, or 4.44 per cent, to close at 20,943.51. The S&P 500 fell 114.09 points, or 4.41 per cent, to 2,470.50. The Nasdaq Composite Index shed 339.52 points, or 4.41 per cent, to 7,360.58, Xinhua reported.

The three major averages dropped more than 5 per cent at session low.

Original Post: The Hindu

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