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Confusing Euro Commission

The idea that Eurocrats are totally ignorant is fast gaining global currency, writes Dr Bhaskar Dasgupta.

india Updated: Dec 01, 2003 20:43 IST
Dr Bhaskar Dasgupta
Dr Bhaskar Dasgupta

The India Babble
It was a weekend of light trading on Saturday, more to welcome in the Hindu new year than actually trading major numbers. The Sensex ended 45 points higher at 4802 even though institutional investors were absent. After all the firecrackers and noise, Monday saw the Sensex dive by 104 points to close at 4698, following heavy selling pressure on auto's, Hindustan Lever, and other old economy stocks.

The large open futures positions contributed to the heavy selling pressure, as traders tried to sop up their open positions and last week's drop in FII inflow made the markets a bit nervous. Tuesday saw a large volatile move in the markets, roiling from the world markets, but managed to end up 12 points for the Sensex to close at 4707.

The Sensex closed 36 points up on Wednesday, after spending most of the day in negative ground, with auto and cement stocks heading the pack and good news from the global markets! Tata Motor's quarterly profit was up 250 per cent as it thoroughly beat forecasts as did IDBI. After the massive volatility on Thursday, Friday saw the Sensex move up 126 points today to close at 4907, following on from an excellent reporting season from Indian corporates and evidence that post monsoon demand is powering up rapidly.

The Ambani Brothers have come out top, as the Corporate India's most powerful, followed by Azim Premji and NR Narayan Murty. No 5 is Ratan Tata and then Kumar Mangalam Birla. Very nice indeed, but the interesting thing was a poll some time ago. The poll asked various young people in India as to who they would like to emulate the most. The answer, very surprisingly, was Mukesh Ambani. In a way, its good, but sad at the same time. The good part is that Indian youth are now getting out of the horrendous picture they had of businessmen and profit is no longer a dirty word. The sad part is the rest of the society where politicians, armed services personnel, philosophers, teachers, scientists and the whole host of other professions didn't get a look, more importantly, there is nobody who can really fire up the people to that extent. Reminds me of the time that Richard Branson was considered to be one of the most admired people in the UK.

The fiscal deficit is moving upwards with depressing regularity, the deficit now is 81014 crores at the end of September 03, compared to 57745 crores September last year. This is unbelievable, and we are sowing the seeds of our own destruction if this runaway deficit is not reigned in. Just what are the governments (both central and state) thinking? Just what are their plans
to handle this yawning gap in our finances? Besides a mealy mouthed "concern" every time the budget is announced in parliament, nobody does anything about it. I wonder if anybody else is interested in this issue? We are spending more than we are earning, and now this gap is up to 50% of our entire budget. Thank god this is an internal deficit rather than external, so we are shielded to a certain extent, but it will bite the next government very hard. Beware and watch people move their funds into land and gold.

The World Babble
Japanese stocks closed higher on Monday because of traders looking for bargains for the domestic stocks. The Nikkei ended up 1.15 per cent at 10454. The beleaguered construction industry gave slightly better results after a horrid spate over the past few years. European stocks also rose on hopes of a global economic uptick and good results from Reuters. The DOW closed 26
points up at 9608, while the NASDAQ went up 17 points to 1883. Microsoft did well after last week's fall, Proctor and Gamble came in above analyst's expectations, but the main driver was the announcement that Bank of America
will purchase Fleet Boston, one of the biggest banking mergers in recent history.

The sales of existing US homes rose by 4 per cent in September as opposed to the expectations that they will fall, and this pushed up the markets even more. Japan, on Tuesday closed higher on the 3rd day with a weakened dollar, interest in bank and real estate and the Nikkei closed up at 10561. Europe and USA did well, going by the wave of multi billion dollar mergers, the DOW closing 1.5 per cent up at 9748 while the Nasdaq closed 2.6 per cent up at 1932. The Fed held its rates and this also calmed the market which was worried that the rates may shoot up.

Tokyo closed higher on Wednesday after a good report on chip demand and Hitachi reported good results with the Nikkei closing 1.69 per cent up at 10739. After Boeing reported better than expected results ,the DOW moved up to 9775, a rise of 26 points. The Fed also reported that the labour market was stabilising and this cheered up the market as well. Thursday saw Europe doing quite well, with the FTSE 100 closing 35 points up, Dax up at 24 and the CAC 40 up 20. The DOW moved up 12 points to close at 9786. The US economy is really powering ahead, with the annualised growth rate in the last quarter being 7.2 per cent, this is the fastest growth in 20 years. New claims for jobless benefits remained lower, but the jobs are not really picking up.

All these good numbers meant that the US markets closed up strongly. The Dow Jones Industrial Average closed Friday at 9,801, up 219 for this week while the NASDAQ ended at 1,932, up 67, for the week.

The sterling is on an upward curve against the dollar, following data which showed an alarming rise in debt. Most of the market currently expects the interest rates to be moved upwards, to try and stop the rapidly rising debt levels, which are currently predicted to exceed national income next year. The Sterling traded at $1.7082 on Wednesday following strong market
reactions to the debt levels.

The Yukos affair is getting curioser and curioser. If you recall, Mikhail Khodorkovsky, the largest shareholder and chairman of Yukos in Russia, was arrested on Saturday, throwing a very big spanner into the commercial and political life of Russia. Deals are being cancelled and its brewing up to be a full blown political crisis after President Putin refused to intervene in the affair. Now, Alexander Voloshin, the head of the presidential administration, the 3rd in the power structure, has resigned over the affair. Some bankers are suggesting that deals are being withdrawn and the capital flight is taking place in serious amounts. The RTS is diving like a dingo down its hole and this is making Russia look very bad indeed.

Pascal Lamy, the EU trade commissioner, in an interview, showed a masterful ability to duck out of any responsibility for the collapse of the Cancun trade talks and blamed everybody else. It was almost as if he was sulking! He questioned the APEC meeting's request to restart talks, he moaned about the South Africans, he moaned about the Indians rejecting the Mexican draft
document, he moaned about Brazil's trade minister, he moaned about the USA's lack of commitment and generally was moaning (was it that obvious?). Even the top European businessmen have complained long and hard at Pascal Lamy to get things moving, but I very much doubt it, since when have the EU ministers worked on the principle of economic logic?

Talking about EU commissioners, here's another classic example. Insurers will not be able to set different rates and premiums for women versus men. Gender has a very strong correlation with longetivity, that is pure biology, but not for the EU social affairs commissioner, Anna Diamantopolou. According to her, gender is not the key to life expectancy. We have heard about evolution, we have heard about God, we have heard about intelligent design as the driving force behind biology, now we have the EU commissioner as the driving force behind biology. Sometimes I feel simply amazed at some of the things the EU comes up with.

Talking about trade, the 2005 liberalisation of the textile and clothing sector is going to have a large impact around the globe, specially considering the number of people working in this sector worldwide. In particular, the European Commission, in its trademark confused way, has decided to have a labelling scheme, which will specify which garments have been made in countries which have certain labour and environmental standards. This is so outrageous that words fail me. Seriously, the idea that the Eurocrats are totally stick in the mud and ignorant is fast gaining currency around the world. More importantly, they will soon become irrelevant in the greater scheme of things and then they wonder why the Europeans don't really like the EU.

A fascinating step by the French government came to light but it has not been confirmed yet. The French government wants to cut one of the 11 national holidays, the traditional Monday after Pentecost in June, to generate funds to help the aged. If you recall, France and its social and political establishment was excoriated after finding that up to 11,000 people had died of heat related causes and its aged population suffers terribly. Now, this in the country of the 35 hour week is well nigh revolutionary. This is amazing, and something which other countries would be well advised to consider, specially those who have an excessive number of public holidays.

(Dr Bhaskar Dasgupta writes a weekly Monday round-up on markets and indicators. He holds a Doctorate in Finance and Artificial Intelligence from Manchester Business School and works in London in diverse capacities in the banking sector.)

First Published: Dec 01, 2003 20:43 IST