The Reserve Bank of India (RBI) held its key interest rate at 6.50% on Wednesday, while signaling potential for future rate cuts by shifting its policy stance to “neutral” from the previous “withdrawal of accommodation.”
The RBI’s Monetary Policy Committee (MPC), comprising three RBI officials and three external members, voted unanimously to maintain the repo rate at 6.50% for the tenth consecutive policy meeting.
However, the committee’s decision to change the policy stance to “neutral” is seen as a move to provide flexibility for future rate cuts as economic growth shows signs of deceleration.
Governor Shaktikanta Das emphasized that while the RBI remains focused on controlling inflation, the central bank will also work to support economic growth.
“The inflation horse has been brought back to the stable within the tolerance band. We have to be careful about opening the gate,” Das remarked, signaling a cautious approach to future monetary easing.
Inflation and economic growth balance
The decision to maintain rates comes at a time when inflation has been relatively controlled, with annual retail inflation remaining below the RBI’s 4% target for a second consecutive month.
In August, inflation stood at 3.65%, slightly higher than the revised 3.60% in July but still below economists’ expectations of 3.5%.
The central bank has projected inflation to average 4.5% for the financial year 2024-25, unchanged from its August forecast.
However, concerns over slowing economic growth have prompted the change in policy stance.
Recent data shows that high-frequency indicators, such as the manufacturing and services PMIs, have weakened, with manufacturing hitting an eight-month low and services dropping to a 10-month low in September.
India’s overall GDP growth slowed to 6.7% in the June quarter, though the RBI maintains its growth projection for the current financial year at 7.2%.
Market reaction and bond yields drop
Equity index Nifty 50 was up 0.67% at 25,177.5 points, while the S&P BSE Sensex added 0.55% to 82,080.
The benchmarks were up 0.2% each ahead of the policy decision.
The Indian rupee was flat at 83.9450 against the dollar.
Shares of rate-sensitive sectors such as banking, finance, auto and real estate rose as much as 6%.
India’s benchmark 10-year bond yield fell by 5 basis points to 6.7392%.
The policy stance shift is seen as a signal that rate cuts could be on the horizon if inflation remains within target and economic growth slows further.
Arun Chitnis, chairman of the Anarok Group, welcomed the RBI’s decision to maintain rates, noting that it helps sustain momentum in India’s housing market during the festive season.
“While a repo rate cut would have been preferable, it is clear that the RBI is on a tightrope walk and must keep various macro-economic factors in mind,” Chitnis said, adding that the fundamentals of the Indian economy remain strong despite global headwinds.
The S&P 500 rebounded on Tuesday after a previous decline on Wall Street, with attention on oil prices and bond yields.
The S&P 500 climbed 0.7%, while the Nasdaq Composite increased by 1.2%. The Dow Jones Industrial Average gained 45 points.
West Texas Intermediate (WTI) oil futures fell by 4% on Tuesday after an earlier increase at the start of the week.
Traders are closely watching Israel’s anticipated retaliation against Iran’s missile attacks and U.S. efforts to prevent a broader conflict in the region.
Tech stocks move higher
Shares of technology companies powered higher on Tuesday.
Shares of NVIDIA Corporation rose more than 2% on Tuesday. Apple’s stock also gained 1.5%.
Additionally, Meta Platforms, Tesla and Microsoft also rose nearly 1% each on Tuesday.
Shares of Oracle Corporation also rose more than 2%.
Meanwhile, Super Micro Computer’s stock rose 4%, extending Monday’s gains. Shares of the company surged after it said that the company deployed more than 100,000 graphics processing units recently.
Oil prices ease more than 4%
Crude oil prices eased more than 4% on Tuesday as fears of Israel’s retaliation against Iran decreased.
Since Iran attacked Israel last week, oil prices have risen 13% through Monday’s close.
Fears about Israel targeting Iran’s oil facilities gripped the market as Brent breached $80 per barrel on Monday for the first time since August 30.
However, reports claimed that US President Joe Biden has advised Israel against hitting oil facilities in Iran. This could be one of the reasons why oil prices have fallen on Tuesday.
At the time of writing, the price of Brent oil was $77.57 per barrel, down 4.2%, while that of West Texas Intermediate fell 4.4% to $73.73 per barrel.
DJT surges
Shares of Trump Media & Technology Group (DJT) surged nearly 5% on Tuesday, following Elon Musk’s surprise appearance at Donald Trump’s rally in Butler, Pa., over the weekend.
Elon Musk, who serves as the CEO of Tesla and owns social media platform X, has been outspoken about his support of Trump ahead of next month’s US elections.
Trump has even said he would consider a cabinet position for Musk.
US trade deficit fell more than expected in August
The US trade deficit fell more than 10% in August as exports rose, imports declined and the shortfall with China was down as well.
The goods and services imbalance totaled $70.4 billion for the month, down 10.8% from the upwardly revised $78.9 deficit in July, the Commerce Department reported Tuesday.
Economists surveyed by Dow Jones were looking for $70.8 billion, according to a CNBC report.
Exports rose $5.3 billion, or 2%, and imports fell by $3,2 billion, or 0.9%. However, the year-to-date trade deficit was still higher.
Chinese stocks fall
The US-listed Chinese stocks fell today after the country’s economic planner failed to offer specific further stimulus packages to revive the economy.
Online video company Bilibili tumbled more than 13%, while automaker Nio fell more than 9% from their previous close.
E-commerce companies, JD.com and Alibaba also tumbled nearly 9% and 7%, respectively on Tuesday.
Remy Cointreau’s stock took a sharp hit, falling nearly 8.5% on Tuesday after China announced new anti-dumping tariffs on European brandy imports.
However, this is just one of the problems plaguing the French alcohol maker.
Broader issues, including weak demand in key markets and fierce competition, have been weighing heavily on its performance, making the stock struggle over the past year.
China imposed provisional tariffs of 30.6% to 39% on European brandies following the European Union’s decision to impose duties on Chinese-made electric vehicles.
This move triggered a decline in the shares of several European spirit producers, including Remy Cointreau, Pernod Ricard, LVMH, and Diageo.
While most companies saw a drop between 1% and 4%, Remy Cointreau suffered the steepest fall, highlighting its vulnerability to external pressures.
Remy Cointreau’s stock has been in decline for some time.
Over the past year, the share price has dropped nearly 45%, with a 35% decline in just the past six months.
In contrast, its competitor Pernod Ricard has experienced less dramatic losses, down 19% over the past year and 12% in the last six months.
Both UBS and Citi revised their outlooks for the company on Tuesday.
Citi lowered its price target from €120 to €115, maintaining a Buy rating, while UBS cut its target from €93 to €71 and maintained a neutral stance.
Meanwhile, Oddo BHF reiterated its “outperform” rating but reduced the target price from €95 to €90.
Remy Cointreau stock: what’s driving its struggles?
Several factors contribute to the bearish outlook for Remy Cointreau.
In the US, the company is still grappling with inventory adjustments, with no strong recovery in sell-out trends.
The Asia-Pacific (APAC) region, particularly China, has faced headwinds, while the Europe, Middle East, and Africa (EMEA) region has seen intensified competition, resulting in weaker performance.
Key concerns for investors include sluggish US sales for Cognac and Liqueurs & Spirits, challenging economic conditions in China, and uncertainties surrounding potential government stimulus measures that may take time to materialize.
Additionally, France’s proposed legislative changes could raise corporate taxes, further adding to the company’s challenges.
The company’s financial performance reflects these struggles.
As of Q4 2024, Remy Cointreau reported a 22.89% revenue decline over the past twelve months and an 18.2% quarterly drop in Q4.
The Mid-Autumn Festival in China, a key sales period, also failed to meet expectations, compounding the difficulties in the Chinese market.
Can Remy Cointreau stock bounce back?
Despite the headwinds, Citi remains optimistic about Remy Cointreau’s long-term prospects, calling it the stock with the “greatest absolute upside” in its coverage universe over the next two to three years.
The company’s gross profit margins, at 71.19%, suggest it still retains strong pricing power for its premium spirits.
Oddo BHF also sees potential for a recovery in the spirits market, noting that Remy Cointreau and Diageo are well-positioned due to their exposure to the US and China.
However, it warned that the timing of such a recovery remains uncertain, and short-term performance is likely to remain under pressure.
For now, Remy Cointreau must navigate significant challenges, including weak sales, external competition, and macroeconomic uncertainties, with any meaningful recovery likely delayed until market conditions improve.
The Reserve Bank of India (RBI) held its key interest rate at 6.50% on Wednesday, while signaling potential for future rate cuts by shifting its policy stance to “neutral” from the previous “withdrawal of accommodation.”
The RBI’s Monetary Policy Committee (MPC), comprising three RBI officials and three external members, voted unanimously to maintain the repo rate at 6.50% for the tenth consecutive policy meeting.
However, the committee’s decision to change the policy stance to “neutral” is seen as a move to provide flexibility for future rate cuts as economic growth shows signs of deceleration.
Governor Shaktikanta Das emphasized that while the RBI remains focused on controlling inflation, the central bank will also work to support economic growth.
“The inflation horse has been brought back to the stable within the tolerance band. We have to be careful about opening the gate,” Das remarked, signaling a cautious approach to future monetary easing.
Inflation and economic growth balance
The decision to maintain rates comes at a time when inflation has been relatively controlled, with annual retail inflation remaining below the RBI’s 4% target for a second consecutive month.
In August, inflation stood at 3.65%, slightly higher than the revised 3.60% in July but still below economists’ expectations of 3.5%.
The central bank has projected inflation to average 4.5% for the financial year 2024-25, unchanged from its August forecast.
However, concerns over slowing economic growth have prompted the change in policy stance.
Recent data shows that high-frequency indicators, such as the manufacturing and services PMIs, have weakened, with manufacturing hitting an eight-month low and services dropping to a 10-month low in September.
India’s overall GDP growth slowed to 6.7% in the June quarter, though the RBI maintains its growth projection for the current financial year at 7.2%.
Market reaction and bond yields drop
Equity index Nifty 50 was up 0.67% at 25,177.5 points, while the S&P BSE Sensex added 0.55% to 82,080.
The benchmarks were up 0.2% each ahead of the policy decision.
The Indian rupee was flat at 83.9450 against the dollar.
Shares of rate-sensitive sectors such as banking, finance, auto and real estate rose as much as 6%.
India’s benchmark 10-year bond yield fell by 5 basis points to 6.7392%.
The policy stance shift is seen as a signal that rate cuts could be on the horizon if inflation remains within target and economic growth slows further.
Arun Chitnis, chairman of the Anarok Group, welcomed the RBI’s decision to maintain rates, noting that it helps sustain momentum in India’s housing market during the festive season.
“While a repo rate cut would have been preferable, it is clear that the RBI is on a tightrope walk and must keep various macro-economic factors in mind,” Chitnis said, adding that the fundamentals of the Indian economy remain strong despite global headwinds.
Indian equity benchmarks surged on Wednesday after the Reserve Bank of India changed its monetary policy stance to “neutral”.
At the time of writing, the BSE Sensex was up 555.59 points at 82,190.40, while the Nifty50 index rose 185 points to 25,198.15.
Overnight, US equity stocks rose as oil prices slipped more than 4%. Most Asian stocks opened higher on Wednesday, tracking overnight gains in Wall Street.
However, Chinese stocks were by far the worst performers, as Shanghai Shenzhen CSI 300 and Shanghai Composite indexes fell more than 4% each from Tuesday’s highs.
RBI keeps repo rate unchanged
The Reserve Bank of India has kept the key lending rate (repo rate) unchanged at 6.5%.
This is the tenth consecutive time the central bank has left the repo rate unchanged.
However, the central bank has changed its stance to “neutral” from “withdrawal of accommodation” earlier.
RBI Governor Shaktikanta Das said the monetary policy committee considered changing the stance and remained focused on bringing the inflation rate within the central bank’s preferred range.
Also, India’s GDP forecast for 2024-25 (April-March) was left unchanged at 7.2% by the RBI. Das further said that India’s financial sector was healthy, resilient and stable.
Bank stocks, NBFCs rally after RBI changes policy stance
Shares of interest rate-sensitive stocks climbed after the policy meeting of the RBI.
Shares of banks and non-banking finance companies (NBFCs) surged by up to 4% on Wednesday after the RBI changed its policy stance to “neutral”.
Shares of SBI rose 2.6% on Wednesday, while those of ICICI Bank also gained 1.7%. Axis Bank’s stock rose 2.5%, while Punjab National Bank’s shares surged 1.5%.
Shares of Shriram Finance were among the top gainers on Wednesday.
The stock surged by more than 4%, boosted by positive sentiments after the RBI’s meeting outcome.
Shares of other NBFCs, including HDFC Asset Management Company, Cholamandalam Investment and Fin Co and Muthoot Finance surged by 3% on Wednesday morning.
OMC stocks rise as oil prices ease
Shares of oil marketing companies surged on Wednesday as global prices declined sharply since Tuesday.
Shares of Indian Oil Corporation rose 1.6%, while those of Bharat Petroleum Corporation gained 1.9%.
Among these, Hindustan Petroleum Corporation was the top gainer as its shares surged nearly 5%.
Oil prices had slipped more than 4% on Tuesday as traders waited for an Israeli response to Iran’s attack last week.
Prices had declined as there had not been any response so far from Israel, which eased some of the tensions in the oil market.
Downstream oil marketing companies tend to perform better when oil prices fall as they import crude from outside to refine into petroleum products.
Torrent Power’s stock jumps 9%
Shares of leading power company, Torrent Power, jumped 9% on Wednesday, and touched a new record high.
The stock advanced after Torrent Power secured a letter of award from Maharashtra State Electricity Distribution, according to a report by The Economic Times.
The letter of award was for long-term supply of 2,000 Megawatt (MW) Energy Storage Capacity from InSTS Connected Pumped Hydro Storage Plant, according to the report.
Meanwhile, shares of SpiceJet surged 7% on Wednesday on settlement of a dispute. SpiceJet and Babcock & Brown Aircraft Management settled a $131.85 million dispute.
The NZD/USD exchange rate continued its downward momentum after the Reserve Bank of New Zealand (RBNZ) slashed interest rates by 50 basis points. It fell to the important support at 0.6100, much lower than the year-to-date high of 0.6377.
The benchmark DJ New Zealand index also continued rising, pumping by 1.50% as investors cheered the jumbo rate cut.
RBNZ cuts interest rates
The NZD/USD exchange rate slipped after the RBNZ decided to cut interest rates from 5.25% to 4.75%.
This cut happened after the recent inflation data showed that prices dropped to 3.3% in the last quarter. It has dropped sharply after peaking at 7.3% in 2023 and has moved inside the bank’s target range of between its 1% and 3% band.
The bank also slashed rates as it sought to boost an economy that it believed was highly subdued, which it attributed to the substantially high interest rates.
Higher rates have affected business investments and consumer spending, which has led to weaker employment figures.
The most recent economic numbers shows that the country’s unemployment rate rose from 4.4% in July to 4.6% in August. It has risen gradually atfter bottoming at 3.3% last year. Also, labor productivity has continued to move downward in the past few months. The statement added:
“The Committee agreed that it is appropriate to cut the OCR by 50 basis points to achieve and maintain low and stable inflation, while seeking to avoid unnecessary instability in output, employment, interest rates, and the exchange rate.”
New Zealand becomes the latest central bank to slash interest rates. In the United States, the Federal Reserve has cut rates by 0.50% while in Europe, the European Central Bank (ECB) has delivered two consecutive 0.25% cuts.
The same trend has happened in other central banks like the Bank of England (BoE), Riksbank, and the South Africa Reserve Bank (SARB).
New Zealand’s cut means that it has moved earlier than the neighboring Reserve Bank of Australia (RBA). Minutes released on Tuesday showed that officials were not in a hurry to slash interest rates.
Analysts now expect New Zealand’s central bank to deliver more rate cuts in the next few meetings.
Federal Reserve minutes
The NZD to USD exchange rate also retreated as traders waited for the upcoming Federal Reserve minutes and the latest US inflation data.
The minutes, which will come out on Wednesday, will provide more information about the last meeting when the committee decided to cut interest rates by 0.50%.
These minutes are usually more detailed than the one-page statement that comes out after the rate decision.
In that meeting, the bank judged that the labor market was the biggest concern and decided to deliver a jumbo cut. The unemployment rate had risen from last year’s low of 3.5% to 4.3% while the Bureau of Labor Statistics (BLS) delivered several downward revisions to the nonfarm payroll numbers.
While these minutes will be important, the NZD/USD pair will react more to statements by several Fed officials like Austan Goolbsee, James Williams, and Tom Barkin. These statements will be important because these officials will react to last week’s US jobs data.
The numbers showed that the labor market was strong as the unemployment rate dropped to 4.1% last month.
US inflation data ahead
The next important NZD/USD news will be Thursday’s US inflation data. Economists expect the data to show that the headline Consumer Price Index (CPI) dropped from 2.5% in August to 2.3% in September.
These numbers will confirm that the headline CPI is moving towards the Federal Reserve’s target of 2.0%. However, the key issue is that service inflation, especially housing, has remained at an elevated level. Core inflation, which excludes the volatile food and energy products, is expected to drop from 3.3% to 3.2%.
The other top concern is on the energy sector, where crude oil and natural gas prices have risen because of tensions in the Middle East. Brent has risen to $80 while West Texas Intermediate (WTI) has jumped to $77, pushing gasoline prices higher.
NZD/USD technical analysis
The NZD/USD pair has done as we predicted earlier this week. It has retreated from last month’s high of 0.6377 to below 0.6100.
Along the way, the pair has dropped below the important support level at 0.6299, its highest swing on August 29, and 0.6221, its highest level on June 12. It also flipped the support at 0.6100, its lowest swing on 11th September into a resistance.
The NZD to USD pair has also moved below the 50-day and 100-day Exponential Moving Averages (EMA). Therefore, the path of the least resistance for the pair is downwards, with the next point to watch being at 0.6050.
As the 2024 US presidential election approaches, the economy is front and center in political debates, as it always is during election cycles. Historically, voters have associated economic growth and prosperity with Republican candidates, particularly former President Donald Trump.
For years, Trump maintained a significant edge in voter trust when it came to handling the economy.
However, recent polling data suggests that his advantage has shrunk dramatically, and in some cases, Vice President Kamala Harris is closing the gap altogether.
The US economy is performing better than expected, and this economic optimism seems to be affecting voter sentiment in ways that neither Trump nor many Republicans anticipated.
How is the US economy really doing in 2024?
To understand the shift in voter sentiment, we must first look at the current state of the US economy.
By many measures, the economy has been performing exceptionally well despite persistent challenges. Inflation, a key concern for voters throughout 2022 and 2023, has cooled significantly.
The Federal Reserve’s aggressive interest rate hikes, once feared to induce a recession, have resulted in what experts are calling a “soft landing.”
In fact, inflation is now close to the Fed’s 2% target, allowing it to cut interest rates—something that brings welcome relief to borrowers across the country.
The labor market has remained resilient, with the latest jobs report showing a robust addition of 254,000 jobs in September.
Even more promising, wage growth for American workers has outpaced inflation for over a year, increasing purchasing power for many households.
These improvements are helping to reduce the “sticker shock” that voters felt during the previous inflationary period.
While inflation remains a hot-button issue in public discourse, the actual impact on everyday life is decreasing.
This shift is contributing to a more positive outlook among voters, especially those who had previously felt squeezed by rising costs.
What are Trump’s economic proposals for 2024?
Trump’s economic agenda for 2024 presents a mix of familiar policies and new, more radical ideas.
Central to his platform are sweeping tax cuts, targeting not just corporations and high earners, but also income from overtime pay, tips, and pensions.
Trump is also proposing to remove the cap on state and local tax (SALT) deductions, a move favored by wealthier homeowners in suburban areas.
But one of the most controversial aspects of his platform is the imposition of heavy tariffs on imported goods.
Trump has floated ideas of a 20% tariff on all imports, and a massive 60% tariff specifically on goods from China.
He argues that these tariffs would protect American manufacturing jobs and raise revenues that would fund the tax cuts.
However, economists widely agree that these tariffs would raise prices for US consumers, as companies would pass on the increased costs of imported goods.
In essence, this would function like a national sales tax, disproportionately affecting low- and middle-income households.
Given Trump’s long-standing reputation as a businessman who understands how to grow the economy, why is his lead on this issue slipping?
The first reason is that Trump’s economic proposals, especially his tariff policies, are increasingly viewed as economically risky by many voters.
While his base may still support protectionist measures, there’s growing concern that such policies could ignite inflation once again, undermining the economic progress made in recent years.
Independent analyses suggest that Trump’s plans could raise consumer prices and potentially harm economic growth—an argument that is beginning to resonate with voters who remember the impact of past trade wars.
Adding to the concern is the potential impact of Trump’s plans on the national debt.
According to the Committee for a Responsible Federal Budget (CRFB), Trump’s economic agenda is projected to raise the federal debt by $7.5 trillion through 2035, roughly double the $3.5 trillion increase expected under Kamala Harris’s platform.
The CRFB warns that Trump’s proposed tax cuts, tariffs, and immigration policies could significantly strain US finances, raising the debt to 142% of GDP.
This increase in borrowing could risk triggering a fiscal crisis, slow economic growth, and weaken national security.
Such concerns about long-term fiscal responsibility are making some voters reconsider the viability of his economic approach.
Another reason is that his stance on immigration and the US-China relations is fueling economic concerns.
It is projected that Trump’s proposed mass deportations could reduce the US GDP by more than 3% by 2028, disproportionately affecting states like California, Texas, and Florida that rely heavily on migrant labor.
Meanwhile, his plan to impose up to 60% tariffs on Chinese imports risks severely disrupting the US-China trade, potentially ending the economic relationship between the two countries.
These policies add to the perception that his economic approach might be too volatile to maintain stable growth.
Lastly, Trump’s messaging has been inconsistent. Instead of focusing on concrete economic policies during campaign events, he has often veered into unrelated topics, such as his infamous Michigan speech where he claimed to have won a fictional “Michigan man of the year” award.
Such distractions do little to reassure voters who are concerned about the future of the economy.
In contrast, many believe that Kamala Harris has managed to communicate a more straightforward and relatable economic message.
While her policy platform is aligned with many of President Joe Biden’s initiatives—such as increased taxes on the wealthy, manufacturing subsidies, and an expanded child tax credit—she has shifted the focus toward cost-of-living issues, which are more forward-looking and resonate better with middle-class voters.
Her emphasis on reducing everyday costs like healthcare, housing, and childcare has struck a chord with many who feel the pain of rising living expenses.
Are voters simply feeling better about the economy?
Beyond the candidates’ policies and messaging, the simplest explanation for Trump’s shrinking lead on the economy may be that the US economy is performing well enough to soothe voter concerns.
As inflation continues to stabilize and wages rise, voters are beginning to feel the benefits of a recovering economy.
Consumer sentiment has risen 40% from its low in June 2022, according to the University of Michigan’s consumer survey.
This newfound optimism may be undermining Trump’s narrative that the Biden-Harris administration has mismanaged the economy.
Voters may also be growing tired of Trump’s dire warnings about economic doom when they are experiencing improvements in their own financial lives.
The gap between voter perceptions of the economy and objective economic data is narrowing, and that shift benefits Harris.
What’s next for Trump and Harris?
With five weeks left until the election, both Trump and Harris have significant work to do.
For Trump, the challenge is to refocus his campaign on economic policies that appeal to middle-class voters without alienating them with protectionist measures that could increase costs.
He will also need to provide clearer and more consistent messaging on how he intends to fix the issues facing American workers.
Harris, on the other hand, must continue to capitalize on the economic momentum.
If the positive economic trends hold and she can maintain a steady narrative on reducing living costs, she stands a strong chance of closing the gap even further.
Her challenge will be convincing voters that the progress made so far can be sustained and expanded under her leadership.
Overall, the US economy has always played a decisive role in presidential elections, and 2024 is no exception.
While Trump’s economic proposals once resonated with voters, the strong performance of the current economy undercuts his message.
Voters are beginning to see through the complexities of tariffs and protectionism and are instead focusing on immediate concerns like the cost of living and job security.
As US citizens continue to feel the benefits of a recovering economy, Trump may find that his once-commanding position on economic issues is no longer enough to guarantee victory.
The newest country in the world has imploded, less than six months after it was launched. The USD to ZiG exchange rate has soared from 13.5 in April to 25.86, according to Zimbabwe’s central bank. This performance means that it has now dropped by almost 100% against the benchmark US dollar.
The situation is worse in the informal sector, where the USD/ZIG exchange rate has soared to a record high of 50.
Bid for stable currency fails
The Zimbabwe ZiG currency has dropped to a record low as concerns about the experiment and the country’s economy continue.
For starters, the ZiG is a new currency launched by Zimbabwe’s central bank in April after the previous one plunged by over 80% in three months.
It was the country’s sixth attempt to create a stable currency after the previous ones failed. Zimbabwe’s first currency crashed, pushing the central bank to print extremely large denominations.
The new currency whose code is ZWL boasts of being backed by US dollars and gold reserves. However, unlike other asset-based currencies, one can’t convert their ZIG currencies to gold or the US dollar at a fixed rate.
This is different from stablecoins like Tether and USD Coin, which are backed 1:1 to the US dollar. With 1,000 USDT, one can easily convert them to $1,000 within a few seconds.
There are a few reasons why the Zimbabwe ZiG has imploded a few months after it was launched.
First, there is a crisis of confidence among Zimbabwe citizens and businesses because of the past currency failures.
When a currency depreciates so much, it worsens inflation, and most importantly, it devalues savings. For example, assume that you saved 1 million Zimbabwe dollars when the currency was trading at 10 against the US dollar. In this case, you have $100,000 in your account.
If the currency devalues to 50, it means that your original $100,000 is worth $2,000. This is important because Zimbabwe imports most of its items, including oil, which are traded in US dollars.
Once bitten twice shy. In Zimbabwe’s case, the currency devaluations have happened several times. The most recent one was the Real-Time Gross Settlement (RTGS) Zimbabwe dollar (ZWL), which was launched in 2019 with a lot of fanfare. By June 2019, the bank had made the currency the sole legal tender.
Between January and April this year, the new currency was down by 80%, which pushed the central bank to start a new one. All ZWL savings and stocks were converted to the new currency.
Therefore, many Zimbabwe residents and businesses have given up on a local currency, with most of them moving to US dollars. Most companies, including the neighborhood shops and markets now use the US dollars.
Zimbabwe Central Bank devolution
The Zimbabwe ZiG was fairly strong in its first few months. However, as we wrote at the time, this stability was because of the currency’s rarity and the actions taken by the central bank. For example, the bank started a major crackdown on the black market, which it blamed for the past crashes.
These actions led to a big divergence between the official rate by the central bank and the black market.
This changed recently when the central bank intervened and devalued the currency by 43% in its bid to close the gap.
Before that, the bank had added more liquidity in the market to prevent further deterioration. It added $50 million in the interbank currency before the devaluation. That was the second big intervention after it added another $64 million in early September.
Zimbabwe economy is not doing well
The Zimbabwe gold currency has also imploded because of the ongoing economic performance as the country nears a recession.
A key issue has been a prolonged drought that has affected the country in the past few months. Just this week, the City of Bulawayo, the second-biggest city in Zimbabwe, announced a 130-hour water-shedding.
The city’s water supplies have been dire as the country remains in the worst drought in over 40 years because of the recent El Nino. It is unclear whether the country will receive adequate rains in the upcoming season.
This drought has led to more food imports, which has led to substantial demand for foreign currency like the South African rand and the US dollar.
Zimbabwe ZiG is in peril
Therefore, according to many analysts,the Zimbabwe ZiG’s future is in peril as concerns about the economy continue.
The biggest concern for the currency is that many people and businesses have lost confidence in it and moved their savings and daily transactions in US dollars.
A likely solution for Zimbabwe would be to create a stablecoin that is backed 1:1 on the US dollar or the South African rand. The challenge in doing that is that the country does not have adequate funds in its reserves to back such a currency.
The Nifty 50 index rose for the second consecutive day after the Reserve Bank of India (RBI) delivered its interest rate decision. It soared to a high of ₹25,180 on Wednesday, a few points above this month’s low of ₹24,695.
RBI interest rate decision
The biggest catalyst for the Nifty 50 index and the BSE Sensex was the decision by the RBI to go against the grain.
It left interest rates unchanged at 6.50% for the tenth consecutive time. Before that, the bank hiked rates from 4.0% in 2022 in a bid to fight the elevated inflation rate.
Recently, however, the country’s inflation has continued falling, moving from 7.45% to 3.6%. The key challenge, however, is that food inflation has remained at an elevated level for a while.
On the positive side, there are signs that the RBI will start cutting interest rates in the coming meetings. In his statement, Governor Shaktikanta Das sounded optimistic that the country’s food and energy inflation will start moderating in the coming months. In a statement, a Standard Charted analyst said:
“The surprise decision to change the stance to neutral underlines growing confidence in achieving the inflation targets. It’s likely to raise expectations of rate cut in December though the headline CPI prints will remain the key determinant of the first rate cut timing.”
The RBI’s shift to a dovish tone happened as most central banks cut interest rates. In neighboring China, the central bank has brought rates to the highest level in years and implemented a series of measures to stimulate the economy.
In the United States, the Federal Reserve has slashed interest rates by 0.50%, and officials have hinted that more of these cuts were coming. The bank is expected to deliver 0.25% cuts in the next two meetings.
In Europe, the European Central Bank (ECB) has slashed rates by 0.50% this year as the economic weakness continues. European inflation has now moved to the 2% target and industrial and manufacturing production has moderated.
Other top central banks like those in Switzerland, the United Kingdom, and Indonesia have also slashed rates.
Therefore, the Nifty 50 index will likely benefit from low interest rates by pushing investors from bonds to equities.
Top Nifty 50 stocks in 2024
Most companies in the Nifty 50 and BSE Sensex indices have done well this year as many Indians have started to invest in the local market.
Mahindra & Mahindra, a leading company in the automotive and farm equipment industry, has been the best-performing company in the Nifty 50 index this year as it jumped by over 83%.
Other Indian automakers like Tata Motors and Maruti Suzuki have done well, soaring by more than 30% this year. This performance is mostly because of the strong order flow from Indian customers as the economy continues doing well.
Indian automakers have done better than their western peers like Stellantis, Ford Motor, and General Motors, which have all dropped this year. These western brands have struggled because of their flawed movement into electric vehicle industry.
Indian companies like Bajaj Auto, Eicher Motors, and Hero Motorcorp have also done well this year, rising by over 40%.
The other top companies in the Nifty 50 index in 2024 are Adani Ports, Shriram Finance, Sun Pharmaceuticals, Tech Mahindra, and SBI Life Insurance.
A key concern among invesrors is that the Nifty 50 index has become severely overvalued. For one, data shows that the Nifty 50 index has a price-to-earnings ratio of 23, higher than other global indices. For example, the S&P 500 index has a multiple of 21 while the German DAX has a multiple of 15.
Therefore, Nifty index constituents will need to continue reporting strong financial results to justify the hefty valuation.
The next key catalyst for the Nifty 50 index will be the upcoming US inflation and Federal Reserve minutes. These events will provide more color about the next action by the Fed.
The weekly chart shows that the Nifty 50 index has been in a strong bull run in the past few years. It has rallied from the 2020 low of ₹7,452 to a record high of ₹26,305, a 254% increase.
The index has remained above the 50-week and 100-week Exponential Moving Averages (EMA), meaning that bulls are in control.
However, there are some potential risks. For one, the Relative Strength Index (RSI) has moved from the overbought point of 77 to 61. The two lines of the MACD indicator have formed a bearish crossover pattern.
Also, the index has formed a rising broadening wedge, pointing to more downside in the coming weeks. If this happens, the next point to watch will be at ₹23,500. A move above the year-to-day high of ₹26,305 will invalidate the bearish view.
Tradeweb (TW) and MarketAxess (MKTX) stocks have done well in the past few months, helped by the rising demand for fixed income solutions. MKTX has soared to $280, up by over 45% from its lowest point this year, bringing its market cap to over $10 billion.
Tradeweb has done much better, with its stock soaring by over 46% this year and 60% in the last 12 months. Its performance has pushed its valuation to over $31 billion, making it one of the biggest companies in the industry.
Giant players in fixed income
Stock brokerage companies like Robinhood and Schwab are well-known brands in the United States. That is because most people interact with stocks all the time.
While the equity market is big, the debt market is much bigger. Data by the International Monetary Fund (IMF) shows that the global debt market is worth over $315 trillion while the equity market is valued at over $111 trillion. The main issue is that debt is not seen as sexy as equities.
Tradeweb and MarketAxess are some mostly unknown companies among most Americans because of their role in the fixed income industry. They are, nonetheless, well-known brands among institutional investors.
Established in 2000, MarketAxess has grown to become one of the top players in the debt market, handling trades worth over $3.1 trillion in 2023. It has also grown itss market share in the high-grade and high-yield bond market to 20%.
Tradeweb is the biggest player in the debt market with clients from over 70 countries. Its platform that lets investors buy and sell fixed income. Its main difference with MarketAxess is that it relies on request-forquote (RFQ) and order book trading. In this, when a customer places an order, the company’s technology les them seek competitive pricing.
MarketAxess, on the other hand, focuses on open trading, which enables anonymous all-to-all trading.
The other difference between the two is that Tradeweb provides more solutions like government bonds, mortgage-backed securities (MBS), interest rate swaps, and corporate bonds. As a result, the company handled deals worth over $8.8 trillion in 2023.
Tradeweb and MarketAxess make money by taking a small cut of all orders that pass in their platform.
Growth is accelerating
Tradeweb and MarketAxess have done well in the past few months because of the anticipated demand for credit in the US and other countries.
This demand has led to a substantial increase in trading volumes. The most recent financial results shows that Tradeweb had an average daily volume (ADV) of $1.9 trillion, a 48% increase from the same period in 2023. This growth happened mostly because of the surge in US government bonds.
Its revenue rose by 30% to $404 million, with rates, credit, and market data being the best performers with annual changes of over 30%. Its net income jumped by 33.8% to over $136 million.
Analysts are optimistic that Tradeweb’s business will continue doing well as interest rates start moving downwards. Tradeweb is a highly profitable company with a gross profit margin of 94% and a net margin of 28%.
MarketAxess has also continued doing well. In a recent statement, the company said that its daily trading volume averaged $45.2 billion in September, a 52.5% increase from the same period in 2023.
Its earnings report showed that total revenue rose by 10% in the second quarter to over $197.7 million. Its operating income rose by 7% to $81 million while its net income spiked by 8% to $65 million.
Like Tradeweb, MarketAxess is a bigh-margin company. It makes gross margins of 65% and net income margin of over 33%.
The daily chart shows that the MarketAxess share price bottomed at $197.72, its lowest point in October and July. It has recently formed a golden cross pattern as the 200-day and 50-day Exponential Moving Averages (EMA).
The stock is nearing the important resistance point at $294.75, its highest swing in December last year. Also, the Relative Strength Index (RSI) and the MACD have continued rising. Therefore, the path of the least resistance is bullish, with the next point to watch being at $294, which is about 7% from the current level.
On the daily chart, we see that the TW share price has done well in the past few months. It has remained about 12% above the 50-day moving average and 25% higher than the 200 MA.
The Relative Strength Index (RSI) and other indicators have continued rising, with the RSI moving to the extremely overbought point at 80. Therefore, while Tradeweb is seeing more growth, there is a risk of a pullback now that it has soared sharply recently.
Therefore, in this case, some analysts believe that the stock may see a pullback in the near term as some traders start taking profits.
