New York, Aug 2 (IANS) Wall Street's major averages posted mixed results in the week as investors digested the US Federal Reserve's latest policy statement and a slew of grim economic data.
For the week ending Friday, the Dow lost 0.2 per cent, while the S&P 500 and the Nasdaq gained 1.7 per cent and 3.7 per cent, respectively, Xinhua news agency reported on Saturday.
The S&P US Listed China 50 index, which is designed to track the performance of the 50 largest Chinese companies listed on US exchanges by total market cap, logged a weekly rise of 3 per cent.
"As we wait for a vaccine and for the market to fully recover, many investors will have to brace themselves for continued volatility," analysts at Zacks Investment Management said in a note on Saturday.
"Market volatility is challenging for just about every investor, especially with all the unknowns that come with the current pandemic," they added.
Wall Street eyed the Federal Reserve's latest economic assessment and its interest rate decision.
The US central bank on Wednesday kept its benchmark interest rate unchanged at the record-low level of near zero amid a resurgence in COVID-19 cases nationwide.
"The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term," the Fed said in a statement after concluding a two-day policy meeting, adding it decided to maintain the target range for the federal funds rate at 0-0.25 per cent.
The Fed slashed interest rates to near zero earlier this year in an effort to support the economy amid the pandemic shock.
As of Saturday afternoon, the United States has reported more than 4.5 million COVID-19 cases and over 153,000 deaths -- both figures the highest worldwide, according to a tally by Johns Hopkins University.
The United States has suffered its worst economic decline on record as the economy contracted at an annual rate of 32.9 per cent in the second quarter of the year, amid mounting COVID-19 fallout, the US Commerce Department reported Thursday.
"'As expected' is the best that can be said about second quarter GDP. It was abysmal, but at least it was not a surprise," Chris Low, chief economist at FHN Financial, said in a note.
Looking ahead, Low said "weakness is likely to linger in business investment and state and local government spending, where cuts are already in the works."
Moreover, US initial jobless claims, a rough way to gauge layoffs, came in at 1.434 million in the week ending July 25, an increase of 12,000 from the prior week's revised level, the Department of Labor said on Thursday. The previous week's level was revised up to 1.422 million.
The week also featured a big wave of earnings reports including those from Apple, Amazon, Facebook and Google-parent Alphabet.
The above four tech giants all reported after Thursday's close. Apple delivered quarterly revenue of US $59.7 billion, up by 11 per cent year on year, with quarterly earnings per diluted share of US $2.58, up by 18 per cent. The stock surged more than 10 per cent on Friday.
Facebook and Amazon reported quarterly results that beat forecasts, sending shares of each company noticeably higher on Friday.
Google-parent Alphabet also beat Wall Street in second-quarter earnings, but the company's overall revenue declined for the first time in its history. The stock struggled on Friday.
US equities advanced in the past month. The Dow rose 2.4 per cent in July, the S&P 500 climbed 5.5 per cent and the Nasdaq surged 6.8 per cent.
New Delhi, Aug 8 (IANS) The government proposes to give the go-ahead for a new credit enhancement non-banking finance company (NBFC) that will act as a guarantor for lower-rated bonds issued by infrastructure companies to help them raise funds at competitive rates.
A credit enhancement structure or a company helps in lifting the ratings of a specific project or a Special Purpose Vehicle (SPV) executing that project, making it easier for them to mobilise funds from the market at attractive rates.
The need for credit enhancement has become acute during the Covid-19 pandemic as infrastructure companies are under stress and need necessary support to enhance the ratings of their projects and ensure adequate liquidity required for fresh investments.
Government sources said that though the operation of a Credit Guarantee Enhancement Corporation has been revised in view of similar operations being currently offered by a few government agencies, a dedicated structure plan has not been junked and the Centre will go ahead with a new NBFC after further discussions and at an appropriate time.
It is expected that the credit enhancement structure would take shape as planned earlier, wherein infrastructure financing firm India Infrastructure Finance Co Ltd (IIFCL) in a joint venture with the National Housing Bank (NHB) the and National Bank for Agriculture and Rural Development (Nabard) would set up a SPV known as 'National Infrastructure Credit Enhancement Ltd' or NICE.
Last year, the government provided seed capital of Rs 500 crore to operationalise the SPV but ever since the project has been delayed over further reviews by an inter-ministerial committee.
Sources said now is the right time for the new entity to come into being as it will help several infrastructure projects to take off which otherwise are stuck due to liquidity issues.
In its 'Atmanirbhar Bharat' package, the government has already introduced a 100 per cent Emergency Credit Line Guarantee Scheme (ECLGS) for MSMEs to ensure adequate liquidity to the segment hit hard by the Covid-19 outbreak. Also, a partial guarantee for stressed MSMEs has been provided for.
However, infrastructure projects entailing large investments will gain a lot from a dedicated credit enhancement entity. The SPV will ensure that the Rs 100 lakh crore investment required in infrastructure over the next five years materialises.
Presenting her maiden Budget last year, Union Finance Minister Nirmala Sitharaman had said that a credit guarantee enhancement corporation, for which regulations have been notified by the RBI, will be set up in 2019-20. However, it got delayed and may be considered this year.
As per the blueprint of the proposed corporation finalised by the government earlier, the IIFCL will hold 22.5 per cent stake in the new NBFC while the NHB and Nabard could pick up to a 10 per cent stake each.
The NICE will set up a fund to attract infrastructure investments by insurance and pension funds to provide credit enhancement to infrastructure companies. However, its main job will be to act as a guarantor for lower-rated bonds issued by infrastructure companies. This would help these bonds to bolster their ratings.
As per the Reserve Bank of India estimates, more than 85 per cent of corporate bond issuance in India is by borrowers with ratings of 'A' and above. The credit enhancement set-up will help bring even lower-rated borrowers into the bond market.
The proposal on the credit enhancement fund was first announced in the Budget for 2016-17 fiscal by then Union Finance Minister Arun Jaitley. But since then, the scheme has not taken off due to various regulatory hurdles.
The Centre had earlier mooted the idea of IIFCL and several state-owned institutions like LIC, State Bank of India, and Bank of Baroda to come together to set up a dedicated credit enhancement company.
But the Insurance Regulatory and Development Authority's regulations prevented LIC from being part of the fund, while banks could not participate due to the rising NPAs and other commitments.
The government is now looking to bolster infrastructure investment as it is the key to boost economic growth. It is estimated that India needs to spend $4.5 trillion on infrastructure development over the next 25 years.
But a lot lesser amount is expected to be garnered by the government. Innovative funding and financing schemes are thus being looked into to bridge the deficit and allow the sector to grow at the desired pace.