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Wed, 26th April 2017

Anirudh Sethi Report

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Archives of “April 21, 2017” Day

Why “Nothing Matters”: Central Banks Have Bought A Record $1 Trillion In Assets In 2017

A quick, if familiar, observation to start the day courtesy of Bank of America which in the latest overnight note from Michael Hartnett notes that central banks (ECB & BoJ) have bought $1 trillion of financial assets just in the first four months of 2017, which amounts to $3.6 trillion annualized, “the largest CB buying on record.”

As Hartnett notes, the “Liquidity Supernova is the best explanation why global stocks & bonds both annualizing double-digit gains YTD despite Trump, Le Pen, China, macro…

Trump To Sign Executive Orders On Corporate Inversions and Dodd-Frank Regulations

As pressure mounts on Trump to post some victories within the totally arbitrary window of the “First 100 Days” of his administration, the President is expected to join Treasury Secretary Steven Mnuchin later this afternoon to sign a combination of executive orders and memos targeting the reduction of tax regulations and certain components of Dodd-Frank. 

Per a statement from the White House, one of Trump’s new executive orders will seek to undo tax rules put in place in the last year of Obama’s presidency that were designed to limit so-called ‘corporate inversions’ which allows U.S. traded companies to recognize income in lower cost countries like Ireland.  Per Bloomberg

Under President Barack Obama, Treasury sought to rein in U.S. companies’ attempts to shift their profit offshore by proposing rules that would curb so-called “earnings stripping” and inversions — mergers in which U.S. companies transfer their tax address overseas to low-tax countries like Ireland to cut their tax bills.

 Some of those rules, first proposed in April 2016, sought to restrict lending among subsidiaries of the same corporate parent, a technique that can create income in low-tax countries and tax-deductible interest payments in the U.S. The proposed rules met a barrage of criticism from corporations and tax lawyers, who complained that they went too far by banning common, everyday cash-management practices that have nothing to do with tax avoidance.

 Amid the criticism, Treasury last October softened the proposed rules to allow cash pooling, a common corporate money-management technique in which excess cash in subsidiaries is swept daily into a single pool. It also delayed a related proposal, which would require companies to extensively document their related-party lending, until Jan. 1, 2018.

Draghi says risks of deflation have largely disappeared

Draghi statement to IMFC

  • Growth in the Eurozone is firming and broadening
  • There are sign of a somewhat brighter global recovery and increasing global trade
  • Cannot yet have confidence that a sustained rise in inflation will materialize in a sustainable manner
  • Underlying inflation has not shown a convincing upward trend

You could say he’s cautiously optimistic.

Earlier in the year, the market read the optimism as a sign of potential action to tighten but officials have fought back against that idea, and that’s what helped to cap the euro at 1.09.

“As underlying inflation remains subdued and the path of inflation crucially dependent on the prevailing very favourable financing conditions, we cannot yet have sufficient confidence that a sustained adjustment in inflation will materialize in a durable manner,” he wrote.

It’s a similar line to what he said after the March 9 ECB meeting. The next ECB meeting is April 27.

Analyst Who Predicted Trump’s Rise Bets On Le Pen Victory

Don’t bank on a relief rally in the euro area anytime soon…

 Le Pen’s momentum is a slow-moving reaction against the men of Davos – as we have seen with Brexit and Trump – but markets don’t want to believe it.”  

That’s the conclusion drawn by Charles Gave, founder of Hong-Kong based asset-allocation consultancy GaveKal Research, who, as Bloomberg reports, predicted the triumph of Donald Trump in the U.S. election, and is now betting on a win for the anti-euro National Front candidate.

Markets are underpricing the prospect of Marine Le Pen emerging victorious in the French election as a sea of undecided voters throws into sharp relief pronounced apathy for center-leftist Emmanuel Macron — the front-runner by a whisker — and the backlash against the European Union project.

CBDT announces extention to file declaration till May 10 under Pradhan Mantri Garib Kalyan Yojana

The Central Board of Direct Taxes (CBDT) on Friday announced the Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana (PMGKY), open for declarations up to March 31.

As per the announcement, the representations from stakeholders have been received stating that in some cases tax, surcharge and penalty have been paid on or before March 31, but the corresponding deposit under the Pradhan Mantri Garib Kalyan Deposit Scheme, 2016 (Deposit Scheme) could not be made by the said date.

Accordingly, DEA vide notification S.O.1218(E) dated April 19, the tax payers can now enjoy the extended date of making deposit under the Deposit Scheme up to April 30 in respect of cases where tax, surcharge and penalty under PMGKY has been paid on or before March 31.

Subsequently, CBDT vide Circular No.14 of 2017 dated April 21, 2017 has extended the date of filing of declaration under PMGKY to May 10 in cases where tax, surcharge and penalty under PMGKY has been paid on or before the March 31, and deposit under the Deposit Scheme has been made on or before the April 30, 2017.

The Pradhan Mantri Garib Kalyan Yojana commenced on December 17, 2016.

Forex reserves increase by $889.4 mn to $369.887 bn

India’s foreign exchange reserves rose by USD 889.4 million to USD 369.887 billion during the week ended April 14, helped by increase in foreign currency assets, the Reserve Bank said.

They had declined by USD 956.4 million to USD 368.998 billion in the previous reporting week.

The reserves had touched a life-time high of USD 371.99 billion in the week to September 30, 2016.

Foreign currency assets (FCAs), a major component of the overall reserves, surged by USD 881 million to USD 346.248 billion in the reporting week, RBI said.

Expressed in US dollar terms, FCAs include the effects of appreciation/depreciation of non-US currencies, such as the euro, pound and the yen, held in the reserves.

Gold reserves remained unchanged at USD 19.869 billion, the apex bank said.

The special drawing rights with the International Monetary Fund was up by USD 3.1 million to USD 1.446 billion.

India’s reserve position with the Fund, too, rose by USD 5.3 million to USD 2.323 billion, RBI said.