The Nifty and the Sensex have made marginal gains since open today. After a week of volatility led by geopolitical tensions in the Middle East, there are some signs of stability in markets.
The big news this week is the spike in retail inflation. Analysts expect Indian bond yields to rise to adjust to higher inflation. The yield on the 10-year Indian government bond hit a 5-week high today.
Ahead of Bezos visit, India antitrust chief says e-commerce firms shouldn't offer heavy discounts
Big e-commerce firms should not offer steep discounts, must disclose discounting policies and ensure they do not drive brick-and-mortar rivals out of business, India's antitrust chief said as his commission launched a probe into Amazon.com and Walmart's Flipkart.
The remarks come ahead of a visit by Amazon's CEO Jeff Bezos to India this week - one likely to marked by much tension with the country's small business owners planning protests in 300 cities as they step up their campaign against what they see as unfair business practices.
In particular, the shopkeepers accuse the two U.S. giants of indulging in heavy discounts and giving preferential treatment to select sellers.
Openness about discounting policies and how companies use customers' data is essential, said Ashok Kumar Gupta, chairman of the Competition Commission of India (CCI).
If you are absolutely clean, come out, put it (details) on your website. So that everybody knows and there is nothing opaque, he told Reuters in an interview.
Otherwise there will be complaints, we will inquire - why do you want to subject yourself to this type of investigation if you are open about it.
He did not refer to the companies by name. But just hours after his comments, the commission on Monday said it would be investigating Amazon and Flipkart, noting allegations of deep discounting and promoting preferred sellers. Reuters
China's most populous province to loosen grip on internal migration
China's southern province of Guangdong will relax the household registration system that restrains internal migration in all its cities except the powerhouses of Guangzhou and Shenzhen, the provincial governor Ma Xingrui announced on Tuesday.
The move is part of the provincial government's effort to accelerate the promotion of new urbanisation and improve county-level economies, Ma said while delivering the province's annual work report.
The Chinese government has encouraged the relaxation of residency restrictions in many of its smaller cities to help boost the urban population and revive slowing economic growth.
Guangdong's move follows guidelines from the State Council in December which called for the full removal of resident restrictions in cities with populations under 3 million, and the relaxation of restrictions in cities with populations of 3 to 5 million.
China has a population of around 1.4 billion people and household registration permits, known as hukou, have been used to control internal migration for decades. Without a permit, a city resident is denied access to many public services such as education and healthcare. Such restrictions have often been blamed for pushing migrants to the margins of society in China's cities. Reuters
Housing sales across 9 major cities drop 30% in Q3
Housing sales declined 30 per cent during the third quarter of this fiscal year to around 64,000 flats across nine major cities on poor demand amid economic slowdown, according to a PropTigers report.
Sales in the residential property market fell 13 per cent to 2,63,294 units during the first nine months of this fiscal as against 228,220 units in the corresponding period of the previous year.
In its Real insight Q3FY20 report, the News Corp-backed company said that housing sales across nine cities fell 30 per cent during the October-December quarter despite the government launching several measures in the recent past to revive buyer sentiment.
Compared to 91,464 units sold during the quarter last year, only 64,034 homes were sold across the nine markets in Q3 this year. PTI
WPI inflation surges to 2.59% in December
Wholesale prices based inflation surged to 2.59 per cent in December, as against 0.58 per cent in November due to increase in prices of food articles like onion and potato.
The annual inflation, based on monthly wholesale price index (WPI), was at 3.46 per cent during the same month a year ago (December 2018).
The rate of price rise for food articles rose to 13.12 per cent during December as against 11 per cent a month earlier, while for non-food articles it rose nearly four-fold to 7.72 per cent from 1.93 per cent in November, showed the data released by the Ministry of Commerce and Industry on Tuesday.
Among food articles, vegetable prices surged by 69.69 per cent mainly on account of onion, which witnessed 455.83 per cent jump in prices, followed by potato at 44.97 per cent.
The consumer price index based retail inflation, as per data released on Monday, spiked to over a 5-year high of 7.35 per cent in December due to costlier food products. PTI
China's economic growth set to slow to 30-year low this year; more government support seen
China is expected to post its slowest economic growth in 30 years in 2020 as domestic and global demand remain sluggish, a Reuters poll showed on Tuesday, reinforcing views that Beijing will roll out more support measures.
This year is crucial for the ruling Communist Party to fulfill its goal of doubling gross domestic product (GDP) and incomes in the decade to 2020, but risks to growth still loom large despite a trade deal with the United States that will relieve some pressure on Chinese exporters.
China's economic growth is expected to slow to 5.9% this year, according to median forecast of 83 economists polled by Reuters, which would mark the weakest clip since 1990 and a further easing from an expected 6.1% in 2019.
The United States and China are expected to sign the Phase 1 trade deal on Wednesday, de-escalating a prolonged confrontation that has disrupted global supply chains and rattled financial markets. But Washington will not roll back all of its punitive measures, and the risk of another flareup remains.
China's economy was already slowing before the trade war erupted 18 months ago, as a regulatory crackdown on debt and riskier types of lending and led to a sharp slowdown in investment. Since the trade dispute escalated, business and consumer confidence have softened.
But November data and December factory activity surveys have pointed to signs of improvement in the manufacturing sector as trade tensions eased and Beijing rolled out more stimulus measures.
Policy sources have told Reuters that Beijing plans to set a lower economic growth target of around 6% this year from last year's 6-6.5%, relying on increased infrastructure spending to ward off a sharper slowdown. Reuters
Michael Patra appointed as RBI deputy governor
India's government appointed career central banker Michael Patra as one of the Reserve Bank of India's four deputy governors for a three-year term, it said in a statement on Tuesday.
He will fill a vacancy left by former deputy governor Viral Acharya, who resigned last June, six months before the scheduled end of his term in office.
Acharya cited personal reasons for his departure, but had previously clashed with Prime Minister Narendra Modi's government over an erosion of the central bank's independence.
He was the third key senior central bank official under the Modi government to resign, following the departures of former RBI governors Raghuram Rajan in 2016 and Urjit Patel in December 2018.
Patra, currently an executive director at the RBI, had applied for a deputy govenor's post in 2017.
He has been a part of the central bank's monetary policy committee since its inception, and has long been viewed as a monetary policy hawk.
However, since Governor Shaktikanta Das took office in December, Patra has voted for three successive rate cuts and has said the economy needs fiscal support in the current environment. Reuters
Indian bond yields surge on higher inflation, shares largely flat
Indian bond yields rose sharply on Tuesday, while shares were little changed as hopes of a rate cut in February dimmed after data showed a higher-than-expected surge in inflation.
India's annual retail inflation rose to 7.35% in December, its highest level in more than five years and well above the Reuters poll of a 6.2% rise.
The benchmark 10-year bond yield was up 7 basis points at 6.68% by 0430 GMT, after rising to 6.7% earlier and compared with its Monday's close of 6.60%.
Market expects that we have seen the top on inflation and it will come off from these levels. RBI too is likely to wait for 2-3 prints to see how it is panning, the head of debt trading at a private bank said.
The 10-year yield is expected to be capped at 6.75% levels in the near term, the banker added.
The rise in inflation in December was mainly driven by food prices and market participants expect the central bank to look through these temporary blips and remain accommodative in its stance but rate cuts bets for February are not off the table.
However, investors remain hopeful of a possible rate cut in April after the union budget on Feb. 1 and as inflation starts to moderate as per the central bank's projections.
The NSE Nifty 50 index climbed 0.060%% to 12,336.90 by 0414 GMT, while the benchmark S&P BSE Sensex was flat at 41,856.55.
The partially convertible rupee was at 70.86 per dollar, compared with its previous close of 70.96. Reuters
China trade surplus with US dropped 8.5 per cent to $296 billion in 2019
Chinas trade surplus with the United States narrowed last year as the worlds two biggest economies exchanged punitive tariffs in a bruising trade war, official data showed Tuesday.
The figures were released just a day before the US and China are expected to sign a phase one agreement that marks a de-escalation in their two-year conflict.
The perennial US trade deficit with China has been a major source of anger for President Donald Trump, who has slapped tariffs on hundreds of billions of dollars worth of Chinese goods, triggering tit-for-tat responses from Beijing.
Chinas surplus came in at around USD 295.8 billion in 2019, down 8.5 per cent from the previous years record USD 323.3 billion, according to customs data.
In December, its surplus with the US was around USD 23.2 billion, down from USD 24.6 billion the month before.
As part of the interim trade deal, Beijing will buy an extra USD 200 billion of US products over a two-year period, according to Washington officials. China has yet to publicly confirm the figures. PTI
Rupee rises 8 paise to 70.78 against US dollar in early trade
The rupee appreciated by 8 paise to 70.78 against the US dollar in early trade on Tuesday as sign of easing tensions between the US and China strengthened investor sentiments.
The United States on Monday removed the currency manipulator label it imposed on China last summer and forex traders believe it as a sign of easing tensions between the two economic powers after nearly two years of conflict.
The US Treasury in its semi-annual report to Congress said that the yuan has strengthened and Beijing is no longer considered a currency manipulator, just days before US President Donald Trump is set to sign a phase one trade agreement with China.
At the interbank foreign exchange the rupee opened at 70.78 against the US dollar, registering a rise of 8 paise over its previous close.
On Monday, rupee had settled for the day at 70.86 against the US dollar. PTI
Yen slips, yuan ascends as U.S. drops China FX manipulator label
The yen plumbed eight-month lows while China's yuan climbed to its highest level since July on Tuesday, as the U.S. Treasury Department reversed its decision in August to designate China as a currency manipulator.
The announcement came as Chinese Vice Premier Liu He arrived in Washington ahead of Wednesday's signing with U.S. President Donald Trump of a preliminary trade agreement aimed at easing tensions between the two countries.
Washington's decision to lift its designation of currency manipulator on China has added to the positive mood that has been already in place ahead of the signing of the trade deal, said Minori Uchida, chief currency strategist at MUFG Bank.
People familiar with the negotiations said that although the manipulator designation had no real consequences for Beijing, its removal was an important symbol of goodwill for Chinese officials.
The dollar rose as much as 0.25% to 110.22 yen, its highest since late May against the safe-haven Japanese currency. It last stood at 110.04 yen, capped at a technical resistance from Bollinger band around 110.22. Reuters
India urges boycott of Malaysian palm oil after diplomatic row
Indian palm oil importers have effectively stopped all purchases from top supplier Malaysia after the government privately urged them to boycott its product following a diplomatic spat, industry and government sources said.
The warning, issued last week, comes almost in parallel with New Delhi's move to restrict imports of refined palm oil and palmolein after Malaysia's Prime Minister criticised India's actions in Kashmir and its new citizenship law.
Consequently, Indian importers were not buying any crude or refined palm oil from Malaysia, at least five industry sources familiar with the matter told Reuters.
Officially there is no ban on crude palm oil imports from Malaysia, but nobody's buying due to government's instructions, said a leading refiner, adding that buyers now import from Indonesia despite paying a premium to prices in Malaysia. Reuters
Retail inflation at 5-year high of 7.3% in December
Retail inflation soared to a five and a half year high of 7.35% in December 2019, with the shortage of onions driving the surge.
According to information released by the National Statistical Office on Monday, retail inflation based on the Consumer Price Index was only 2.11% in December 2018 and 5.54% in November 2019.
The last time retail inflation was this high was the 7.39% recorded in July 2014, just after Prime Minister Narendra Modi began his first term in office.
The hike in inflation in the vegetables category was at 60.5% last month in comparison to December 2018. Onion prices were above the Rs. 100 per kg mark in many major cities last month, due to a 26% fall in production. Read more.