Global stock markets rose on the final trading day, recouping losses from earlier in the week, as the dollar steadied against other currencies.
Major indexes in the US hit session highs, finishing the day squarely in record territory and booking a fourth straight weekly advance. A reading of fourth-quarter gross domestic product came in slightly softer than expected but was viewed by Wall Street as healthy enough not to derail the perception that the economy is on firm footing.
President Donald Trump delivered a keynote speech at the World Economic Forum in Davos, Switzerland highlighting the strength of the domestic economy and offered a less protectionist stance on international trade.
The European markets ended Friday’s session with modest gains. The markets climbed in early trade, but settled into a sideways pattern for the bulk of the session. France’s CAC 40 was up 0.87% while London’s FTSE 100 was up 0.65% and Germany’s DAX was up 0.31%.
Stock markets in Asia were mixed with benchmark indices in Hong Kong and China surging by 1.6% and 0.3% respectively, while the index in Japan ended the week lower by 0.2%.
Key World Markets During the Week
Back home, benchmark indices in India logged marginal gains of 0.3%, as a spurt in pharma stocks propelled the BSE Sensex to close the year above 34,000 levels.
BSE Indices During the Week
Now let us discuss some key economic and industry developments of last week.
The government unveiled the first tranche of the massive 2.11 trillion bank recapitalization plan. The government will infuse a total of Rs 881 billion into 20 public sector banks which account for more than 80% of the colossal R s8.4 trillion worth of bad loans.
The money will go to all public sector banks but one – Indian Bank.
11 lenders under the Reserve Bank of India’s Prompt Corrective Action will together receive Rs 523 billion or the lion’s share of the total amount. These are banks that cannot even meet the regulatory minimum in capital.
Public Sector banks (PSB) had a field day on 24th October 2017 after the government’s announcement of the recapitalisation plan. Under the plan, it is set to inject Rs 2.11 trillion into public sector banks over a period of two years. State-run bank stocks went up from 30% to 49% in a day.
The government’s move was mainly aimed at resolving the long standing non-performing assets (NPA) problem of PSBs. It is expected to shore up the capital of state-run banks, spurring them to clean up the bad loan mess and revive lending.
In news from the economy, highlighting India is coming out of post Goods and Services Tax (GST) implementation woes, global rating agency, Standard & Poor’s (S&P) ratings, in its latest report titled ‘APAC Economic Snapshots, January 2018’ has said that overall economic risks in India remain low, on the back of pick up in industrial output and bank credit.
However, the rating agency raised concerns over rising crude oil prices, terming it as a ‘risk’ for the country, as a majority of India’s import bill stem from crude oil purchases.
The report further mentioned about recent growth of industrial sector, noting that Industrial output (and investment more generally) — the missing piece of the sustainable growth story in recent years — jumped to a 25-month high in November, led by manufacturing. Besides, the rating agency also highlighted improving bank credit situation to the real economy.y
In the news from currency markets, the rupee edged up 5 paise to 63.82 against the US dollar today. This was seen on the back of increased selling of the dollar by exporters and banks.
Note that the rupee surged almost 6% against the dollar in 2017, mostly driven by strong inflows into capital markets.
The appreciation in the rupee comes as a welcome breather for importers in India. A softer rupee helps importers to buy goods and services at a cheaper rate that earlier. This is vital for a developing economy that relies heavily on imports. So this bodes well for the Indian economy as higher imports normally mean increased economic activity.
