Asian stock which had reached a 9-month high due to positive export and banking data in China continued to rally as the investors hoped that the Chinese economy would get better. Meanwhile, Wall Street underperformed as the quarterly earnings of major banks started pouring in.

In the market

Stocks: Asia-Pacific’s shares broadest index MSCI climbed by 0.3% mainly due to market gains in India and China. The index was at its 9-month high due to positive export and banking data in China. The Chinese shares reacted positively to the house pricing data and rose by 1.7%. The NSE, India climbed 0.8% as the country heads to general elections. In the other important Asian market, Nikkei was up by 0.2%.

The positives from the Asian market could not see through the pessimism seen in Wall Street as the banking earnings reports did not meet expectations. The major stock indexes were all lower than before with only the S&P 500 doing better.

The European shares picked up as Frankfurt and London shares rose to 0.3%.

Treasury yields: The 10-year US treasury bond yields were at 2.548% a fall from its previous high of 2.574%.

Commodities: The oil rally due to a supply crunch and also sanctions on Iran and Venezuela by the US halted as OPEC and Russia may increase oil production in a fight for domination with the United States. The US WTI crude was at $63.30 for a barrel a fall by 0.15 cents.

Spot gold suffered its fourth consecutive day loss and was at $1,286.21 for an ounce.

Currencies: The dollar was at 96.980 against the major currencies. Against the yen, it was at 111.94. The euro remained unchanged and was at $1.13045.

Senior Strategist Yukino Yamada talking about the recent developments in the Asian markets said ‘Recent Chinese data is boosting confidence in the Chinese economy while earnings have not been bad either’. On the Indian stock market doing well she said ‘Indian shares are rising on hopes on the country’s elections. In the past, they have tended to do well during a six-month period leading up to the election as well as one month after the election.’ To top it, the Asian investors became optimistic about the trade negotiations ending with a deal between China and the US. Wall Street will only hope that the earnings report that is due in this week by big corporates is not too bad as that could mean another downward spiral for the stocks.

U.S. consumer prices went up the most in the last 14 months in March. However, the underlying inflation trend seems to slow down the domestic as well as global economic growth.

On Wednesday, a mixed report was released by the Labor Department which seemed to support the Federal Reserve’s decision to suspend its campaign in raising interest rates. The projections put forth by the U.S. central bank showed no interest rate hikes planned for this years, especially after the borrowing costs were lifted four-times last year.

The minutes of the Federal Reserve’s March 19-20 meeting was published on Wednesday. It showed that most of the policymakers saw the price pressures to be muted. However, they expected inflation to go up to reach the central bank’s target of two percent. The Federal Reserve’s inflation measure which includes personal consumption expenditures price and excludes energy and food is currently at 1.8 percent.

According to Joel Naroff, a chief economist at Naroff Economic Advisors in Pennsylvania, the inflation is likely to remain tame. He also said that the Federal Reserve seems to have gone on vacation and is likely to stay that way for a few more months.

The Consumer Price Index went up by 0.4 percent according to the Labor Department. This jump was encouraged by the prices increase of gasoline, food, and rents. In fact, this is seen as the biggest increase since January 2018.

In the past twelve months till March 2019, the CPI has gone up by 1.9 percent. The CPI went up by 1.5 percent in February alone. Economists who were polled by Reuters had forecast a 0.3 rise in March.

After excluding volatile components like food and energy, the CPI went up by 0.1 percent, thereby matching February’s gain. This CPI remained held down by the 1.9 percent drop in apparel prices.

Last month, the government introduced a new method to calculate apparel prices. This caused the apparel prices which had gone up for two consecutive months to be trimmed to 0.07 percent suddenly. Most economists expect a reversal this month.

In the past twelve months till March 2019, the core CPI went up by 2.0 percent, which is the smallest increase since February 2018.

The dollar was traded at a lower rate compared to a basket of currencies as the U.S. Treasury prices went up. Stocks on Wall Street also went up as well.

Inflation remained mute, as wage growth increased moderately even though conditions tightened in the labor market.

Ping An Bank Co., a Chinese bank is performing at its best at the moment after its dismal performance last year. This has given hope to the investors that the strength of the lender in retail banking will help shoulder the country’s economic slowdown. Ping An Bank shares went up by 39 percent this year. This is the largest gain seen on the CSI 300 Banks Index. According to the analysts in the industry, the bull run will probably continue. The rise of share prices has stoked demand for its $3.9 billion convertible bond sale, which offers nearly 1,400 times the amount.

With Chinese banks benefiting from the pledge made by policymakers for regulatory and capital support, China Merchants Bank Co. and Ping An Bank are reaping the rewards for their concentrated focus on retail banking.  The sector is dominated by the Shenzhen based lenders where competition is slightly less fierce and offers higher returns than in the corporate lending sector.

According to Liao Chenkai, an analyst at Capital Securities Ltd, investors are open to paying a premium to retail banking even during the economic slowdown as it is less recurrent than wholesale banking. He also mentioned that although China Merchants Bank and Ping An have a lot in common, the former bank trades at a higher premium which will probably cause Ping An bank shares to rise further.

China Merchant Bank shares were traded at almost 1.6 times its forecast price while Ping An shares were traded at almost the same forecast price.  The transition of Ping An Bank from corporate to consumer backing began in the year 2016, several years behind the China Merchants Bank. At the tie, retail contributed only forty-one percent of its profit. When the share prices rose to 68 percent in 2018, the bad-loan ratio of Ping An Bank stood at around 1.05% which was lower than the corporate lending bad-loan ratio at 2.49 percent. However, Ping An Bank’s return on equity remains at eleven percent which is lower than the sector’s average, as the bank continues its transition.

The fourth quarter net income of Ping An Bank beat market expectations and triggered a rally among the mid-sized banks in the country. China International Capital Corp. has forecasted about 17.6 percent gain compared to the average 9.4% for China listed banks. According to analysts, retail banking is bright at the moment due to its ability to being less capital consuming and able to provide earnings stability.

Oil prices dropped on Wednesday as a result of the bullish output forecasts by two of the biggest U.S. producers. The OPEC led production cuts that led to a buildup of weekly U.S. crude oil stockpiles also had a role in the oil prices falling on Wednesday.

International Brent crude futures dropped 39 cents to $65.47 per barrel from their last settlement. Brent fell to its lowest point at $65.22 on Wednesday earlier in the session.  

The U.S. West Texas Intermediate crude oil futures also went down by 0.7 percent to $56.15 per barrel.

According to Benjamin Lu, an analyst at Philip Futures, a Singapore based brokerage firm, crude oil futures will continue to have trouble as markets try to balance between rising U.S. production levels and OPEC led cuts. He also said that the rise in event-driven trading was also responsible for increasing market volatility.

Exxon Mobil Corp and Chevron Corp released Permian Basin projections on Tuesday, which pointed to increased shale oil production.

This will result in cementing the two companies as dominant players in New Mexico and West Texas field, with at least one-third of the Permian production coming under their control in the next five years.  American Petroleum Institute released data that showed a larger than expected gain in U.S. crude stockpiles.

U.S. crude inventories went up by 7.3 million barrels in the last week. This showed an increase of 1.2 million barrels compared to analysts’ expectations. According to Kim Kwang-Rae, an analyst at Samsung Futures, Seoul, saw a rise in U.S. crude inventories weighs heavily on oil prices. Rising concerns about the increasing oil production in the Permian region is also another reason for dropping oil prices.

U.S. Department of Energy’s Information Administration will be releasing official data later on Wednesday.

The rise in oil production in North America undermines the efforts led by OPEC (Organization of Petroleum Exporting Countries). U.S. crude oil inventories have gone up by 7.3 million bpd last week alone.  OPES and its allies had pledged to reduce its output to 1.2 million bpd (barrels per day).

With the ongoing U.S- China trade talks, the market is on the lookout for further signs for resolving the conflict between the world’s two largest economies. According to Mike Pompeo, U.S. Secretary, the U.S. President Donald Trump is not willing to accept any deal that is not perfect. However, Trump is open to work until an agreement is reached with Beijing.

Saudi Arabia is an important country in the oil market and a member of the OPEC. Known for its production of natural gas and petroleum, it also has an emerging stock market called the Tadawul. It is the main stock exchange among the Gulf countries since 2007. Being a relatively new exchange, it did not offer derivative products like options or futures. But now the stocks in Saudi Arabia are gaining the attention of investors and fund managers as they are soon going to be listed in the emerging-markets benchmark.

The Dubai market has had a terrible few years due to the real-estate slump which is the backbone of the country’s economy, but despite that investors believe that the Dubai market offers better gains than the Saudi market.

But should investors switch to Saudi or the Dubai market is the question that needs to be answered?  

Some of the views expressed by experts:

Change global investments portfolio manager, Thea Jamison was of the opinion that the market in Saudi Arabia is expensive and when compared to Dubai, the returns and the operating margin are ‘not attractive’. Thea, says that the Saudi stocks are rallying due to the MSCI inclusion and thus the investors are optimistic about the stocks, but many companies are cautious about making any investments. Moreover, with the Saudi government adding stimulus to help the economy, companies will be under pressure to profitability making Dubai stocks a better option at least for now.

RWC Partners said that when compared to Dubai shares, the Saudi shares have always been expensive with fewer earnings for the value as the stocks have reached its maximum price. The RWC considers Dubai as a place which is good for companies which are looking to expand and foray into the African and the Middle Eastern markets due to it being a business hub. The property stocks in Dubai is expected to do well and yield great results. James Johnstone, who is the head of the RWC partners said, “We think the UAE has reached the bottom of its real-estate cycle. We have been using the opportunity to reduce some of our Saudi holdings and reallocate it back into the property stocks that are very cheap and attractively priced.”

The Saudi market is likely to join the MSCI emerging index from May and with Dubai posting strong fourth-quarter things deciding on where to invest is not going to be easy.

While the trade war with China rages, United States President Donald Trump has decided to focus on another trade agreement and this time he has turned his gaze at the preferential trade agreement with India, another giant economy in Asia. On Monday, the US President stated that preferential trade agreement is going to be ended for India since it is not in the US’ best interests. For decades, India has enjoyed being exporting products to the US to the tune of $5.6 billion per year without paying any duties. This move is directed at ending asymmetrical trade with India and remains a part of Donald Trump’s larger promise of substantially curbing the country’s trade deficits.

In a letter to the leaders of the United States Congress, Trump stated, “I am taking this step because, after intensive engagement between the United States and the government of India, I have determined that India has not assured the United States that it will provide equitable and reasonable access to the markets of India.” A copy of that letter has been sent to the Government of India as well, and the measures could go into effect in 60 days.

The entire issue is related to India being part of the Generalised System of Preferences (GSP) programme that gives preference to certain developing countries. The US believes that high tariffs imposed by India on US products and regulation that has hurt US companies have made the whole thing untenable. It is believed that one of the biggest reasons behind this move is the new regulatory measures for e-commerce companies that were imposed by India, earlier this year. Those measures adversely affected the businesses of Amazon India and Walmart’s Flipkart. Both companies have invested billions in the country, and the sudden change in the ground rules has not been taken kindly.

The being said, the Government of India is not perturbed at all regarding the move, and a source inside the government told Reuters that the ‘actual benefit’ received by the country stands at around $250 million. It is not a particularly large amount in the large scheme of things; however, the source did add that he hoped that this does not lead to barriers to trade with the US. Considering the fact that India is going to have its elections this year; it would be interesting to see if New Delhi retaliates in any way to this move from Trump.

The U.S. President Donald Trump criticized the Federal Reserve again about its tight monetary policy which has made the dollar strong and as a result hurt the country’s competitiveness. At the annual Conservative Political Action Conference held in Oxon Hill, Maryland, Trump said that the gentleman at the Federal Reserve Bank likes a very strong dollar. Although, Trump mentioned his preference for a strong dollar, he mentioned that he would rather have a dollar that is strong and yet does not prohibit the United States from delaying with other nations.

Trump had made the economy an important part of his political platform. As a result, he has been repeatedly critical of the country’s central bank and its chairman, Jerome Powell. Although, Trump himself had appointed Powell, he remained critical of the Fed’s decision to raise interest rates several times last year. With rising concerns about slowing global economy trade war between the U.S. and China as well as financial markets volatility, the United States central bank has indicated that it will remain patient about the further tightening of the monetary policy.

The Federal Reserve had raised interest rates four times in 2018 as a part of tightening the monetary policy. On Saturday, Trump talked about lowering the dollar by avoiding quantitative tightening and by leaving the interest rates alone. He also mentioned that a weaker currency helps improve the competitiveness of a country’s exports. Powell, Chairman of Federal Reserve, has made it clear that he will not bow down to political pressure. He has already given a clear signal of the central bank’s independence in January 2019 by saying that he will not be resigning if requested to do so by Trump. This followed the reports in December that the United States President had discussed the feasibility of firing the Federal Reserve Chairman with his advisors after the interest rates were raised again by the Fed.

The Federal Reserve’s measure of purchasing large quantities of U.S. government bonds in order to boost economic growth especially during the financial crisis is called quantitative easing. This measure was taken by the Federal Reserve, which dropped its overnight lending rate to zero in order to lower long term lending rates.

According to investors, the Federal Reserve’s attempts at trimming its four trillion dollar balance sheet by at least $50 billion a month has resulted in tightening financial conditions. The Federal Reserve’s benchmark overnight lending rate is at present between 2.25 percent to 2.50 percent.

The US and China negotiators are very close to reach out to a deal to end the trade war. The Trumps administrator is thinking of withdrawing almost entire tariff hike on the Chinese products. The US can only remove the tariff hike if and only if China abides by its promise of protecting intellectual property rights and purchasing American goods, sources informed to Wall Street Journals.

There are important issues that still remain to be settled; meanwhile, the deal is still in discussion. US and China have agreed on a deal that needs Beijing to buy larger American agricultural goods, energy goods and seeks to remove some barriers that do not allow American Companies to operate in China. If China accepts the above condition, then the US is ready to remove its tariff hike on Chinese goods of worth 200 billion dollars out of 250 billion dollars of Chinese imports which are currently under the American charges.

One of the most important sticking points is whether the tariffs should be immediately withdrawn by the US or should the US wait for a little more time so that they can keep an eye over China and see whether it is following its promise, the sources mentioned. The US seeks to go ahead with the threats of tariffs hike to pressurize China and to make sure that China does not back out of the deal and withdraw the taxes completely when Beijing has implemented all the promises made in the agreement.

During the ongoing negotiation, the US had urged China not to bring in World Trade organizations cases in response to the US tariffs which needs to be levied so as to execute the deal, a person familiar with the talks informed.

The Summit Dates between the US President Trump and Chinese President Xi still needs to be finalized, delegates from both the side stated. The Wall Street Journal reporters had earlier mentioned the summit date to be on March 27 so as to end the trade war.

Sources say that China has presented that it will reduce the tariffs on Chemical, US farm, auto and other US products. Few sources also say that China may purchase natural gas of worth 18 billion dollars and also promises to speed up the process of withdrawing foreign ownership limitations on ventures namely Auto industries and to decrease the tariffs on imported vehicles by less than 15 percent, Wall Street Journal reports suggest.

Meanwhile, Trump along with his Economic team members have given a positive signal of reaching out a deal and sealing it. Earlier, Trump had extended the plan of increasing the tariff hike on Chinese goods that was supposed to take place on March 1.

On Friday, citing the delay over the tariff hike, US President had mentioned Beijing to remove all tariffs immediately that are levied against the US agriculture products.

The U.S and Chinese delegates are regularly in touch with each other through phone or video conference to strike the details of the deal.

However, the Trump administration is pressurizing China to approve the enforcement mechanism so that if China fails to keep its promise, then the US can immediately impose the tariffs hike on Chinese goods. Trump was accusing China of illegal trade practices for a year now and also delaying the promise of moving the economic power back to the US.

The Chinese delegates have offered to increase the purchases of American goods by around 1.2 trillion dollars for the next 6 years, a person familiar with the negotiation stated. But, it is still not known how Beijing is going to follow it if the tariffs hike will not be lifted along with other trading barriers, the person added further. In 2017, China had purchased around 130 billion dollars of US goods, reports according to the US figure.

Oil prices were high on Monday in Asia, with a slight recovery from its last week performance. During the time, when the OPEC the manufacturer club, tightened its supply output, there were progressive ongoing trade talks between the US and China. The report suggests that both the countries were very close to reach out a deal which will eventually bring an end to the tariff issue which had led for the slowdown of the economic growth globally.

The International Brent futures at 0135 GMT were at 65.46 dollar, which was up by 39 percent from its previous close. At the same time, the US West Texas Intermediate (WTI) crude futures were high by 36 percent at 56.16 dollars.

The recovery in the oil prices was noticed when the reports mentioned that the United States and China were both were close to end their trade dispute which had impacted the global economic slowdown.

In the on-going negotiation between the US and China, President Trump and President Xi might reach out to a formal trade deal during the summit which is to take place on March 27, the report has mentioned that there were productive talks taking place between the two countries, the report was published by Wall Street Journal on Sunday.

This positive news gave the needed support to the market which had affected the production of oil cuts from the past two months.

The Reuters survey observed that oil supply from the Organization of the Petroleum Exporting Countries (OPEC) was down to almost 4 years low in February. The top oil exporters Saudi Arabia and its Gulf associates have out-performed on oil group supply. Meanwhile, Venezuela has registered a further decline in the output.

In the previous week, the oil prices were moving down due to a decline in the manufacturing index data which was noticed in both the countries and there was a rise in the crude oil output. On Friday, Brent crude oil fell down to 1.9 percent, as much as 3 percent for the whole week and WTI crude were down by 2.6 percent for the week.

The result of the on-going trade talks that were taking place from a very long time between the US and China will increase the oil prices, and the investors will also focus on the supply of crude oil. The progressive trade talk news has improved the market performance across Asia and has declined the gold and dollar rate.

Oil prices have been significantly driven by the US sanctions against OPEC members of Iran and Venezuela, which Barclays bank predicts to have further resulted in the reduction of 2 million BPD (barrels per day) in the global crude supply.

There are positive signs in the United States regarding oil production. They believe that crude oil production is growing high than of past years. While, the energy companies of US had reduced the number of oil rigs in the previous week so as to look for new reserves which was at the lowest as compared to 9 months because few oil manufacturers strictly follow on plans to cut the expenditure, even though there was a 20 percent increase in the crude oil futures in this year.

Barclays further say that the performance of crude oil might be repeated in the second half of 2019 and we truly hope for it especially for US oil output.

The US sanction against Venezuela and Iran, both the OPEC members have supported for raising the prices in 2019 starting from January 1, Brent crude oil has achieved around 17 percent, and WTI crude has nearly achieved 18 percent gain.

During this week, the American Petroleum Institute on supplies numbers will be noticed by the investors on Tuesday, and on Wednesday the report on stockpiles from the US Energy Information Administration. On Friday, Baker Hughes is intended to publish its weekly oil rings counts which are active in the US.

The production of US has been up from 2018 onwards to around 12.1 million BPD at the time when the OPEC members and few of its non-affiliated members like Russia had reduced its output by 1.2 million BPD so as to support oil prices. These OPEC cuts have supported for a decent fall in the oil prices at the end of last year.

On Thursday, Infosys, the second largest IT Company of India has imposed a fine of 9.5 lakh rupees on one of its key independent director Kiran Mazumdar Shaw for selling 1,600 shares accidentally of Infosys during the trading hours. Infosys has mentioned it in on February 28 during its BSE filing. She had not taken any prior permission to carry out such a trade from Infosys board members.

In the filing of exchanges, Infosys has stated that even though the trade was executed by the portfolio manager without consulting Mazumdar-Shaw, there has been the violation of trading rules of the company under Trading Policy and violation of SEBI Regulations 2015 Act (Prohibition of Insider Trading).

Infosys mentioned in a filing that the trade was performed by the portfolio manager and Kiran Mazumdar-Shaw had no prior knowledge about it. There were no directions given by the company to the independent director to execute the trade, and she was even unaware of the trade that took place. The decision was singlehandedly taken by the portfolio manager, and he executed the trade.

In portfolio management services, the investors do not keep track of the various activities of the day and their investment decisions, and in this case, a similar thing happened with the independent director of Infosys Kiran Mazumdar-Shaw.

Kiran Mazumdar-Shaw had no knowledge about the transaction as a result of the process; she was charged with a fine of 9.5 lakh rupees. As of now, she needs to pay the penalty imposed by Infosys on her to a charity organization of her choice for violating the trade rule.

Regarding the case, according to the Infosys filings, the case was brought to the notice of the Compliance Officer of Infosys on February 13, 2019.

The Infosys Audit Committee has justified that the trade was unintentionally carried out and there was no intention to violate the insider trading regulations of SEBI and also of Infosys.

A similar case was noticed in January 2017 by Infosys, wherein Ravi Venkatesan- the former board member had accidentally purchased 50 shares of the company during the trading hour and had breached the insider trade policy of Infosys.

Relating to Venkatesan case, Infosys addressed that there were no guidelines given to the former board member to buy the shares of the company, which was carried out by his portfolio management services account and he too did not have any knowledge about it. The trade was executed by the fund manager of Venkatesan for all of his clients.

Infosys Audit Committee observed that there was a breaching of insider trading policy and therefore it is our duty to impose a fine of Rs 9.5 lakh on Kiran Mazumdar-Shaw, and she has to pay it.

Corporate governance experts suggest that company directors and other important management people need to take prior permission from the company before carrying out any trade of its shares in the market trading hours.

Shiram Subramanian, the founder of corporate governance company InGovern, says that the directors of the company who intends to execute such trade need to present a trading plan to the respective company and also take advance permission from the company.

In this case, the step taken by the company is to self-censure and sends out a clear message that the company works with respect to the regulations of SEBI and others, he further added.

As per the PIT Regulations and according to Infosys Insider Trading Policy, Infosys will be informing the SEBI regarding the case of Muzamdar-Shaw, Infosys announced.