BackDiwali chokes Delhi, Donald Trump gains ground and factory output rises
Delhi reels from deadly smog; Trump makes late surge in US election campaign; India manufacturing PMI hits 22-month high
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1. Manufacturing PMI at 22-month high
The Nikkei India Manufacturing Purchasing Managers’ Index (PMI) came in at 54.4 for October. This is the highest level in 22 months, according to data that was released on Tuesday. The pick-up in manufacturing as reflected in both output and new order growth. The Nikkei India Composite PMI Output Index, which includes manufacturing as well as services, was at its highest level since January 2013. However, the rise in the manufacturing PMI also points to an increase in input prices. This could lead to the risk of higher inflation. The sub-index for input prices is at its highest in two years.
2. S&P says no immediate ratings upgrade for India
S&P Global Ratings released a statement on Wednesday that it is leaving India’s rating unchanged. India is currently one notch above junk. The current rating of BBB- is the lowest possible investment grade and credit ratings below this level are considered highly speculative. India has a higher credit rating than some of its emerging market peers such as Russia and Brazil. China is the highest rated BRIC country. Developed market ratings are significantly higher. There is no rating change expected till at least 2017, according to S&P.
3. Price of gold crosses $1,300
The price of the yellow metal crossed $1,300 per ounce, the highest in almost a month during the week, as the world looked for a safer haven on the back of investor risk aversion. Global stocks declined, and the dollar weakened in the recent turmoil, while gold gained. Gold was trading above $1,300 on Thursday. Meanwhile, industrial metals such as aluminium, copper and nickel fell, according to Bloomberg. Fear of an adverse election result in the US is said to be driving risk-averse behaviour among global investors. Indian markets too were trading weaker.
4. Bonds give higher returns than Sensex
Equities generally provide higher returns than debt instruments, though there can be periods of underperformance. The current calendar year seems to be one such time. Mint reported on Monday that the S&P BSE India Government Bond index gave higher returns than the S&P BSE Sensex in 2016 so far. Equities have been affected by the lack of strong earnings growth. Government bonds have, meanwhile, benefited from interest rate cuts. A drop in yields pushes up bond prices. Another rate cut is expected, which could further boost returns.
5. US Fed lines up December rate hike
American central bank officials decided against a rate hike on Wednesday, while setting the tone for a potential hike next month. US Federal Reserve officials said that there is an argument to be made for higher borrowing costs because inflation is strengthening. Higher borrowing costs have a dampening impact on inflation. The rate hike would be only the second since the financial crises of 2008-09. The first came in December 2015. The next two-day meeting is scheduled for 13-14 December.
6. Bangladesh beat England for first time
Bangladesh got 10 England wickets in a single session on Sunday, securing their first ever win against the country. Nineteen-year-old Mehedi Hasan took six wickets to set up the victory. This is only Bangladesh’s eighth victory in 95 Test outings. It became a Test-playing nation in 2000. It has lost 72 matches. Fifteen were draws. It had no victory at all for the first five years. This changed when it beat Zimbabwe in 2005. More than half of Bangladesh’s eight wins have come in the past five years.
7. Clinton’s lead over Trump shrinks
Democratic presidential candidate Hillary Clinton’s lead over her Republican rival Donald Trump appeared to shrink during the week. The Federal Bureau of Investigation said that it may probe Clinton’s alleged security lapses while she was the US secretary of state. She is said to have used a private server for mails which allegedly contained sensitive information. Clinton’s lead narrowed from 5.6% on 27 October to 1.7% on 3 November, according to an average of key polls carried out by election-tracker Real Clear Politics. The election will be held on Tuesday.
8. AP, Telangana top ease of doing business rankings
The World Bank and the department of industrial policy and promotion released an ease of doing business ranking for states on Monday. States are ranked to kindle competition among them, and act as an incentive for reforms. Andhra Pradesh and Telangana jointly got the top spot. Telangana was ranked 13 last year. Gujarat has dropped from the top spot in 2015 to No. 3 this year. Uttarakhand climbed from No. 23 last year to ninth, while Maharashtra dropped from eighth to 10th.
9. Pollution in Delhi spikes after Diwali
Pollution levels in Delhi were higher after this Diwali than they were last year. The System of Air Quality and Weather Forecasting and Research of the Union ministry of earth sciences released numbers which showed that certain pollutants were at almost 10 times the safe limit on Monday evening. Particulate matter (PM) 2.5 was at 624.2µg/m³. This is nearly 10 times the safe limit. PM10 was at 836.1µg/m³ or eight times the safe limit. These fine particles settle into the lungs and enter the bloodstream and cause respiratory issues and lung cancer. Factors such as the burning of crops in the neighbouring states of Haryana and Punjab are likely to have contributed to the smog in the national capital, known for its deadly air.
10. GST slabs to range from 5% to 28%
The centre has reached a consensus with the states on the goods and services tax (GST), a uniform tax rate that would be applied across the country. Thursday’s move is a step towards turning India into a common market. Currently, state-level taxes on goods and services can distort prices across the country for the same goods. A consensus has been reached on what tax slabs apply to what kind of goods. The lowest 5% slab will apply to mass consumption items. Other goods used by the common man will be taxed at two standard rates of 12% and 18%. Tobacco, luxury cars and aerated drinks will be taxed at 28%, in addition to a separate central government cess.
Graphics by Ajay Negi/Mint
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