Summer lull? Don’t even think about it. There’s a multi-trillion dollar selloff in AI-linked equities taking place, devastating wildfires across Europe and the war in the Middle East continues to rage.

In Asia, India holds a crucial central bank meeting against a complex backdrop, while Friday’s U.S. non-farm payrolls report comes as traders grow increasingly convinced that the Federal Reserve may have to hike interest rates again.

1/AI-WATERING MOVES

The AI-driven bull run has gone from seemingly unstoppable to spectacularly volatile in a matter of weeks.

Investors are increasingly uneasy about profitability, competition and who’s paying ‌for it all. Unprecedented volatility ⁠in chipmakers ⁠and other AI-related stocks is the result. South Korea’s KOSPI, which jumped 18% on Friday after tumbling 40% over the previous six weeks, is the prime example.

Pressure is emerging elsewhere too. The cost of insuring against default by some AI hyperscalers has risen as debt levels climb, while earnings reports are triggering increasingly dramatic market reactions.

More turbulence may lie ahead. Elon Musk’s SpaceX reports its first results since its blockbuster June IPO. Since then, its market value has slumped by an eye-watering $1 trillion.

2/WAR WORRIES

Markets will remain focused on the Middle East, where a U.S.-Iran ceasefire announced in mid-June now appears a distant memory and oil prices have climbed back towards $90 a barrel.
A drone strike on two U.S.-owned gas tankers in Egypt’s Mediterranean port of Damietta this week has opened a potential new front in the five-month conflict, raising concerns that traffic through the Suez ⁠Canal, one of ‌the world’s most important trade routes, could come under threat. In another first, Saudi Arabia publicly joined military strikes alongside U.S. forces this week, targeting Iran-aligned groups in eastern Iraq. The U.S. military also carried out what it described as a “heavy wave” of strikes against Iran after an attempted ballistic ⁠missile attack on U.S. forces in the region.

Diplomatic efforts continue, however. Saudi Arabia is seeking to lead a 14-country coalition to boost maritime defence in the Bab el-Mandeb strait, the Red Sea and the Gulf of Aden, all critical chokepoints for global energy supplies.

3/JOLT FROM JOBS?

Markets get a fresh read on the U.S. economy on Friday when closely watched non-farm payrolls data are released.

Economists polled by Reuters expect the July report to show payrolls increased by 91,000 jobs and the unemployment rate held at 4.3%. A stronger-than-expected reading could raise bets that the Fed may need to resume raising rates to contain persistently above-target inflation at its next meeting in September.

The central bank held rates steady on Wednesday, but three policymakers voted for a hike and Chair Kevin Warsh reiterated the Fed’s commitment to returning inflation to its 2% target.

4/ EUROPE’S BURNING ISSUES

Europe’s record-breaking heatwave looks set to ‌continue with fears mounting that wildfires that have devastated parts of Spain and France are spreading to Italy, Central Europe and Greece.

Markets should pay attention.

The economic costs are mounting, from healthcare spending and insurance claims to reconstruction bills and higher food prices, at a time when many heavily indebted governments are already grappling with the fallout of the Iran ⁠war. Adding to concerns, a ‘super’ El Nino event appears increasingly likely, raising the risk of further extreme weather globally.

In Britain, also facing wildfires and drought, major supermarket groups warn another food-price shock could be looming. In Germany, meanwhile, a contentious cabinet reshuffle has renewed pressure on Chancellor Friedrich Merz as the country also battles record temperatures.

DRUPEE

The Reserve Bank of India announces its latest policy decision on Wednesday, with most economists polled by Reuters expecting no change to the benchmark interest rate of 5.25%.

However, authorities will be attempting to prop up the rupee , one of Asia’s worst-performing currencies this year.

In June, the central bank unveiled measures designed to boost capital inflows and strengthen the balance of payments. The moves attracted more than $20 billion in their first month, but renewed strength in oil prices has since clouded the outlook.

For those thinking an interest rate increase might help, retail inflation has just breached the central bank’s target for the first time in over a year. Nevertheless, economists still expect the risks to growth to keep policymakers from acting, for now at least.

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Mumbai: Banking credit to industry remained robust, increasing 19% year-on-year due to broad-based growth from both large and small companies. Personal loan growth also remained strong, expanding 16% YoY compared to 12% a year ago, the latest sectoral data for June showed.

In the personal loan segment, loans against gold jewellery, which include certain agriculture loans, remained the fastest-growing sector, surging 93% YoY, data published Friday by the Reserve Bank of India (RBI) showed. Vehicle loans with a 17% growth were the second-fastest in the personal loan segment. Credit card outstanding growth decelerated to 2% compared to 7% recorded a year ago.

Growth in education loans also remained strong at 13% versus 14% recorded a year ago.

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Mumbai: The Securities and Exchange Board of India (Sebi) has disposed of legal proceedings against Religare Enterprises, its former chairperson Rashmi Saluja and five current and former directors, concluding that no further regulatory directions were warranted after the Burman Group‘s open offer was completed and control of the company changed hands.

The regulator on Friday disposed of the June 19, 2024 interim order-cum-show cause notice without imposing any fresh directions, holding that the remedial objective of the proceedings had already been achieved. Sebi had launched proceedings alleging that Religare and its board failed to cooperate with the mandatory open offer triggered after the Burman Group sought to raise its stake beyond the 25% threshold under the takeover rules.

The regulator alleged that the company violated its takeover code by delaying the process.

Sebi had alleged that REL repeatedly questioned the Burman Group’s ‘fit and proper’ status and refused to apply for approvals from the Reserve Bank of India, IRDAI and the market regulator despite being advised to do so.

The regulator had said the open offer could not progress because the RBI would accept the application only from the target company.

The interim order had directed Religare to facilitate the open offer, seek the necessary regulatory approvals and ensure the constitution of the committee of independent directors.
During the proceedings, several independent directors argued they had relied on representations made by Saluja, whom they alleged later misled them about the Burman Group. They maintained that they were not involved in the company’s day-to-day affairs and had acted on independent legal advice. Saluja, in her defence, contended that the obligation to obtain statutory approvals rested with the acquirers and that REL acted in good faith over governance and ‘fit and proper’ concerns.

New Delhi: Maruti Suzuki Friday missed D-Street estimates to report an 11% year-on-year decline in consolidated net profit in the June quarter, with input costs inflated by West Asia hostilities outweighing a robust increase in sales at India’s biggest carmaker.

Consolidated profit at Maruti fell to ₹3,352 crore, compared with ₹3,758 crore in the corresponding period of the last financial year. Bloomberg’s consensus earnings estimates for the June quarter were ₹3,440 crore.

The company said input costs increased during the quarter due to the crisis in West Asia, denting profitability despite strong growth in sales.

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“Material costs had started to increase in the quarter and were seriously aggravated during the war,” Maruti Suzuki said in a statement.

Net sales in the period under review rose to ₹49,959 crore, climbing 36% from ₹36,620 crore recorded in the year-ago period.
Total expenses surged 41% to ₹49,988 crore. Unit sales climbed 29% in the first quarter to a record 682,724 cars over the same period of the previous year.Four CBG Projects
Sales for the company climbed across categories. Domestic small cars sales expanded 34%, paced by demand for SUVs that sold 45% more. Exports, meanwhile, climbed 29%.

Domestic market share increased 2.3 percentage points to 41.2%.

“Higher sales were possible because the company commissioned its second plant in Kharkhoda,” Maruti said.

Despite increased sales, the network inventory level at the end of the quarter was about 13 days.

The company’s board also approved four compressed bio gas (CBG) projects in the first phase with a budget of ₹ 561 crore. The board would consider expansion of CBG manufacturing based on the experience of these projects, the company said.

Shares of Maruti Suzuki marginally climbed to ₹14,239.40 apiece on the BSE. The earnings were announced after trading ended in Mumbai.