Global financial markets ended the holiday shortened week with modest gains. The rally put behind days of decline as concerns regarding swift interest rates hikes were put to ease.
Earlier in the week the Dow and S&P continued to decline steadily as minutes from the US Federal Reserve’s January meeting showed the central bank’s rate-setting committee grew more confident in the need to keep raising rates.
However, the benchmark US indices recovered by the end of the week as concerns about a faster pace of rate hikes from the central bank were eased by comments from St. Louis Fed President James Bullard that expressed concerns a “bunch of hikes” could turn Fed policy restrictive. Market participants are still largely expecting the Fed to raise rates three times this year. The Dow Jones Index ended the week up by a modest 0.4%
European stocks ended the week mixed, with most major indices charting a recovery in a variety of sectors as concerns about rising interest rates and inflation apparently eased. Among country benchmarks, the UK’s FTSE was down 0.7% and Germany’s DAX added 0.3%, while France’s CAC 40 was up 0.7%.
Asian shares rebounded on Friday as comments from a Federal Reserve official eased worries that the central bank might raise rates more aggressively this year. Chinese stocks advanced in a holiday-shortened week, paring some of their big declines from the previous week’s global sell-off, as the country celebrated the Lunar New Year holiday. China’s Shanghai Composite was up 2.8% over the week.
Back home, benchmark indices in India too logged modest gains of 0.4% as BSE Sensex closed at 34,142. While the Nirav Modi fraud saga still continued with public sector banks witnessing selling pressure, a spurt in metal stocks and pharma stocks meant that the benchmark indices ended the week on a positive note.
Key World Markets During the Week
On the sectoral indices front, stocks from Consumer Durables and Banking witnessed selling pressure.
BSE Indices During the Week
Key economic and industry developments last week
In news about the economy. Fitch Ratings in its latest report has stated that the Reserve Bank of India’s (RBI) new norms for overhauling the mechanism to deal with the bad debt, is likely to push up banks’ credit costs and weaken earnings in the near term.
However, it believed that stronger regulatory efforts to deal with the problem of mounting bad loans in Indian banking system along with planned recapitalisation of state banks, could help support a recovery in the sector over the medium term.
It also noted that the new framework gives banks less discretion over the reporting and resolution of bad assets and attempts to address the complexities involved in resolving the stressed loans of large borrowers. Under the new framework for NPL resolution, it observed that banks will need to report defaults by large borrowers weekly, indicating a more invasive approach to tracking bad assets.
It added that more accounts are also likely to be pushed toward insolvency courts and into liquidation, particularly since the new guidelines require all of a borrower’s lenders to agree on a resolution plan to keep it away from the courts.
In news from the IT sector. In a move that could potentially hurt India’s IT industry, the Trump administration has announced a new policy that makes very tough the procedure of issuing H-1B visas to those to be employed at one or more third-party worksites.
Under the new policy, the company would have to go an extra length to prove that its H-1B employee at a third-party worksite has specific and non-qualifying speculative assignments in speciality occupation.
Indian IT companies, which are among the major beneficiaries of H-1B visas, have a significant number of its employees deployed at third-party worksites.
The new move announced empowers the US Citizenship and Immigration Services (USCIS) to issue H-1B visas to an employee only for the period for which they have worked at a third-party worksite.
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