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1 Emerging markets slump hurts world stocks (Nathaniel Popper in The New York Times) Stock markets fell around the world on Friday as investors worried about an economic slowdown in emerging markets. The concerns led to the first sustained decline in US stock indexes in 2014. The Standard & Poor’s 500-stock index was down 2.09 percent on Friday; so far, it is off more than 3 percent for the year. The Dow Jones industrial average dropped 1.96 percent and 4 percent for the year.
The downturn was much worse elsewhere, with the Euro Stoxx 50 index falling more than 2.8 percent, bringing it into the red for 2014. The declines this week have been fed by disappointing economic news out of China and the rest of the developing world. An index of Chinese manufacturing growth showed that the sector was contracting for the first time in six months. A number of slightly disappointing economic data points in the US has led to some concern that a slowdown in China could be contagious.
The pessimism in the markets came after a nearly unbroken market rally that has lasted for months. Many strategists had been anticipating some kind of pullback. For most of the past decade, except for a fairly brief interlude during the depths of the global financial crisis, the world’s emerging markets seemed to be the main beneficiaries of two global trends: the seemingly inexorable rise of China and the willingness of the Federal Reserve to pursue an accommodative monetary policy.
Now neither trend seems so reliable, and emerging markets are paying a heavy price. Since the Fed officially announced in December that it would ease its bond-buying stimulus, investors in emerging markets have been cautious. There are fears that rising interest rates will choke off growth in countries dependent on foreign lenders. This week, the currencies in several countries, including Turkey and Argentina, have been falling sharply. Next week, the Fed is scheduled to meet and announce whether it will continue to lower its bond purchases.
2 Toyota keeps world No 1 title in sales (Johannesburg Times) Toyota sold a record 9.98 million vehicles last year, outpacing rivals General Motors and Volkswagen to maintain its title of world’s biggest automaker. The Japanese auto giant’s highest-ever annual sales volume came thanks to a weaker yen as well as strong US and China sales, signalling it had recovered from a series of damaging safety recalls and Japan’s 2011 quake-tsunami disaster.
The figures beat US-based GM, which said it sold 9.71 million cars last year, while Germany’s Volkswagen logged annual sales of 9.5 million. Toyota broke GM’s decades-long reign as world’s top automaker in 2008 but lost the crown three years later as the quake-tsunami hammered production and disrupted the supply chains of Japanese automakers.
However, in 2012 it once again overtook its Detroit rival, which sells the Chevrolet and luxury Cadillac brands. GM’s strong results come after it emerged from bankruptcy and a government bailout during the 2008 global economic crisis. Toyota also said it expects this year to become the first automaker to break the 10 million vehicle sales barrier.
3 India’s gold rush (Neeta Lal in Khaleej Times) With the Indian government slapping a 10 per cent duty on bullion, and a 15 per cent tariff on jewellery — up from just one per cent a year ago — to control ballooning imports, gold prices have skyrocketed faster than the Aam Aadmi Party’s popularity. Not that this is a dampener for gold-crazy Indians. They are fanning out across to other Asian countries — where the yellow metal can be bought cheaper — to buy it and sneak it back into the country!
Gold being encoded in the Indian DNA, demand for the yellow metal continues to soar especially during this silly season of the ‘Big Fat Indian Wedding’. It is also pushing the trade underground, with inventive techniques being devised by smugglers to sidestep the state crackdown on imports. Consequently, Asia’s third largest economy is witnessing a several-fold increase in gold smuggling.
Old-style gold smuggling, which was the trend du jour in the heyday of the dreaded gangster Haji Mastan is also making a comeback. Haji Mastan, a notorious smuggler of gold, silver, and electronic goods in the 1970s and 1980s, lorded over the smuggling syndicate in Mumbai then. Colourful Mastan’s fascinating story continues to allure Bollywood with blockbusters like Deewar and Once Upon a Time in Mumbai based on his charismatic persona. Smuggling was even glamorised by Bollywood in olden days as the profession of choice for villains.
The World Gold Council estimates that about 200 tons of smuggled gold entered India in 2013, on top of the 900 tonnes of official demand. “Gold carriers” often do these risky assignments for as little as Rs 10,000. Unfortunately, the brains behind the smuggling racket are rarely caught, thereby proving that the road to perdition is indeed paved with gold!