The Markets Continue Bounce Back On Trump Victory
The stock markets posted their highest single-day jump in over six weeks
On Episode 428 of The Core Report, financial journalist Govindraj Ethiraj talks to Indrani Bagchi, CEO of Ananta Centre (and former Associate Editor with the Times of India) as well as Irfan Noorudin, the Hamad bin Khalifa Al-Thani Professor of Indian Politics at Georgetown University in Washington, D.C.
(00:00) The Take
(05:38) The markets continue bounce back on Trump victory
(07:26) The dollar is on an unbreakable run. Will it last?
(09:11) What does a Trump administration mean for India?
(20:31) Global tariff wars could break out and European luxury car makers could be among first to be hit by America
(22:53) Is festival consumption spikes making up for the slowdown?
NOTE: This transcript contains the host's monologue and includes interview transcripts by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regarding any feedback, you can drop us a message on [email protected].
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Good morning, it's Thursday, the 7th of November and this is Govindraj Ethiraj, headquartered and broadcasting and streaming from Mumbai, India’s financial capital.
The Take: What does Make America Great Again mean
Donald Trump’s victory was not a surprise, at least not at The Core Report.
And its core campaign proposition, including on all the red hats, was to make America great again.
And the reason is partly to do with the definition of greatness.
Many non-Americans and even Americans associate the term greatness with economic achievement, prosperity, well paying jobs, success and the American dream.
For Trump, then and now, greatness has not been so much economic as social.
At a victory speech delivered on Wednesday morning India time in Florida, the issue he first touched upon was immigration.
Not surprisingly, since the issue of illegal immigration figured prominently in the campaign trail and was amplified by Elon Musk and his social platform, X.
Whether or not the democrats under Joe Biden did anything in the context of immigration is not so relevant here because Trump has owned this issue since 2016.
The Economist argued a week ago that a country like the United States with a per capita income of $85,000 does not need to be made great, it is already great.
If greatness were to be defined by economic value, that is absolutely true. Remember India has a per capita income of $2,500 per annum.
The Wall Street Journal pointed out last week that the US is now outrunning every major developed economy, not to mention its own historical growth rate.
More impressive than the rate of growth is its quality because it did not come from inflation-inducing squeeze on labour and other resources rather from making people and businesses more productive, says the WSJ.
The only economic factor that clearly weighed on many Americans is inflation which has been running high and hitting items of daily consumption, apart from other non discretionary items.
While inflation could have played a strong role, it is also more of a post Covid phenomenon and was not really an issue in Trump’s earlier messaging in the run up to his previous stint.
The question then is how does the term greatness resonate with young voters, new voters and the rest including disaffected young males who voted for Trump, whether from his traditional base or otherwise.
For Trump’s campaign positioning then and now, greatness is going back to something, not going ahead to the next thing. The slogan says it all, it is Make America Great Again, the word again referring to a point in the past where things were great.
Is that greatness economic and thus prosperity, pride, joy, low inflationary environment or something else ?
Or is it the altering structure of the populace thanks to heightened immigration, including illegal which has clearly riled up many people, including Trump and his key allies ?
What does Trump’s victory mean to us in India then ?
Partly, it is the old, which is a regime where immigrating into the USA was tough, where only the best and brightest as we know could make it there.
These are the immigrants, Trump and Elon Musk - it might be easier to think of them jointly for some time - want.
The new tariffs include bringing manufacturing back, putting America First and thus creating more local jobs.
This was a stated objective in Trump’s 2016 campaign rallies and continues to be so, with the added factor and threat of slapping high import tariffs on China and lower tariffs on other countries.
This was also the area where Trump linked clearly with now vice president J D Vance, whose book Hillbilly Elegy written in June 2016 highlighted the plight of mostly white American communities, who experienced job losses and social tensions, particularly in the midwest part of the country.
It is not clear to me where Musk will sit on this.
Remember, his largest Tesla factory sits in Shanghai in China and not in the United States which is the second largest, followed by Germany. While these factories manufacture for domestic markets and do not seem to be exporting back to America, there is an interconnectedness that is tough to break.
India is on a different economic spectrum. For India, greatness can only mean higher prosperity and growth. This is mathematical and not political, given our current per capita GDP of approximately $2,500 and of course the fact that we have hundreds of millions of aspirations to be fulfilled.
It is tempting to revert to a bygone era or some period where things were better than they are today. And politicians will always attempt this, possibly even with some success.
But India’s aspirations will largely be and should be economic, greatness linked to prosperity, better quality of life, education for children and a roof over the head that you can call your own.
Greatness as a societal value, linked to families, relationships and social capital is something India always had in abundance.
And that brings us to the top themes of the day.
The markets continue to bounce back on Trump's victory.
What does a Trump administration mean for India ?
The dollar is on an unbreakable run. Will it last ?
Global tariff wars could break out and European luxury car makers could be among first to be hit by America
Is festival consumption spikes making up for the slowdown?
The Markets On Bounce
The stock markets posted their highest single-day jump in over six weeks, even as Donald Trump romped to a comfortable victory in the U.S. presidential election, as global markets had been pricing in for more than a month now.
The Sensex and NSE Nifty50, were up for the second consecutive session.
The BSE Sensex closed higher by 901.50 points at 80,378.13. The NSE Nifty50 was up 271 points at 24,484.05.
The broader indices including the Nifty Midcap 100 and Nifty Smallcap 100 were higher by over 2 percent each.
The Nifty IT index gained almost 4%.
While there is much discussion on a Trump impact on markets, there is nothing positive that I can see on the horizon given the looming threat of tariffs which will obviously hurt some Indian companies.
Remember tariffs can also be in the form of restrictions on H1B visas which will affect Indian IT companies.
There could be geopolitical benefits of a Trump presidency but it is not clear to me how that spreads into economic benefits that go beyond what we are seeing today, if so.
The question of course is if the general buoyancy on Wall Street could rub off on Dalal Street, beyond a few specific stocks. Tough to say right now.
For example, shares of US banks including Citigroup Inc., JPMorgan Chase & Co. and Goldman Sachs Group Inc. were up in premarket trading as investors wagered that Donald Trump would make good on his promises to lower taxes and reduce regulation for the industry, Bloomberg reported adding that Trump had vowed to cut the corporate tax rate to as low as 15% from 21%, and to eliminate 10 regulations for every new one.
He also promised to overhaul key regulatory bodies and pledged to fire regulators including Securities and Exchange Commission Chair Gary Gensler.
All this is music to banks and of course sectors like crypto.
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A Trump victory has strengthened the dollar more, as anticipated in some ways, even yesterday by forex experts we spoke to.
On Wednesday, the rupee fell to a fresh record low thanks to a spike in the dollar and U.S. bond yields.
The rupee closed at 84.28, down 0.2% from its previous close, in what was its worst single-day fall in over four months, Reuters reported.
However, intervention by the Reserve Bank of India helped the currency limit losses compared to its regional peers, which fell as much as 1.8%.
The dollar index has now climbed over 1.5% to 104.9, while the 10-year U.S. Treasury yield touched a more than four-month peak before retreating to 4.43%.
The rupee was not alone. As we have discussed earlier, all currencies, particularly Asian, will be under pressure now from a stronger dollar, at least for some time.
The offshore Chinese yuan was down 1.1% at 7.18 per dollar.
Meanwhile the markets are still betting the Federal Reserve will cut interest rates by 25 basis points on Thursday, whether that will happen in light of Trump’s resounding victory of course remains to be seen.
Meanwhile, oil prices have not moved much in the last two days. If there is a sense that a Trump administration might be more successful in restoring peace to the Middle East then that is some time away as the new president only takes charge in January.
Brent crude was quoting at $74.54, or under $75 a barrel.
India and the Trump Victory
What does a Trump victory look like for India and how will the two areas of trade and geopolitics stand and or balance each other out ?
To discuss this, I am now joined by
Indrani Bagchi, Chief Executive Officer, Ananta Centre and earlier Associate Editor with the Times of India where she reported and analysed foreign policy issues for the newspaper until two years ago and continues to be a columnist there.
I am also joined by Irfan Noorudin, the Hamad bin Khalifa Al-Thani Professor of Indian Politics at Georgetown University in Washington, D.C.. I work with Lokniti: Programme for Comparative Democracy in New Delhi and with Samhita Social Ventures in Bombay.
His work centres around problems of economic development and globalisation, democracy and democratisation, and civil conflict.
INTERVIEW TRANSCRIPT
Indrani Bagchi: I think Trump has been more or less, as you said, consistent in his message, and we have experience of Trump 1. Unlikely that Trump 2 will be very different, except in terms of scale, because Trump has not won just the presidency, he's won the Senate. I think the House is definitely leaning Republican way, which would be a first in many years.
That means Trump's legislation doesn't face the checks that it would have otherwise. And that's something that we need to keep in mind. Geopolitically, I think he has a couple of hot button issues.
China, we all are, I think everybody's pretty clear on how he will proceed to deal with China. However, we must also remember that Trump is not only a China hawk, he's also the hawk of the art of the deal, where and how he makes a deal is something that we need to watch. The second geopolitical issue would be Russia and Ukraine.
And here I think he has also, he's said certainly during his campaign that he would shut down this war. What does that mean? Does that mean Russia gets to keep the territory?
Does that mean Kiev accepts defeat? And will Europe be okay with that? Frankly, I don't think it's going to be as simple as the campaign rhetoric made it out to be.
This is a fairly complex issue. Does Ukraine get an automatic invitation to NATO? And if so, how does that play with Russia?
I think that's on the Middle East. I think there's clear support for Israel. That's not very different from the Biden administration.
I mean, the Biden administration did only talk about the killings in Gaza, but didn't really do very much about it. I don't think Trump is going to do very much about it either. So I think he will, that's not a focus.
So that's basically where I see it.
Govindraj Ethiraj: Got it. And we'll come to the India lens in a moment. Irfan, how are you seeing it sitting out of Washington DC as you are?
Irfan Noorudin: Govindas Indrani said, I mean, you know, we've seen the playbook before and now we get to see it a bit on steroids, as it were. The one question, of course, is who does he get to fill a lot of the key positions? This was unprecedented in many ways, in every way.
But at least one of them is that there's never been a quasi incumbent president running where virtually nobody of his cabinet endorsed him. His vice president obviously didn't. He's a new vice president now.
But everyone else, from chiefs of staff elsewhere, they were just not endorsing him. They were saying pretty disturbing things about his governing style. That suggests, of course, some of them will backtrack politics.
You know, who's your friend today is enemy tomorrow, and then your friend again the day after that. But it also suggests that we're going to get a lot of new faces. We do know from Trump, one, that he did struggle with putting qualified, serious people in certain positions.
There were a lot of offices left unfilled in the State Department. Right. And I think that's going to be much more in this case.
But it means that there's going to be certain key individuals, maybe a Stephen Miller, right, Elon Musk possibly, et cetera, who are going to be much more outsized in their influence in this next administration. And that means that a lot of the predictability that D.C. can have, even when you get wildcard situations, is even more amplified. As Indrani said, I think the big loser here is Ukraine and possibly Europe more generally.
I mean, there's no way that the Trump administration doesn't read this as a verdict in favor of his rhetoric against NATO and Ukraine and alliances more generally. Trump, I think, is fundamentally bored by foreign policy. I think what he cares about, I think, is himself.
And of course, he cares a lot about domestic kind of rhetoric. So I think there will be, as Indrani says, I think a realization that Ukraine is not easily solved. But nonetheless, it's hard to see him putting real pressure on Putin to secede.
So what exactly happens over there? Look, where China's concerned, I think the question is both sort of does he follow through on a blanket set of tariffs, but also what does American business tell him, right? I mean, so American business are kind of sat on the sidelines over here.
Globally, we are seeing a return to China. So a lot of the China plus one never fully materialized. We are seeing money flowing back into China.
And I think there's going to be much more pressure on Trump to basically say, keep the pressure on them, but don't screw this up. I mean, don't go to the extreme. Now, whether he listens to that or not, it's impossible to predict.
But it's just clear that there won't be real appetite for trade deals anywhere. I don't think there's going to be a lot of multilateral kind of reform. There's just going to be a lot of ad hoc bilateralism, the art of the deal, if you will.
Govindraj Ethiraj: Indrani, what's your sense now looking from an India point of view? I know that we saw a lot of bonhomie in the relations between Prime Minister Modi and Donald Trump in his first tenure as president. Again, could that change?
Because some things have changed since then, while we may not feel so.
Indrani Bagchi: Yes, but you please remember that we had that whole fracas over Harley Davidson motorbikes. We also, if he does put tariffs on exports, it would probably not be just for Chinese exports. We also have a trade surplus.
Govindraj Ethiraj: He's talking about a 10 to 20% across the board.
Indrani Bagchi: And that would be difficult for India, because of course, we actually have a trade surplus with America. But I think there is a place for making a deal for every, I think as Irfan very correctly said, there will be no multilateral trade reform, but there will be bilateral deals. And in many ways that is also acceptable to countries like India, which have their own version of a MAGA movement.
We also have an Atmanirbhar Bharat movement. We keep forgetting that. Where Atmanirbhar Bharat meets MAGA, there is a space for a deal.
How does that deal work out? I suspect it will be on a case to case basis. Certainly, if you remember Elon Musk, it came in or at least tried to come to India early this year, as I remember correctly.
Govindraj Ethiraj: And we put out the red carpet. I mean, he backed out.
Indrani Bagchi: No, but he didn't get the comfort. He didn't get the comfort of full free tariffs on his EVs. Because remember, there is an Indian EV maker, there is Tata, there is Mahindra.
It's going to be very hard for India to say, oh, yeah, Elon Musk gets a free ride and Tata's don't. So I think that balancing will be something that we should be watching for.
Govindraj Ethiraj: I'm going to come back to you. But also, anything that stood out for you from the campaign trail going into the election, and of course, now the presidency for Donald Trump, that we should be looking out for as in the next few months, including to the point that he actually becomes or the day he takes over as president. Irfan, you first.
Irfan Noorudin: I think one thing that has been maybe underexplored, and they're all reeling in many ways, regardless of what you wanted, no one is fully expecting to be quite so decisive, is the rhetoric against the Inflation Reduction Act and more generally green transition economy, which is ironic given how influential Elon Musk is in sort of his mind. This is, I think, a net loss for India. It's a net loss for the world.
But just on the business side, India really stood to be a major beneficiary of a massive infrastructural build out in the US on the green economy. It's not something they wanted to trust China with. India has that capacity.
We are now one of the leading solar panel manufacturers in the world, etc. It's a huge market for electric vehicles that American businesses would have wanted to play in. If, in fact, Trump doubles down on saying we're going to be not investing in the green economy, a lot of potential suppliers, of which India was a major one, can lose out there.
So that's one of those places where that's not a traditional, it's not obvious why the Republican administration should be so avowedly anti-green economy, especially one that's creating jobs at home. But it's one of the weird intersections of MAGA and Trumpism and tariffs. Another example for this might be public health, right?
I mean, India is the world's great manufacturer of generic medications. Does that get caught in the crosshairs both of sort of a public health administration that's anti-vaccine, maybe skeptical, and then luck immigration. The attack on undocumented immigrants is going to just ramp up.
But one of the side products of that is potentially there's no hope of really fixing America's work visa crisis. And Indians, especially skilled Indians, have been a beneficiary of that, as migrants, as I have. But also, Indian businesses have long said that H-1B is a critical way for them to be competitive, etc.
So I think there's a couple of, let's call them collateral issues that I'm tracking, that I do think we need to think about it, because the implications for India are quite profound, even if they're not as central as, you know, 20% tariffs across the board.
Govindraj Ethiraj: In that last word, so, I mean, issues that are standing on for you, I mean, which could be positive and not so positive as you look ahead and we wait till January?
Indrani Bagchi: Well, you know, to Irfan's point about the IRA, and the Indian companies have actually applied to be a beneficiary of the IRA with the Biden administration. They didn't get very far. They didn't get that kind of relief.
And there is a company, Indian company called Epsilon in Bombay, that's actually been one of the first companies too. But the other thing is, on the undocumented migrants, I agree with Irfan, I think that's going to be a public relations disaster. Because we, very oddly, Indians are number three on the list of undocumented migrants.
We will have, I mean, I don't know if you followed this, but last week, there was a plane load of Indians who were returned to India. We will see more of those. And they generally go from Punjab, Haryana, Gujarat.
These are the states that are send off. We are also the source of the largest legit legal migrants, of course. Frankly, I think H1B will continue if MAGA is to continue.
They will find some way around it, I think. But frankly, I think H1B isn't going anywhere. 65,000, I mean, I don't think they will cut that level down.
But we will definitely have PR issues with undocumented migrants being picked up on the US border and sent back. That's going to happen.
Govindraj Ethiraj: All right, Indranil Irfan, thank you so much for joining me.
May The Tariff Wars Begin
Trump does not like the Europeans much and analysts are already bracing for higher tariffs on luxury cars, aircraft and other distinctly European exports.
Not surprisingly, BMW AG and Porsche AG led German automaker shares fell over concerns the US will hike tariffs on imported cars.
BMW, which also reported disappointed quarterly earnings earlier Wednesday, fell as much as 6.8% in Frankfurt. Porsche, the maker of 911 sports cars, dropped to its lowest intraday value since the stock started trading more than two years ago, Bloomberg reported.
Germany’s largest export destination for its cars is the United States.
Other car stocks which lost similarly were Mercedes-Benz Group AG declined as much as 4.9%. Volkswagen AG fell as much as 4.4%.
Of course, German car companies also operate several factories in the US where they produce cars both for local buyers and for export.
Bloomberg says any European countermeasures could increase the fallout from a trade spat.
A conflict with the US would create yet another problem for the Germans, which are already facing tough price competition in China and muted demand in Europe.
Tesla Romps Home
If Elon Musk’s reason, or at least one of them, was to create a more positive environment for electric cars in the US, that could happen, given that Trump has been against EVs in the past and in favour of internal combustion engines.
Evidently, the market thinks Trump will relent which in itself will make Musk’s investment of time and money in the Trump cause worthwhile, presumably.
Tesla Inc. shares climbed as much as 15% in early US trading as investors wager the carmaker run by Elon Musk will be a major beneficiary of Donald Trump’s return to the White House, Bloomberg reported, adding Musk was arguably the most prominent supporter of Republicans this election cycle, backing them with more than $130 million in spending and relentless messaging on X, his social media network.
While Trump criticised electric vehicles throughout his campaign, he softened his tone somewhat after Musk’s endorsement.
In his victory speech on Wednesday, he spoke about Musk for almost four minutes, Bloomberg said.
What Really Happened In Festival Consumption
We are still suffering from a deluge of confusing data points, the amplification of which is obviously not helping.
So the question is have festival sale bump ups made up for the slowdown that we have been seeing ?
Of course not.
But that is me saying it more intuitively and on the back of a few data points like auto sales.
Meanwhile, Japanese brokerage Nomura on Wednesday said the growth rate in festive consumption halved to 15 per cent in the current year.
Analysts there quoted by PTI attributed their findings to "rough estimates" and added that the same growth had stood at 32 per cent in 2023 and 88 per cent in 2022.
"Anecdotal data suggests retail sales (offline and online) rose during this festive season, but overall growth rates are slower," they said in a note.
It said while festive demand remained steady in rural areas and tier-2 and tier-3 cities, metros and industrial demand was "weak", leading to "mixed" overall festive consumption trends.
But the Nomura analysts like others have not given up.
They said weddings in December should provide a fillip to the festive sales.
"There are broadly two ways to assess the strength of festive demand. One is to sift through anecdotal evidence and compare trends with previous years. Another, in the case of 'hard' conventional data, is to aggregate economic activity across the September-December period and compare across years, which helps to iron out the 'date effect' on growth rates," it explained.
Under anecdotal evidence, it cited The Confederation of All India Traders (CAIT) expectations on retail sales growth slowing down to 13.3 per cent in 2024 from 36.4 per cent in the year before, growth in ecommerce sales and gold volumes falling even though sales have picked up.
On the 'hard' data front, the brokerage said incoming inputs are suggesting stability but there are fireworks.
It said retail auto sales are up 14 per cent adjusted for the period of shradh, but on the wholesale side, passenger vehicles and MHCV have fared poorly in 2024.
A "cyclical growth slowdown" is underway in the economy, it said, adding that the Reserve Bank of India's 7.2 per cent real GDP growth estimate for FY25 looks "overly optimistic" and there are "rising downside risks" to its own projections of 6.7 per cent growth.
I know this adds more confusion but I promise to address it more closely in the coming days.
