Global Market Reviews

If India’s overall rainfall deficiency falls to 20%-25%, India’s GDP growth could fall to sub-5% this fiscal year, says Mridul Saggar, chief economist at Kotak Securities. India government forecasts FY economic growth of between 6.25% and 7.75%. Meteorological Department forecasts rainfall
in June-September wet season at 93% of long-term average, which not an
unusually large deviation, but distribution so far has been extremely uneven,
with some areas flooded while others parched. After driest June in 83 years, 4 of India’s 28 provinces declared drought. A slump in the agricultural sector
would pressure government to respond with support measures, even as it already struggles with fiscal deficit of 6.8% of GDP. Jahangir Aziz, chief India
economist at JPMorgan, estimates inflation to rise by 2 to 3 percentage points over RBI’s baseline forecast of 4% if monsoon rains don’t pick up.

FTSE stays positive as financials and miners extend gains. Joshua Raymond at City Index notes that since July 13, the FTSE 100 is 12% higher and rallying at an average of 1.2% each day, largely following a pleasing earnings season. Says, “the main positive it shows is [the] growing trust amongst investors that the heavyweight stocks will head in the right direction.” Warns, though, that stock prices could be artificially inflated if companies are beating expectations due to lower expectations, allied with low volumes in equity markets.

The euro zone’s economic contraction slowed more than expected in July, but an acceleration in the decline of French output suggested the currency area’s recovery from the deepest recession since World War II is likely to be gradual.

The flash reading of the euro zone’s composite output index, a closely watched gauge of private-sector activity, rose to a 10-month high of 46.8 in
July from 44.6 in June, Markit Economics said Friday.

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