A security guard walks past the National Stock Exchange of India building in Mumbai, India.
Dhiraj Singh | Bloomberg | Getty Images
India’s markets could “easily” see a 10% return in the next six months, and that’s a buying opportunity for investors, according to a strategist from Credit Suisse.
Its benchmark stocks have come down from earlier highs this year. The Nifty 50 has declined around 8.71% while the S&P BSE Sensex index has slipped about 7.44% as of Wednesday’s close, from their highs in June.
“It might take a bit of time for (the) Indian equity market to rebound strongly, but I think if somebody has a six month plus horizon, they could easily see 10% return from here,” Suresh Tantia, senior investment strategist at Credit Suisse’s Asia Pacific CIO Office, told CNBC’s “Capital Connection” on Tuesday.
“Every time (the) market has corrected by 10%, it’s always been a good buying opportunity unless there is an external risk,” Tantia said.
At present, he added: “We don’t see any external risk for India.”
Tantia pointed to the low price of oil currently, with international benchmark Brent crude futures sitting at the low 60 dollars per barrel level. India, a major crude importer, is especially vulnerable to any increases in oil prices, being heavily reliant on the commodity. More expensive oil would lead to a widening current account deficit for the country.
Meanwhile, the country’s central bank is also cutting interest rates and the government is offering “some sort of fiscal stimulus support.”
In late August, the Reserve Bank of India’s (RBI) central board said it will transfer 1.76 trillion Indian rupees (about $24.6 billion) as dividend to New Delhi for the year that ended on June 30, 2019 — higher than what the market had been expecting.
The RBI follows a 12-month period that runs from July to June and pays an annual dividend to the government based on its profits. Last year, the RBI board formed a committee to look into how much the central bank should hold in its reserves amid a push from the government to access the surplus for stimulus packages.
India is also a “defensive market” that is more domestic oriented, Tantia said, leaving it relatively insulated from the ongoing trade fight between Beijing and Washington — as compared to most of Asia where markets are “very vulnerable” to headlines about the dispute.
The ongoing, protracted trade war between the U.S. and China has led to tariffs slapped on billions of dollars worth of each other’s goods, hitting badly companies which are heavily intertwined in those supply chains especially in Asia.
— CNBC’s Saheli Roy Choudhury contributed to this report.
Oil on track for weekly gain as OPEC+ set to confirm supply cut
A truck used to carry sand for fracking is washed in a truck stop in Odessa, Texas.
Oil prices fell on Friday, but were set for weekly gains ahead of the OPEC+ meeting which kicked off Friday in Vienna.
The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia – a grouping known as OPEC+ – agreed on Thursday to more output cuts to avert oversupply as economic growth stagnates amid the U.S.-China trade war.
But OPEC stopped short of pledging action beyond March and analysts have questioned the impact of the latest curbs.
Brent futures were down 18 cents at $63.21, but are set to rise 1.5% on the week.
West Texas Intermediate oil futures fell 33 cents to $58.10 a barrel. They are set to rise nearly 6% on the week.
The cuts next year will expand the existing agreement by an extra 500,000 barrels per day (bpd) reduction in the first quarter next year, through tighter compliance and some adjustments. OPEC’s current agreement is a supply cut of 1.2 million bpd and the increased amount represents about 1.7% of global oil output.
“If we were to have an outcome of an extension of cuts with only the official quota of the OPEC+ group being reviewed lower (the 500,000 bpd), rather than actual production, then the change in supply policy would be cosmetic (given below target production in some countries, notably Saudi Arabia and Angola),” said Harry Tchilinguirian, global oil strategist at BNP Paribas.
OPEC is likely to shoulder 340,000 bpd in fresh cuts and non-OPEC producers an extra 160,000 bpd, one source said on Friday.
Any price gains from the OPEC+ output cut are likely to benefit American producers not party to any supply curbing agreement. American drillers have been breaking production records even as they cut the number of oil rigs in operation, filling gaps in global supplies.
“North American shale supply will continue growing even in an environment with lower oil prices,” Rystad Energy said in a note.
Higher oil prices are also supporting the initial public offering of Saudi Arabia’s state-owned oil company, Saudi Aramco, which priced its shares on Thursday at the top of an indicated range.
The sale was the world’s biggest initial public offering (IPO), beating Alibaba Group Holdings’ $25 billion listing in 2014, but fell short of a $2 trillion valuation for Aramco sought by Saudi Crown Prince Mohammed bin Salman.
Foreign investors stayed away and the sale was restricted to Saudi individuals and regional investors.
266,000 payrolls added, 3.5% unemployment
The jobs market turned in a stellar performance in November, with nonfarm payrolls surging by 266,000 and the unemployment rate falling to 3.5%, according to Labor Department numbers released Friday.
Those totals easily beat the Wall Street consensus. Economists surveyed by Dow Jones had been looking for solid job growth of 187,000 and saw the unemployment rate holding steady from October’s 3.6%.
The jobs growth was the best since January. While hopes already were up, much of that was based on the return of GM workers following a lengthy strike. That dynamic indeed boosted employment in motor vehicles and parts by 41,300, part of an overall 54,000 gain in manufacturing.
The vehicles and parts sector had fallen by 42,800 in October. However, the job gains were spread among a multitude of sectors. Health care added 45,000 positions after contributing just 12,000 in October.
Leisure and hospitality increased by 45,000 and professional and business services rose by 31,000; the two sectors respectively are up 219,000 and 278,000 over the past 12 months. Wage gains also were a touch better than expectations.
Average hourly earnings rose by 3.1% from a year ago, while the average work week held steady at 34.4 hours.
Economists had been looking for wage gains of 3%. A separate gauge of unemployment that includes discouraged workers and the underemployed declined as well, falling to 6.9%, one-tenth of a percentage point below October.
In addition to the robust November gains, revisions brought up totals from the two previous months. September’s estimate went up 13,000 to 193,000 and the initial October count increased by 28,000 to 156,000. Those changes added 41,000 to the previous tallies and brought the 2019 monthly average to 180,000, compared to 223,000 in 2018.
The U.S. economy needs to create about 107,000 jobs a month to keep the unemployment rate steady, according to calculations from the Atlanta Federal Reserve.
The unemployment rate of 3.5%, down from 3.6% in October, is back to the 2019 low and matches the lowest level of unemployment since 1969.
The news was not all good. As the holiday shopping season accelerated, retail companies added just 2,000 net hires as gains in general merchandise of 22,000 and motor vehicle and parts dealers of 8,000 were offset by an 18,000 loss in clothing and clothing accessories.
Mining also showed a loss of 7,000 positions, bringing to 19,000 the total jobs lost since May.
The strong jobs report comes amid a challenging year for the U.S. economy. Recession fears surged in late-summer amid worries that a global slowdown would spread to American shores. The back-and-forth lobbing of tariffs between the U.S. and China also raised fears of instability, and the bond market sent what has been a reliable recession indicator when short-term government yields rose above their longer-term counterparts. The Fed reacted by cutting its benchmark interest rate three times, part of what officials deemed insurance against a potential slowdown.
Those recession fears have ebbed recently, though, as consumer and business sentiment remains high, spending remains resilient and the stock market scales new highs.
The Fed meets next week, and officials have been clear that they plan no further rate changes unless conditions change significantly.
OPEC discord raises questions about its long-term future, analysts say
The future of OPEC looks increasingly uncertain, energy analysts told CNBC Friday, citing a deepening rift among the 14-member group.
OPEC and non-OPEC partners, sometimes referred to as OPEC+, have gathered in Vienna, Austria to decide the next phase of their oil production policy.
Led by Saudi Arabia, the oil cartel agreed in principle on Thursday to cut production by an additional 500,000 barrels per day (b/d) through to the end of March 2020, according to CNBC sources.
But it was initially unclear whether OPEC members had secured a deal, following an acrimonious meeting that ran late into the evening.
Herman Wang, OPEC and Middle East specialist at S&P Global Platts, said Thursday’s meeting had caused him to question the long-term future of OPEC.
Speaking to CNBC’s Dan Murphy in Vienna on Friday, Wang said: “What we saw last night was not a unified OPEC. Is this the beginning of the end?”
Wang highlighted several issues that suggested a cause for concern, including Ecuador’s decision to quit the group at the end of the year, media reports of Angola’s delegate walking out of the OPEC meeting, Iraq consistently over-producing its quota and a strained relationship between OPEC kingpin Saudi Arabia and non-OPEC leader, Russia.
“It’s all about the unity of OPEC. Can they hold this coalition together to keep oil prices from falling?” he added.
‘Stresses and strains’
Founded in 1960, OPEC currently has 14 members — five in the Middle East, seven in Africa and two in South America.
Saudi Arabia has long been the de-facto leader of the group, reportedly accounting for roughly one-third of the group’s total crude production.
Ecuador, the smallest member of OPEC, is scheduled to leave the organization on Jan. 1, 2020. Its departure comes exactly one year after Qatar terminated its OPEC membership.
“I think it’s quite symbolic that OPEC+ had to at least postpone their celebratory boat trip last night,” David Fyfe, chief economist at price reporting news agency Argus Media, told CNBC on Friday.
“You are beginning to see stresses and strains in this relationship,” he said, before adding OPEC+ was now faced with a “very challenging” two-to-three-year period.
When asked whether he was implying that the group could soon split, he replied: “It can never be completely discounted.”
“Let’s wait and see what they deliver today and whether they deliver upon it in the first quarter (of next year).”
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