The PBOC lowered the yaun's reference rate by 0.3%

China's Central Bank lowered the yuan's reference rate by 0.3% to 6.5693 per dollar overnight, marking the currency's weakest level against the greenback since March 2011. The move could increase tensions between China and its trading partners, as recent strength in the dollar and yen make exports from those countries less competitive globally.

Global stocks fell to a six-week low

 Global Equity stocks ,sovereign bonds slumped and the dollar held gains after minutes of the Fed's last meeting put the prospect of a June rate hike firmly on the table so long as economic data continues to show positive signs. Oil is under pressure from the financial movement, in addition to EIA data showing a build in U.S. crude inventories, as well as surging output from Iran to Europe and Asia.

Transfer Pricing: Corporate Guarantees are not comparable to Bank Guarantees & so the commission of 3% charged by Banks is not a benchmark to evaluate the ALP of a corporate guarantee but it has to taken at 0.5%. ITAT decisions which upheld the 3% rate cannot be followed as they are contrary to Everest Kanto 378 ITR 57 (Bom)

Thomas Cook (India) Limited vs. ACIT (ITAT Mumbai)

Instances of commercial banks providing guarantees could not be compared to instances of issuance of corporate guarantee. When commercial banks issue bank guarantees, the same is quite distinct in character, than the situation where a corporate issues guarantee to the effect that, if a subsidiary associated enterprise does not repay a loan, the same would be made good by such corporate. It is quite clear that the manner in which the Transfer Pricing Officer has proceeded to determine the arm’s length rate based on the probable rate being charged by the commercial banks is not justified. In this view of the matter, we are unable to approve 3% rate of guarantee commission fee determined as arm’s length rate by the income-tax authorities. In the alternative, the addition that is required to be sustained is the position canvassed by the assessee before the Transfer Pricing Officer i.e. adoption of 0.50% as arm’s length rate for the purpose of determining the arm’s length income on account of guarantee commission fee in the present case 

Thoughts on Current market conditions

What an interesting two months we have seen in the market.  Although I wasn't expecting to see one of the biggest rallies the S&P has ever seen in such a short amount of time, my overall mid-term (1-3 years) bearish opinions haven’t changed.  One of the most interesting aspects of the recent rally is that despite companies across the US having terrible earnings calls after the first quarter, investors weren't rattled (so far).  For me, this is the bigger issue.  From a fundamental level, growth continues to slow, profit margins continue to decrease, and international markets continue to struggle (particularly the Bank of Japan, the PBOC, and European Banks).  Although the market could even run higher, I think the upside to downside risk/reward continues to be asymmetrical.

Now, one of the more interesting developments in the market is the FED’s change in forward guidance.  At the start of 2016, the FED was saying they would raise rates four times throughout the new year.  As months progressed, the FED continued to distance itself from being so aggressive.  I believe this is one of the main reasons we have seen the sharp recovery over the past few months.  This “dovish” talk has caused the dollar to lose value (relative to global currencies), which obviously gives US equities the hope for better numbers in the coming quarters (a big if).  Now, where this gets very concerning for me is Japan, Europe, and China.  If the dollar continues to weaken, the Japanese Yen (and other currencies) get stronger.  This has really caused some interesting circumstances for the disastrous monetary policies in Japan in particular.  I think this pressure has the potential to cause major issues in the coming quarters if the Yen continues to get stronger.  This could also cause second and third order effects in the international markets.  One of the benefits of the dollar weakening is that oil is making a very strong comeback (assuming you own oil companies).   I still haven’t taken a position in any oil companies (which might be the wrong decision).  For me, the bigger concern moving forward isn’t the oversupply; it’s the future demand.

Some global risk items and concerns to watch for in the coming quarters:

1. The impact of negative rates for banks in Europe (Particularly Deutsche Bank)   
2. A strong Yen pushing Japanese stock prices lower
3. Chinese Commodity prices returning to reality (because the PBOC pushed commodity prices into outer space during the first quarter)
4. Potential impacts of the Saudi currency de-pegging from the US dollar due to the speed and impact of their domestic reserves being spent.  Could cause the dollar to strengthen and put more pressure on US Stocks.
5. Watch the 2^nd quarters US earnings trends.  If earnings continue to slip into the second quarter, things could get ugly for US Stocks.
6. Brexit: This could be a big concern for trade and US stocks.
7. High yield debt.  The oil industry supposedly has 3 trillion or more in debt with as much as 50% being estimated as junk.  Some really interesting things could happen here if global demand continues to slip in energy and prices start heading lower again.  I think this is a major concern moving forward, but there is no way of knowing if this trend will return for sure.  My expectation is that it will, but who knows at this point.   

Anyway, those are a few big items that got my attention.  I think individuals should be aware of these possibilities to mitigate potential risks in your portfolio. I hope that helps.

The Economic recovery in Euro zone will be at slower pace due to subdued growth globally

Euro zone growth will be slower than previously expected with subdued inflation in 2016, the European Commission announced in its spring economic forecast, warning of high risks to the bloc's economy. The GDP of the 19-nation area is now predicted to expand just 1.6% this year, less than the 1.7% growth of 2015, while consumer prices are seen up 0.2%, significantly below the 0.5% increase projected in February. "The economic recovery in Europe continues but the global context is less conducive than it was. 

Economies in Europe are firming towards slow recovery

Major Economies in Europe are showing some firming up as they stay on the slow road to recovery. The unemployment rate in Italy fell to its lowest level in over four years during March as the economy continued to grow. The jobless rate fell to 11.4% to beat the consensus estimate of analysts of 11.6%. GDP in Italy rose 0.3% in Q1. A bounce in consumer spending in France helped GDP expand to 0.5% in Q1, to top estimates for 0.4% growth. Meanwhile, Spain is expected to hit its target of 1.5% growth in Q1. Eurozone Q1 GDP rose 0.6% vs. 0.4% expected. The GDP mark was 1.6% higher than a year ago.