Standard & Poor’s reiterated its negative rating outlook on India’s credit rating, which is one notch above junk status, warning of risks if the government carries out less reform than the agency says is needed to boost growth.
The rating agency, which warned of at least a one-in-three chance of a downgrade within the next 12 months, said the major risks for a lower rating are a high fiscal deficit and heavy government borrowing.
India’s benchmark 10-year yield rose 4 basis points to 7.41 percent from levels before the statement. The yield closed at 7.39 percent on Thursday.
“If India’s general government fiscal or current account deficits worsen contrary to our expectations, we may lower the ratings,” S&P said in a release on Friday, after affirming India’s BBB- rating with a negative outlook.
Finance Minister P Chidambaram has said he will stick to a budgeted fiscal deficit target of 4.8 percent of GDP in the fiscal year ending March 2014 after being able to restrict the deficit to around 5 percent in the previous fiscal year.
“We may revise the outlook to stable if the government carries through with its plans to unleash public and private investments (for example, by enacting the land acquisition bill), to implement a nationwide government sales tax, or to further trim fuel and fertilizer subsidies,” S&P said.
India’s growth slipped to a decade low of 5 percent in the fiscal year that ended in March 2013 after posting nearly double digit growth in 2008. Recent corruption scandals have prevented the government from passing key reform bills in the parliament.
State-owned Dutch bank ABN AMRO is to cut 400 jobs, about 2 percent of its workforce, as it prepares for an eventual sale.
The bank, which on Friday posted first-quarter results hit by bad loans in its home market, said the cuts are part of a reorganisation of its commercial and merchant banking division and will mostly be through natural attrition and reallocation.
ABN AMRO, which was partly bought by Belgian group Fortis in 2007, was nationalised by the Dutch state a year later as part of the bailout of Fortis. It now generates the bulk of its business in the recession-hit Netherlands.
The coalition government that took office in November wants to return ABN AMRO to the markets but has not set a date. It has said it would consider options other than a full public listing of ABN AMRO to recoup as much as possible of the funds paid to nationalise the bank.
First-quarter net profit fell 17 percent from a year ago, to 415 million euros.
While the results benefited from a large loan impairment release related to the sale of part of the bank’s exposure to Greek government-guaranteed loans, bad debts in the Dutch market rose as unemployment increased and more small and medium-sized enterprises went bankrupt.
“As unemployment is still on the rise and no economic growth in the Netherlands is expected for 2013, we remain cautious for the remainder of the year,” Chief Executive Gerrit Zalm said in a statement.
Brent futures slipped on Friday, staying below USD 104 as bleak US economic data revived worries about demand growth in the world’s biggest oil consumer, while a stronger dollar also pressured prices.
Barring news on major supply disruption, the dollar will be a key driver for oil with investors increasingly expecting the greenback’s recent surge to peter out.
Brent slipped 5 cents to USD 103.73 a barrel by 0552 GMT. It is expected to end the week mostly unchanged. U.S. oil was up 18 cents at USD 95.34, after settling up 86 cents, but was on track to end a three-week winning run.
“The dollar will influence oil quite a bit over the next few sessions because at some point it will start to weaken as it has strengthened too much in recent days,” said Tetsu Emori, a commodities sales manager at Astmax Investments in Tokyo.
“All US economic indications in the last few days have been weak and that is raising doubts about demand.”
The US economy showed fresh signs of slowing in the second quarter, with factory activity slipping in the mid-Atlantic region while groundbreaking declined at home construction sites.
Dell Inc , the subject of a takeover battle between activist investor Carl Icahn and the company’s billionaire founder, reported a 79 percent slide in profit as personal computer sales continue to shrink.
Revenue in its fiscal first quarter ended May 3 fell to USD 14.1 billion, while net income fell to USD 130 million, Dell said on Thursday. The revenue was higher than the average analyst estimate of USD 13.5 billion according to Thomson Reuters I/B/E/S.
Michael Dell wants to take the world’s third-largest PC maker private for USD 24.4 billion, but Icahn and major stakeholder Southeastern Asset Management dismiss that as too low and are proposing new leadership and additional cash or stock for shareholders.
The percentage of global investment that goes to developing countries should triple in the next two decades as emerging economies catch up to richer nations and become more integrated into financial markets, the World Bank predicted in a report on Thursday.
These nations and their comparatively younger and bigger populations are also set to become the largest sources of capital, with China and India turning into the world’s two biggest investors by 2030, the global development lender said.
The shifting landscape of saving and investment has profound implications for everything from which currencies will dominate global markets to the rise of new financial centers, patterns of capital flows and investment priorities.
But policymakers are still woefully unprepared for the changes, fixating instead on what will happen in the next three to six months, Kaushik Basu, the World Bank’s chief economist, said.
“The big question that should concern us all is what will happen to the major drivers of growth and development: namely savings and investment,” Basu told reporters ahead of the report’s release.
“In some sense, some of the global economic turmoil that we are seeing today are some of the early indicators of the kind of turbulent period that the world is going into,” he said.
Standard & Poor’s earlier this week predicted that Chinese non-financial companies will overtake US companies in their borrowing needs over the next two years.
By 2030, for every dollar invested in the world, 60 cents will flow into developing countries, a dramatic change from 20 cents to the dollar in 2000. China will make up 30 percent of all investment activity, while the United States will have 11 percent and India, 7 percent.
The numbers assume the world will grow on average 2.6 percent to 3 percent a year in the next two decades, while emerging economies will grow 4.8 to 5.6 percent a year.
Today is 9th (17th May 2004 ) Anniversary Day for First Down Freeze in BSE & NSE
First Down freeze applied 10%, Then one hour Market halted……
Second time applied 5%, Again Market opened @ 15 % down, Again halted Two hours….
Sensex Marked low was 4283
Closed 11.14% Down @ 4505.
Updated : 08.17am / 17th May
Credit-rating agency Standard & Poor’s on Thursday cut its rating on Berkshire Hathaway Inc , the insurance and industrial conglomerate controlled by billionaire investor Warren Buffett, one notch, citing the company’s reliance on its insurance operations for dividend income.
S&P cut the counterparty rating on Berkshire to “AA” from “AA+,” but the agency left Berkshire’s insurance units’ financial strength ratings intact at “AA+.”
“The lower credit rating on BRK better reflects our view of BRK’s dependence on its core insurance operations for most of its dividend income,” said Standard & Poor’s analyst John Iten.
The outlook on all ratings is negative, S&P said in a statement, and cited two reasons: a ratings cap for financial companies linked to the U.S. sovereign rating; and capital risks at the insurance unit.
Specifically, the agency said, there is the concern that if the insurance unit takes on more investment risk or funds a large acquisition, it could hurt capital adequacy for the insurance business.
Gold dropped to its weakest level in almost a month on Thursday, hurt by a firmer dollar and as holdings in exchange-traded funds fell to the lowest in over four years, potentially stretching bullion’s losing streak to a sixth day.
If gold ends lower on the day, it would be its longest losing streak since March 2009. The drops have already helped to fuel another scramble for bullion that has push Asian premiums for physical gold to record highs.
Spot gold fell to as low as $1,374.99 an ounce, its cheapest since April 18. By 0748 GMT, it was down 1 percent at $1,378.36.
Gold is less than $60 away from two-year lows hit in mid-April. Prices have fallen nearly 18 percent this year and are well below a record top near $1,920 struck in September 2011.
“The recent stronger profile of the U.S. dollar has undermined some of the financial investments side of buying gold,” said Tim Riddell, head of ANZ Global Markets Research, Asia. A stronger greenback makes dollar-denominated commodities more expensive for holders of other currencies.
Financial markets are also rife with speculation that the U.S. Federal Reserve may begin winding down its aggressive economic stimulus, undermining the argument for holding gold as a hedge against potential inflation.
Buying in China, the world’s No. 2 consumer after India, has helped limit price losses.
China bought a large amount of gold on Thursday morning after prices fell by more than $20 overnight, said Peter Tse, director at ScotiaMocatta in Hong Kong.
Premiums for gold bars rallied to all-time highs in Hong Kong – China’s main source for gold imports – after bullion’s steepest drop since its April sell-off fuelled another round of buying, according to dealers.
Gold bars in Hong Kong fetched premiums of up to $5 an ounce over spot London prices, up from $3 an ounce last week.
With three congressional probes of the IRS looming and Republicans’ calls for firings at the agency growing louder, Obama said he told Treasury Secretary Jack Lew to demand the resignation of Steven Miller, the acting IRS commissioner. Lew had done so, the president said.
“I’ll do everything in my power to make sure nothing like this happens again by holding the responsible parties accountable, (and) by putting in place new checks and new safeguards,” Obama told reporters in the White House’s East Room.
Obama’s remarks came on a day in which he tried to regain the initiative amid a series of controversies that have threatened his second-term agenda. The Democratic president said new leadership was needed at the IRS to restore public confidence in the tax agency, whose reputation for political independence has taken a hit because of scandal.
“Americans are right to be angry about it, and I am angry about it,” Obama said. “I will not tolerate this kind of behaviour in any agency, but especially in the IRS, given the power that it has and the reach that it has into all of our lives.”
The IRS revelations have added to a sense of a White House under siege, and a president struggling to recover his political footing in the face of fast-moving events.
The demand for the precious metal stood at 202.1 tonnes in the same quarter last year, it said.
“Gold demand in India for both jewellery and investment continues to remain strong. The price fluctuations in gold recently have only served to reinforce Indian consumers’ appetite for purchasing physical gold,” WGC India Managing Director Somasundaram PR told reporters here.
He said gold is a time-tested asset class which has helped preserve the wealth of Indian families for generations.
“With the ongoing wedding and festive season, we believe that demand for gold will continue to remain robust,” he said.
In terms of value, WGC said in its latest report that gold demand in India during January- March period of this year increased by 32 per cent to Rs 72,899.4 crore as against Rs 55,148.7 crore in the year-ago period.
Total jewellery demand rose by 15 per cent to 159.5 tonnes from 138.3 tonnes, while investment demand increased by 52 percent to 97 tonnes from 63.8 tonnes in the review period.
A total of 21 tonnes of gold was recycled in the January-March quarter of this year as against 25 tonnes in the same quarter of 2012, the report said.
The global gold demand in the first quarter of 2013 fell by 13 percent to 963 tonnes as strong growth in consumer demand for gold jewellery, bars and coins was exceeded by substantial net outflows from gold ETFs, WGC said.