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The long standing disagreement between US auto workers and the US auto giants seems to be seeing a resolution, there is a spreading out of India’s rich away from the usual centres and earnings to digest, in India and overseas, not to forget the dichotomy in US-China ties. Here’s the key news:
200 Billion Wiped Off!!
S&P 500 edged closed in the correction territory — down over 10% from its July peak. Recent days have seen solid earnings reports from some of the mega-cap tech stocks.
Especially impressive was Microsoft, whose quarterly EBIT was greater than the combined recent quarterly EBITs of Adobe, Salesforce, Tesla, Netflix, ASML, Costco, Novo Nordisk and Nvidia.
Yet the earnings of Microsoft, Meta, Netflix and others are no longer enough to shield them from the downturn in equity markets. Even with good numbers, the likes of Alphabet and Meta have corrected.
Alphabet investors were concerned about disappointing revenue in the Google Cloud division, while Meta’s sell-off resulted from cautionary comments regarding the ad market in light of the escalating conflict in the Middle East.
And treasuries have largely risen and stayed higher even as economic data reinforced bets on a Federal Reserve pause. The so-called Magnificent Seven tech companies have wiped about $200 billion off their value after reporting results. Indian markets have not been too different, with
UAW’s Big Win Has Long Term Implications – Gavekal Research
The UAW’s big win against Ford suggests a serious improvement in workers’ bargaining power, with the deal, if approved, securing an 11% pay bump in the first year of the contract and other gains on pensions and job security.
Typically, a deal with one automaker will lead to others following suit. Hence, the “big three” will not only face one-off costs from the 40-day strike but structurally higher wages going forward. General Motors has withdrawn its full-year forecast due to losses arising from the strike.
As a reference, the hit incurred from a previous UAW walkout cost GM some US$3.6bn. Taken in the round, this strike will have done limited damage to the US economy. At its peak only 4% of the US auto industry’s 1.08mn workers had downed tools and so most production was not disrupted.
The real significance of the UAW strike lies in its capacity to spur repeat behavior in other industries, causing a generalized rise in US manufacturers’ wage costs. Such a dynamic is possible, since the US labor market, for now, remains tight. The effect will be to make US firms even less competitive, with this bad brew, down the line, feeding back into weaker payrolls.
India’s Rich – Spreading Out
Hurun’s list of rich Indians identifies 1319 fortunes of $120 mn or more, which is 216 more than last year. And while most of India’s rich still hail from Mumbai (328), Delhi (199) and Bangalore (100), 21 other cities made the cut this year.
Most of it is also the product of the real economy, with only one private equity leader making it to the list. We have now heard from multiple PMS managers that a strong portion of their large investors are outside the main cities, with cities such as Baroda, Indore, Coimbatore, Raipur and Surat regularly getting cited as centres with large moneybags.
Will this help spread the economic growth and demand for goods across the country, in turn helping companies spread across the length and breadth of India in a better fashion than it has thus far? Time will tell.
But one can certainly see a change in the geographical mix, which is a markedly different picture than ever before in recent history.
Zimbabwe Cedes World’s Highest Interest Rate Title to Argentina
Zimbabwe lost its unenviable position – of having the world’s highest interest rate to Argentina last week, after slashing borrowing costs to presumably help boost economic growth, as per a story on Bloomberg.
The country’s MPC cut its benchmark interest rate to 130% from 150%, which lags Argentina’s 133%. Unlike Argentina, which raised borrowing costs by 15 percentage points to 133% on Oct. 12 to curb price growth that’s running at 138%, government interventions in Zimbabwe have enabled it to cut rates, if that is any solace and a small source of ‘respite’.
Zimbabwe’s currency had plunged about 85% against the US Dollar between May and June, causing inflation to surge to over 175% in June!! The government then liberalized the exchange rate and introduced measures to promote use of the Zimbabwe dollar, such as requiring corporate taxes to be paid in the currency, which helped stabilize it and restore some price stability.
Is it out of the woods? Hardly. Do note that in 2022, Zimbabwe’s central bank had raised its benchmark interest rate to 200% as part of the series of measures announced by the government. Citizens and investors would be hoping there is no encore there.
By The Way
While we wrote of aging populations in Asia, this week we learn that Brazil’s population is aging at its fastest clip ever, potentially draining momentum from Latin America’s largest economy after a decade of lackluster growth.
The portion of Brazilians that are 65 or older climbed to 10.9% in 2022 from 7.4% in 2010, according to data from Brazil’s statistics agency, or IBGE, released Friday. The share of seniors is now the largest its been since 1940, the oldest comparable census data.
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