Douglas Adams, the celebrated author of ‘The Hitchhiker’s Guide to the Galaxy’, wrote about a fictional guidebook for galactic travellers that gained wide acceptance because it had, inscribed on its cover in large friendly letters, the words ‘Don’t Panic’. Intrepid travellers in today’s global financial markets too could draw much needed succour from those brave words.
AI worries sent stock markets crashing around the globe, and the oldest move in the book followed: Money fled equities and piled into US Treasuries, pushing yields lower. The technology sold as the future of everything has sent the world’s money sprinting towards the safety of an IOU from Trump’s Washington.
Of course, nobody agrees on what AI does to the economy. The FT asks how worried central bankers should be about AI and inflation, which is a polite way of saying the homework hasn’t been done yet. Does it make everything cheaper, or does the spending binge on chips and data centres push prices up? At the moment, we just don't know.
Pouring oil on these troubled waters doesn't help, it makes things worse. You’d think more ships going through the Strait of Hormuz would cool prices. Instead, here’s a piece on why oil keeps climbing even as Hormuz traffic recovers. One ‘leading currency strategist’ declares that $95 is cheap for oil, with $140 by February and $500 by 2030. That last forecast, of course, may be less analysis and more performance art.
Indian companies, though, march ahead firmly, ignoring the oil slick. This month’s HSBC Flash PMI has the comforting headline, ‘Business activity rises markedly in October as inflationary pressures soften further’. That fits in neatly with the MPC’s reading of resilient growth, and they will be heartened by the PMI’s finding that the rise in manufacturers’ selling prices is the softest in almost four years. What’s more, thanks to our refining capacity, India has emerged as a global fuel swing supplier -- my colleague Shishir Asthana writes, “As wars, sanctions and drone strikes redraw the map of fuel supply, India has stepped in as the supplier that buyers on three continents can turn to.”