In a 400-page report issued last month, former European Central Bank president Mario Draghi called for a “new industrial strategy for Europe”, urging the EU to raise investments by €800bn a year to boost its competitiveness so that the bloc does not fall behind the US and China. ‘Never in the past has the scale of our countries (in Europe) appeared so small and inadequate relative to the size of the challenges,’ Mario Draghi wrote in his report to European Commission president Ursula von der Leyen

Indian Elections:
A note on the Elections to easily understand the probabilities.
1. 2019 Lok Sabha Elections had 91 crore eligible voters. Voters turnout was a record 67% .
2. Around 60 crore votes were polled in all. 3. 2019 :The Bharatiya Janata Party received 37 % of the vote, the highest vote share by a political party since the 1989 general election, and won 303 seats
4. 2019 : The BJP-led National Democratic Alliance (NDA) won 353 seats.The NDA's combined vote was 45% of the 60crore+ votes that were polled.

US Fed Decision : As expected no change in rates .
Pause continues. US Fed policymakers on Wednesday held their benchmark interest rate steady for a third straight time.

AB of Global Markets Updates Jul 24th 2023:
Nasdaq Rebalancing impact:
1. On July 24, the Nasdaq 100 will undergo a “special rebalance,” which is meant to curb the high concentration in the index of a handful of tech stocks. twitter.com/i/web/status/1… AB of Global Markets Updates Jul 24th 2023:
Nasdaq Rebalancing impact:
2.Before trading begins on Monday, exchange operator Nasdaq will trim the weight of a handful of companies that make up close to half of the Nasdaq 100. twitter.com/i/web/status/1…

Some reactions on the Russian events over the weekend :
1/n "The perception of Putin’s fallibility and weakness is growing and creates its own reality. That is dangerous to him. It’s hard to predict what additional power grabs and instability that could create."

Overall , there is no market panic on the @RBI announcement on Rs 2000 notes. The difference from 2016 is:
1. These notes are not widely used in daily transactions and are not widely owned. So the impact on the economic flows is minimal. 2. @RBI was quietly withdrawing these notes for the last 5 years. Hence the Rs 2000 notes outstanding amount has fallen to Rs 3.62 lakh crores in value, 10.8% of Notes in Circulation that were at Rs 34.5 lakh crores on May 12, 2022.

Amazing recovery by PSU banks:
Profits at Rs 104,649 crores in FY23, 57% growth over Rs 66,539 crores in FY22.
They had a loss of Rs 85,390 crores in FY18.
This turnaround deserves applause from all taxpayers whose taxes fund these PSUs.
Great to see this return. The huge deleveraging of the Corporate Balance Sheets in India over the last 10 years provides a launch pad for investment driven growth in the coming decade.India has solved its Twin Balance Sheet Problem of Stretched Bank NPAs and Over leveraged Corporates. Great Story.

Analysing the Fed Rate Hike & Comments of May 3,2023:
1. As expected, the FOMC hiked rates by 0.25%
2. The language was changed and sounded less hawkish in terms of future rate hikes
3. However, in the Press Meet, Chair Powell was clear that the Fed is not signalling a Pause. 1/ 4.“We on the committee have a view that inflation is going to come down not so quickly. It will take some time, and in that world, if that forecast is broadly right, it would not be appropriate to cut rates and we won’t cut rates.” This statement by Powell roiled markets. 2/

First Q today to Powell : Is today marking a pause by June ?
Powell says they will decide meeting to meeting based on incoming data though language has changed . Second Q : View on Recession. Powell says view stays for moderate growth forecast and not recession

“This is a very different China to even a few years ago. The US-China relationship is on the brink. Communications have ground to a halt. There’s a lot going on in the world that’s troubling but to me it’s the US-China relationship that is the most worrying.” : Hank Paulson “This is a very dangerous period. Great powers don’t look to go to war: they stumble into it through some combination of miscalculation or misjudgment or accident. So I think it’s important that we tone down the rhetoric on Taiwan. : Hank Paulson

US government risks running out of cash as soon as June 1, Janet Yellen warns.
President Biden invites Kevin McCarthy to White House next week as worries grow about debt ceiling crisis Yellen warned that even the threat of default could rattle markets and send shockwaves throughout the US economy. The last time lawmakers approached a “fiscal cliff” in 2011, S&P downgraded the US’s triple-A credit rating.

RBI is the second major central bank, after the Bank of Canada, to pause in this present rate hike cycle.
No wonder RBI is rated as one of the most exceptionally run central banks in the world. 1/n The GDP projections for next year were raised slightly and inflation projections brought down slightly. Those numbers look difficult to achieve given the present global scenario. We hope the RBI is proved correct and we are wrong . Happy to take that . 2/n

During the first quarter, investors poured $508 billion into US money market funds , in their largest quarterly inflow since the early days of Covid-19 three years ago, according to EPFR Global data. “Dash for cash continues,” with $60.1 billion being added to the money market funds asset class this week. Meanwhile, US equity funds continued to see outflows, with $5.2 billions of redemptions.

US Banks’ borrowing from the Federal Reserve declined from levels seen earlier this month, offering more evidence that pressures banks faced are receding. As of the week ended March 29, borrowings by US banks from the Fed’s primary lending window totaled $88.16 bn, lower than $110.3 bn last week and down substantially from the record $153 bn posted mid-March. The peak level during the 2008-2009 financial crisis was over $110 bn.

This year started with a strong rally in the markets, but the past month has seen the positive sentiments start to sputter. The failure of Silicon Valley Bank started fears of a contagion and consequent bank runs, which were only partially offset by Federal regulatory actions. But there’s a growing consensus that it was the Federal actions that set the conditions for the bank crisis, when the central bank raised interest rates to fight inflation. Now, investors are trying to cope with the fallout: simmering bank troubles, high inflation +interest rates

Midsize US Banks Ask FDIC to Insure Deposits for Two Years. Financial system risks more bank runs without aid, group says. Deposits have been moving into firms seen as "too big to fail" A coalition of midsize US banks asked federal regulators to extend FDIC insurance to all deposits for the next two years, arguing the guarantee is needed to avoid a wider run on the banks.

Berkshire Hathaway Inc.’s Warren Buffett has been in touch with senior officials in President Joe Biden’s administration in recent days as the regional banking crisis unfolds. There have been multiple conversations between Biden’s team and Buffett in the past week. The calls have centered around Buffett possibly investing in the US regional banking sector in some way. He has also given advice and guidance more broadly about the current turmoil.

Companies are getting more concerned about where they can safely keep their cash given the turmoil in US and European banks.
Some of them are yanking money from their banks and depositing it at other lenders, moving it to money market funds, or buying Treasury bills directly, Wall Street giants including Bank of America Corp., JPMorgan Chase & Co. and Citigroup Inc. in recent days have raked in billions of dollars in new deposits.

US Banks borrowed a combined $164.8 billion from two Federal Reserve backstop facilities in the most recent week, a sign of escalated funding strains in the aftermath of Silicon Valley Bank’s failure. The Fed showed $152.85 bn in borrowing from the discount window — the traditional liquidity backstop for banks — in the week ended March 15, a record high, up from $4.58 billion the previous week. The prior all-time high was $111 billion reached during the 2008 financial crisis.

ECB hikes by 50 bps. Sets stage for Fed to stay the course. ECB statement : Inflation is projected to remain too high for too long.Therefore,the Governing Council today decided to increase the three key ECB interest rates by 50 bps, in line with its determination to ensure the timely return of inflation to the 2% medium-term target.

See the stock market reaction as these markets realising what the bond markets have been pointing to for long:
1. Easy money over, Central Banks mismanaged the transition and gave a shock therapy to markets, taking away easy money of 14 years in 1 year.
1/n 2. Lax supervision of US banks/ mismanagement at banks of ALM mismatches/duration risk/liquidity risk,now transforming into solvency risk as 3 US banks fail.
3. Investors locking into illiquid products in the search for yields, now caught out as valuations crash and no exits 2/n