Global - Economy and Market
· U.S. employment indicator reaches 3-year high
The Conference Board's index of hiring prospects in the U.S. rose to 103.7 last month, from 102.4 in October. It was the highest reading in three years.
· Geithner to see Sarkozy, urge decisive euro action
PARIS - U.S. Treasury Secretary Timothy Geithner meets French President Nicolas Sarkozy in Paris on Wednesday to press for decisive steps towards resolving Europe's deepening debt crisis as the region's leaders prepare for a crucial summit this week.
· Euro zone economy edges up in Q3, but heading for slump
BRUSSELS - The euro zone's economy barely grew in the third quarter, the EU said on Tuesday, with collapsing business confidence and slowing industry pointing to a recession and likely giving the European Central Bank ground for an interest rate cut this week.
· Euro zone leaders may raise esm, efsf capacity limit
REUTERS - Euro zone leaders may decide on Friday to raise the combined lending limit of their temporary and permanent bailout funds to boost the firewall which they hope will contain the spread of the sovereign debt crisis, euro zone officials said.
BRUSSELS - The threat of a credit downgrade to the euro zone's top economies leaves the bloc's EFSF bailout fund dangerously exposed, piling yet more pressure on the European Central Bank to step in as lender of last resort.
India - Economy and Market
· Distress in core India industries drives reform hopes
India's power, telecoms and aviation sectors, core to sustaining the country's growth, are in various states of crisis. That may prove a good thing, if it forces government to act. Regulations in all three industries have kept prices low and brought power, cellphone service and even air travel to millions of Indians for the first time. The same policies have left many operators battered by losses, debt, and plunging share prices.
· Companies approach banks for recast of over Rs 28,000 cr debt in Q2
NEW DELHI: The economic slowdown has started taking a toll on the banking sector, with a large number of companies approaching banks for restructuring of debt totalling about Rs 28,890 crore in July-September, 2011.
· Big borrowers of India Inc default on Rs 47,000 crore loans
NEW DELHI: Large borrowers, who took loans of Rs 10 crore or more, have defaulted on payments to the tune of Rs 47,000 crore, with banks not even pursuing cases to recover over half the amount.
Data available with the finance ministry shows that least 700 defaulters who had borrowed Rs 10 crore or more from public sector banks and cumulatively owe over Rs 26,000 crore have gone scot free despite not clearing their dues. In another 3,400 cases where loans are of the order of Rs 1 crore or more, the lenders have moved courts and tribunals to recover Rs 21,400 crore.
· India most disappointing among BRIC nations: Goldman's O'Neill
India's record on productivity, FDI and reform has been the most disappointing, the chairman of Goldman Sachs Asset Management Jim O'Neill said.
· Indian shares set to open up; retailers watched
NEW DELHI, Dec 7 (Reuters) - Indian shares should open higher on Wednesday on hopes the rupee's pullback from a slide will encourage foreign fund inflows, traders said. However, investors will be cautious due to the government's inability to implement key policy reforms. Retailers will be in focus ahead of Finance Minister Pranab Mukherjee's speech in parliament about the government's stand on retail reform, which was put on hold amid widespread criticism.
Technology News –
· Wipro consolidating services into single business operations unit
Wipro is combining information systems, global delivery and business application to streamline delivery and bring in greater automation at the backend.
· Zensar partners Google to offer apps to retail, other sectors
NEW DELHI: Software services firm Zensar today said it has partnered with Internet search giant Google to provide the latter's enterprise solutions suite 'Google Apps' in Asia Pacific ( APAC) region to retail and manufacturing firms
· Nasscom maintains growth forecast of 16-18% for IT industry
NEW DELHI: Software industry body Nasscom today maintained its growth projection of 16-18 per cent for the sector in this fiscal, notwithstanding concerns over economic uncertainty in global markets.
· Facebook acquires mobile application firm Gowalla
NEW YORK: Social networking website Facebook has acquired mobile application firm Gowalla for an undisclosed amount.
The Gowalla application allows people to share their location and favorite places with friends.
· Belkin to increase Indian channel partners to 30,000
KOLKATA: Belkin, a US-based provider of interconnectivity solutions across computing and consumer electronic devices, is planning to increase its channel partners in India from 17,000 to 30,000 by September next year, targeting over 60 percent growth in its sales revenue.
"We are extremely bullish about the growth in 2012 in India. We are eyeing 60 percent year-on-year revenue growth in the year starting from October 2011 to September, 2012," Belkin India Private Limited managing director Mohit Anand told reporters after announcing the launch of wired and wireless keyboards and mouse range here Tuesday.
· Online uproar as India seeks social media screening
NEW DELHI - India has urged social network companies including Facebook, Twitter and Google to remove offensive material, unleashing a storm of criticism from Internet users complaining of censorship in the world's largest democracy.
· McAfee cuts 3 percent of workforce
REUTERS - Security software maker McAfee laid off about 250 workers, equivalent to 3 percent of its workforce, in a bid to focus on core businesses and improve efficiency in a market led by rival Symantec.
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Global - Economy and Market
S&P warns of broad euro zone downgrade over debt crisis
NEW YORK - Standard & Poor's on Monday warned it may carry out an unprecedented mass downgrade on the credit ratings of euro zone countries if EU leaders fail to reach an agreement on how to solve the region's debt crisis in a summit later this week.
U.S. will avoid euro zone contagion - top investors
The United States faces only limited fallout from the euro zone debt crisis and the struggling European economy, a situation that bodes well for U.S. equity markets in 2012, top U.S. money managers said on Monday.
Hedge fund managers and institutional investors at the Reuters 2012 Investment Outlook Summit in New York said the chances for a recession in the world's largest economy look very low and Europe's struggles will be no more than a headwind.
"We've been able to segregate U.S. economic activity from European economic activity. I don't know how we've done it, but we've done it," said Tom Sowanick, chief investment officer at OmniVest LLC in Princeton, New Jersey.
However, Growth in the U.S. service sector eased last month, and new orders for factory goods fell in October, tempering recent optimism that the U.S. economy may be poised for a more vigorous rebound.
China slowdown spreading, HSBC services PMI shows
BEIJING - China's services sector cooled in November to its weakest growth in three months, an HSBC purchasing managers' index showed on Monday, the latest data portraying an economy slowing quickly and in need of policy support.
India - Economy and Market
Some states may miss fiscal consolidation target: ICRA
"The moderating macroeconomic outlook is likely to have a considerable bearing on the pace of revenue growth in the near-term, even as the ability of the states to curtail the growth of committed expenditures is likely to be limited," the rating agency said, adding it will be challenging to stick to the fiscal consolidation target in this environment.
It also said some states may find it challenging to report revenue surpluses this fiscal. As per the fiscal targets set by the 13th Finance Commission, 19 out of the 28 states are required to eliminate their revenue deficits and curtail their financing gaps (defined as revenue balance plus capital receipts less capital outlay and net lending) to 3% of gross state domestic product (GSDP) this fiscal.
Purchasing managers index hits 3-month high: HSBC
The manufacturing and services sector index, as measured by HSBC India Composite Index, rose sharply to a three-month high in November to 52.3 from 50.3 in the previous month, even though the private sector output rose only modestly, says the HSBC Purchasing Managers Index.
"The HSBC India Composite Index, which covers both the manufacturing and service sectors, posted 52.3, up from 50.3 in October, to a three-month high. The seasonally adjusted business activity index posted 53.2 in November, above the 50.0 no-change threshold that separates growth from contraction.
Retail reforms on hold; shares slide
India has put a plan to open up its retail industry to foreign supermarkets on hold, a senior government source told Reuters on December 4. The first major economic reform since Prime Minister Manmohan Singh's graft-riddled term was reelected in 2009 has been met with fierce opposition from some who say it will destroy the livelihood of millions of small traders. New Delhi continues to disappoint foreign direct investors, with domestic politics seemingly relentless in its refusal to allow major economic reforms.
India's economy runs twin fiscal and current account deficits. It needs inflows of foreign capital both to fuel economic growth and to finance shortfalls on the current account which stands at 3 percent of GDP. In 2010 India was the only BRIC country to see a decline in foreign direct investment. The combined inflows from FDI and institutional investors declined from $16 billion in the first quarter of this year to only $4 billion in the second quarter. This drop-off is putting pressure on the rupee which hit an all-time low against the U.S. dollar last month. The weakness of the rupee in turn fuels domestic inflation which is already above 10 percent.
Welfare payments: Why Jharkhand's initiatives are relevant for all of India
Jharkhand is readying to use UID to ensure NREGS payments reach only the true beneficiaries. This is the first big test of the UID proposition
FinMin wants FDI in airlines within SEBI framework
The Finance Ministry is understood to have given the green signal to the proposal to allow 26 per cent FDI by foreign airlines in the private carriers, many of them facing a cash crunch, with a rider that such investments should not violate Sebi's takeover code.
No plan to decontrol diesel pricing, says govt
The government has no plans to decontrol diesel pricing but wants consumer to "get used" to changes in petrol rates being effected every fortnight.
"There is no immediate plan to decontrol diesel or LPG as they have cascading effect (on general prices)," Minister of State for Petroleum and Natural Gas R P N Singh told reporters here.
India Inc raised $2.47 billion in October through ECBs, FCCBs
Around 80 companies raised around $2.07 billion for various projects through the automatic route in October which does not require approval from the Reserve Bank of India (RBI) or the government.
Another $404 million was raised through the approval route, according to the RBI data.
Indian shares falter on profit-taking; retailers drag
Uncertainty over foreign investments in retail sector plagues
Technology News –
RIL plans to offer 4G services on Rs 3500 tablets
RIL is the only company to have pan-India spectrum to offer wireless broadband services on the 4G technology platform having paid Rs 13,000 crore for these airwaves
The RIL services is based on fourth generation, or 4G, technology which offers faster internet access compared to third generation (3G) services. RIL plans to launch tablets at around Rs 3,500 and bundle it with data offering as low as 1 GB at Rs 10, a tenth of the current 3G prices.
Slump in HP business, higher tax rate to hit growth
Sustained weakness relating to the company's biggest client Hewlett Packard, or HP, continues to drag down MphasiS. Business from the HP channel has declined by eight percentage points to 62% over the past five quarters. HP has been struggling to renew large multi-year contracts and the failure to renew the deals is likely to create pricing and volume pressure on MphasiS' profitability.
US optical networking firm expands Bangalore research facility
BANGALORE: Infinera Corp, a leading US provider of optical networking systems to telecom carriers, Monday announced it is expanding its research and development facility in this tech hub.
Wipro leading IT service provider in Saudi Arabia
Global software major Wipro has emerged as a leading IT service provider in Saudi Arabia with a commanding position in the kingdom, the IT bellwether said on Monday.
Entering the region a decade ago in partnership with Dal Al Riyadh in Al Khobar, the company consolidated its presence by forming a joint venture with the well-diversified group to form Wipro Arabia Ltd for serving a large number of clients across the kingdom.
E-Commerce spurt spawns new services
Services like logistics, delivery & payment collections and referral services, which are often complementary to online transactions, have become crucial for the e-commerce industry as portals jostle for more clicks in a crowded space.
Start-ups are moving in to provide these services exclusively focusing on this burgeoning space. It is a nascent sector but may see traction shortly.
SAP splashes out in cloud-computing business on fear of losing ground to Oracle
FRANKFURT: SAP's $3.4 billion takeover of SuccessFactors will help it keep up with peers in the frenzied race for cloud-computing business, even if the price it paid is very high at first glance, analysts said on Monday.
"We believe SuccessFactors could be a very good strategic fit for SAP in the cloud sector and we prefer the decision to grow externally in this booming area," DZ Bank analyst Oliver Finger said.
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Daily_Markets_Eco_6Dec2011.doc
The austerity versus spending debate is an ongoing phenomena and has opened a deep chasm between differing ideologies in the spheres of politics and economics. Unfortunately, the debate tends to be coloured more by ideological biases than a focus on evidence based economic experience. It is therefore helpful to understand the issues at hand via a simple real life example – and with that aim in mind I summarise below a note by Paul Krugman on the "Baby-Sitting Co-op" written in 1998 in the context of the Asian Financial crisis, but also very relevant to the current crisis. The note illustrates how economies can fall into recessions and the process by which government stimulus can help the economy recover from them.
-The original story was told in an academic article published in 1978 about the experiences of the two authors (husband and wife) who were part of a baby-sitting co-op in the early 1970s in the Washington area. The story had a big influence on Krugman's economic thinking.
-A group of 150 couples agree to baby-sit for each other, thereby removing the need to hire baby sitters for cash. The arrangement was mutually beneficial as baby-sitting more children in addition to your own was not much of an additional burden, particularly given that you would receive the same service some other evening.
-To ensure that every couple did their fair share, the co-op issued scrip-pieces of paper equivalent to one hour of baby-sitting time. The relevant amount of coupons were exchanged at the end of each baby-sitting session and the system was self-reinforcing – over time each couple would do an equal amount of baby-sitting as it received in return.
-However, technical problem developed as couples (during periods of low social activity) would baby-sit more often to build a reserve of coupons to be used when social activity increased at a later date. Normally this demand would average out over time as one couple staying at home would be offset by another couple going out. But since many couples held reserves, the co-op needed to ensure a large amount of scrips in circulation.
-This particular co-op, however, experienced a sharp drop in circulating coupons (for complicated reasons involving the payment and collection of dues which were paid in scrip). This shortage led to more couples trying to build reserves and were reluctant to go out. But this tendency deprived other couples to earn coupons, further reducing baby-sitting opportunities with couples only going out on special occasions. The co-op experienced a recession.
-A debate began between two groups in the co-op – the lawyers (who wanted to legislate a recovery by passing a rule requiring couples to go out more often) and the economists who wanted to issue more coupons. The economists finally won, more coupons were issued and couples started going out more often. Eventually (of course) the co-op issued too much scrip leading to different problems....
-This simple story illustrates how an economy can fall into a recession (because consumer demand falls – i.e. co-op members go out less often) and how central banks can act to resolve the situation (by monetary easing - i.e. issuing more scrip).
-The story also has an important lesson- that recessions are not a punishment for our sins which we are fated to suffer or because its members are bad and inefficient baby-sitters, nor because of a flaw in their values. They happen because there are too many people chasing too few scrips.
-The story could be extended further – there could be situations where co-op members could find themselves out of coupons because they went out several times in a row, and therefore could not get baby-sitters, even though they were able and willing to do more baby-sitting in the future. To resolve this problem, they could borrow more coupons from the co-op, with a penalty in terms of more coupons to be repaid later.
-Under this system, couples would hold less reserves than before knowing that they could always borrow more if necessary. The co-op could also vary the penalty depending on whether there were an abundant supply of baby-sitters (lower the penalty to encourage more people to go out) or a shortage of baby-sitters (increase the penalty to encourage people to go out less).
-The above co-op would thus have a central bank which stimulates, or cools down, an economy by reducing or increasing the interest rate.
-How do "liquidity traps" occur in this co-op? There could be a seasonality to the demand and supply for baby-sitting – with people preferring to stay at home during dark and cold winter months (to build coupon reserves for more summer social activity). The co-op could even out the seasonality by lower rates in the winter and higher rates in the summer – but this seasonality could become so strong that even at zero interest rates people are more willing to baby-sit than go out leading to (via a self-reinforcing cycle) fewer and fewer baby-sitting opportunities in the winter and a recession.
-"The story of the baby-sitting co-op is not mere amusement – if only people could take it seriously and try to understand the great economic issues at stake, whimsical parables are not a waste of time but the key to enlightenment - it is a story which can save the world".
While this article appeared in 1998, in response to the Asian crisis, it has very relevant applications to the challenges we face today – i.e. a liquidity trap where consumer demand remains anaemic despite zero interest rates. So rather than focussing on practical and tested measures to lift developed world economies out of the liquidity trap, the focus has unfortunately shifted to an expression of ideological biases against "big government" and "debt" and the solution being espoused is even more "austerity" – which has prolonged and deepened the slump. It is also clear that the US Fed, led by Bernanke (who probably understands the implications of the above story well by being a leading scholar of the Great Depression!), is taking steps in the right direction (though arguably not aggressively enough as it is constrained by the political dead-lock in the US) while the ECB remains mired in a morass of ineffective decision making and being held hostage to an irrelevant episode of history (the "Weimar Hyperinflation").
The next few weeks are likely to be critical for global markets– with the EU summit on December 9th and the Fed policy meeting on December 13th. The market is expecting an announcement on a plan for fiscal union for the Eurozone, to be followed by more active intervention by the ECB (and the IMF) to support the government bond markets. This would likely lead to a massive year-end rally which may extend to the early part of next year, but as we have seen innumerable times before, this is also likely to be followed by disappointment with a lack of details and unforeseen problems with the plan. Meanwhile, the Fed seems to be laying the groundwork for a QE (with statements in favour by several governors) , with a focus on the housing market, and there is a high possibility they announce this on December 13th.
I have attached below charts which illustrate the year-to-date performances of the major global equity markets and other asset classes. Assuming we get stimulative policy actions across the globe (and there are clear signs that this is beginning to happen with the coordinated central bank actions last week), the markets which are likely to out-perform are the ones which lagged last year- namely: Europe, India, Hong Kong & China, Brazil, Japan and commodities. Sometimes a simplistic approach to investing works far better than complicated analysis!
Global - Economy and Market
Italy PM Monti unveils sweeping austerity package
ROME - Prime Minister Mario Monti will present a 30 billion euro package of austerity measures to parliament on Monday designed to shore up Italy's strained public finances and help to stem a debt crisis threatening to overwhelm the euro zone.
China vice premier calls for trade restructuring
SHANGHAI - China's Vice Premier Wang Qishan on Sunday urged local authorities to stabilise exports and boost imports in the face of growing global economic uncertainties, reiterating Beijing's pledge to transform its trade-dependent economy.
Russia: November manufacturing PMI was up sharply from the previous month, a further sign of a pickup in growth in Q4
The most significant rebound was in the new orders, output and employment sub-components.The output prices sub-component rose, while the input prices sub-component was indicative of a further decline in inflation pressures.
Mexico: The central bank will announce its monetary policy decision today at 10:00am EST; expected to leave the overnight rate unchanged at 4.5%
South Africa: November’s PMI increased to 51.6, but the components were mixed
Taiwan: The Executive Yuan has approved measures to support the economy, aiming at maintaining 2012 GDP growth at 4%
U.S. manufacturing expansion outpaces most other nations
U.S. manufacturing output rose last month, setting the country apart from other developed nations except Russia, the Institute for Supply Management said. The institute's U.S. index rose to 52.7% in November, from 50.8% in October. Russia's index rose 2.2 percentage points, to 52.6%.
India - Economy and Market
Mamata Banerjee says foreign supermarket plan on hold
MUMBAI - The government will put a plan to open up its retail industry to foreign supermarkets on hold until it reaches consensus within the coalition, risking a possible dilution of the policy rather than a change of heart.
RBI says ready to deploy every tool to defend rupee
RBI on Saturday said it will pull all stops to defend rupee if situation warranted and blasted critics questioning its ability to effectively arrest slide, saying selective intervention in recent days should not be "misconstrued" as its "inability" to deal with the challenge.
"We do have the instruments and capacity to enhance the supply of foreign exchange into the market and will use them as appropriate," RBI Deputy Governor Subir Gokarn told a CII event here through a video recording.
New green revolution: Producer comapnies help farmers reap profits
NEW DELHI: Farmers are joining India Inc in mind, body and spirit. In a quiet revolution underway across the countryside, growers are setting up companies, replete with balance sheets, professional CEOs, board of directors, and income tax returns.
By pooling together the land and produce of their shareholders, these companies are signing lucrative deals with large retail chains, food companies and exporters keen to establish reliable supply chains. As many as 200 companies have been formed by farmers from different parts of the country and another 100 are likely to be set up by March next year
Indian shares to drop on profit-taking; UltraTech eyed
MUMBAI, Dec 5 - Indian shares could falter on Monday as profit-taking is seen emerging after the market had rallied the most in nearly two-and-a-half years last week. "I don't see the market going up. It will open in the red and will go down," Kishor Ostwal, chairman and managing director at CNI Research, said. At 0230 GMT, the Nifty India stock futures traded in Singapore were trading down by 0.5 percent, pointing to a lower opening for the Indian market.
Technology News –
Infosys cautious about global IT demand; Wipro, TCS, Cognizant optimistic
While, Infosys is cautious. Tata Consultancy Services (TCS), Cognizant and Wipro were very optimistic on demand for IT products.
Tulip partners Iomega, MindTree for video surveillance service
Tulip Telecom has tied-up with IT firm MindTree and data storage company Iomega to offer video surveillance services to SMEs.
The services will be based on Iomega's storage devices, while MindTree will provide the video management software. The solutions will be rolled out by Tulip.
"The partnership looks to provide India's first video surveillance services based on cloud technology to the SMEs," Iomega President Jonathan Huberman told reporters here today.
Germany's SAP to buy US-based SuccessFactors for $ 3.4 bn
NEW YORK: German business software giant SAP AG has agreed to buy SuccessFactors Inc in an all-cash deal worth $ 3.4 billion.
SAP will pay $ 40 a share for acquiring all common stock of US-based SuccessFactors. This represents a premium of 52 per cent over the closing price of SuccessFactors' shares on December 2, the Germany-based firm said yesterday in a statement.
SuccessFactors, a provider of employee management software, has more than 3,500 customers and over 15 million subscribers in 168 countries.
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