Iran Nuke Deal, UK economic Update, Global Economic Update, EZ Economic Update, India Economic Update, India Iran Oil Import

1. Iran Nuclear Saga
 Iran was/is believed by many to be working over a nuclear weapon which
has been consistently denied by the Iranian authority.
 Developed countries along with few emerging nations imposed a series of
sanctions on Iran. Countries pledged to gradually decrease oil imports
from Iran in a bid to suppress its nuclear programme.
India's oil Import from Iran(mn tonnes)
18.5
17.4
14
 Aforesaid action led to a steep fall in Iran’s oil sales by ~60%. US for
instance have cut oil imports from ~2.5million barrels to ~1million barrels.
11
 On 24th November 2013, Iran and other nations agreed to a deal via
which Iran will curb some of its nuclear activities in return for international
sanctions.
 In addition to increased output in Libya and North America, increased
supply from Iran will compel oil prices to soften.
 Global oil consumption is said to be ~90million barrels/day. Breakthrough
in Iran deal will unlock ~800,000 barrel/day of oil.
 Oil prices gave a knee jerk reaction to the deal however many believe risk
still persist. Iran’s heavy water reactor at Arak continues to pose a risk of
deal reversal.
2010-11
2011-12
2012-13
2013-2014
2013-14 -> targeted figure
Oil Production (bbl/day)
10900000
9900000
8453000
Brent Crude
117
115
113
111
109
107
105
103
4231000
Russia
Saudi
US
Iran

2. UK & Europe
 European economy after a number of incentives continues to lag.
Unemployment which currently stands at 12.2% have been consistently
(gradually) increasing. Unemployment rate in Sep-11 was seen at
10.3%.
EZ Core CPI (YOY)
EZ PPI (YOY)
3.0
2.5
 Consistent fall in inflation has compelled ECB to cut its refinancing rate
from 0.5% to 0.25% on 7th Nov. There were chatters in the market that
ECB is mulling negative rate as well however ECB’s Draghi was quick to
respond and denied such step for now.
2.0
1.5
 A number of polls suggests ECB will conduct another long term
refinancing operation early next year which gives bank, access to cheap
funding.
1.0
 Last print of Inflation in UK was seen as a breather which came in at a
year low of ~2.2%. Developed economies usually do not want inflation to
sustain above 2% for a longer time. Economic situation in UK has
improved adequately. BoE, to tame inflation, may hike rates only after
unemployment rate (currently at ~7.7%) falls below 7%.
0.0
 High inflation expectation will keep yields in UK elevated whereas easy
policy in the Eurozone will support bond prices.
UK 10Yr (in %)
-0.5
-1.0
-1.5
UK CPI (Y-o-Y) (in %)
3.0
EUR 10Yr (in %)
2.8
3.1
2.05
2.8
2.4
1.85
2.9
2.6
1.95
3
2.2
2.7
1.75
2.6
2.5
9/2/2013
0.5
1.65
10/2/2013
11/2/2013
EUR – RHS; UK - LHS
2.0
1.8

3. India : Macro update
 Retail inflation, which is now closely contemplated, remains above
the comfort of policymakers in Mumbai. Last CPI number was
seen at 10.1% courtesy to high food/vegetable prices.
Core Combined CPI
11.20%
 Industrial production’s three month moving average deciphers
some uptrend however the same may not improve final output
substantially.
10.70%
 INR moved up considerably after RBI’s steps taken in early
September. Continuous dollar inflow and tight measures to tame
inflation supplemented the measures announced by new
Governor.
9.70%
10.20%
9.20%
8.70%
 All eyes will now be over Fed’s meeting in Mid December followed
by RBI’s policy.
8.20%
7.70%
 RBI is expected to announce its Mid-Quarter review on December
18, 2013.
 November Inflation numbers and anecdotal fiscal update will drive
the domestic market.
IIP General
IDR
BRL
INR
3MMA
103
101
8.00%
99
6.00%
97
4.00%
95
2.00%
93
0.00%
91
-2.00%
89
-4.00%
87
-6.00%
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
10.00%
85
11/24/2013
7/24/2013
8/24/2013
9/24/2013
10/24/2013