Investors shouldn’t ignore this recession indicator
CNN
23-05-18 11:54
US retail sales for April rose by a muted 0.4% from March, according to the Department of Commerce, which were described by Neil Saunders, managing director of GlobalData, as the shallowest increase in 31 months. The data suggests a "consumer slowdown" is taking place, with households' debt levels reaching a record high of $17.05tn during Q1 2022. Debts have risen by $2.9tn since the end of 2019. Meanwhile, Home Depot reported a disappointing Q1 in which sales growth of 47.2% year on year marked a break in its three-year growth streak. Target reported lumpen earnings in its latest quarter, with total sales increasing by just 0.5% compared with a year ago, and digital sales falling.
The UK Bank of England may reject digital financial services firm Revolut's application for a banking licence, indicating concerns over its balance sheet. The Prudential Regulation Authority had planned to issue a warning notice to Revolut earlier this year over failed accounts, however the notice has been postponed. The bank said it is asking Revolut to present accounts with an unqualified audit opinion and to simplify its share structure before receiving a licence. Customers' money, which is already protected via safeguarding rules, is not expected to be affected.
Demand for battery minerals is increasing — how can we keep up?
CBC
23-05-18 16:36
Rapid growth in demand for battery minerals, including cobalt, manganese, nickel, and lithium, could prove an obstacle in the shift to a cleaner, electrified transport system, according to research from Cornell University. Heavy-duty vehicles, making up between 4% and 11% of the road fleet, would account for over 60% of demand for critical minerals. Researchers suggest electrification be prioritised for light- and medium-duty vehicles instead. PhD candidate Teresa Christiansen urged greater investment in developing methods for easily scavenging minerals following the end of a battery's life, or in recovering minerals from used batteries.
Mortgage rates bounce back up after falling for two weeks
CNN
23-05-18 16:01
US mortgage rates rose in the week ending May 18, marking the first increase in three weeks. Data from US mortgage giant Freddie Mac showed the 30-year fixed-rate mortgage stood at 6.39% in the past week, up from 6.35% the previous week. Despite the rise, mortgage rates have largely stayed within a narrow margin over the past eight months, moving between 6%-7%, with many buyers put off by high house prices and high inflation levels.
Zimbabwe debt clearance tied to farmers' compensation and credible polls
RFI
23-05-19 09:20
The African Development Bank (AfDB) is co-leading a process aimed at starting the nation's recovery by resolving its $6bn of external debt arrears along with reforms to the exchange rate and central bank. Akinwumi Adesina, president of the AfDB, said that Zimbabwe's combined debt of $8.3bn was overwhelmingly in arrears, and owed $14bn to international creditors. He added that debt was not as debilitating as its arrears since Zimbabwe could not access international concessional financing. Without the support of international backers, Zimbabwe is struggling to secure new credit lines. The AfDB is amongst leading financial institutions that the country has not been given access to in over two decades due to its arrears. Among the conditions set by Zimbabwe's main creditors for accepting a debt-arrears-clearance program is compensation for expropriated white farmers.
Wei Li, the global chief investment strategist for BlackRock, has attributed her success in the financial sector to maths skills that she honed as a teenager competing in the International Mathematical Olympiad. Li, who is based in London, explained to Bloomberg Markets that she had initially stumbled into finance, attracted by the "fast pace of markets" and the sense that "an individual can soak all of that in and respond". She has also cultivated an awareness of her introverted tendencies and how to play to her strengths in dealing with her more assertive colleagues. Her advice to younger colleagues is to "be replaceable".
In the interview, Li expressed doubts about the effectiveness of central banks over the longer term. She said that although the banking crisis of March 2020 had “stabilized”, the cost of the supply-side tools of central banks, specifically measures to address the impact of Covid-19, was higher than for demand-side tools, leaving economies vulnerable. Growth would slow down and financial “cracks”, such as unfunded tax cuts and funding stress on commercial real estate, could appear.
Although cautioning against a focus on the longer term, Li said she was preoccupied by “building depth and expertise” and “putting in place a very rigorous process for generating views in a whole portfolio context”. Notably, she said that the net-zero transition and the “structural forces like aging demographics” required closer attention. BlackRock is one of the world’s largest asset managers, with over $9tn in assets under active management.
Westpac Bank will refinance loans for some customers who do not meet the Australian Prudential Regulation Authority’s (APRA) serviceability guidelines. Westpac, which is the country's second-largest mortgage provider, told brokers that if a customer is unable to meet serviceability under the standard assessment criteria, it might apply a to-be-determined modified serviceability assessment rate. The APRA recommends that loans only be extended to customers if the bank believes that the customers can repay the loans at three percentage points higher than current market rates. However, the country’s major banks - including Westpac - are publicly calling on the APRA to ease the rule.
Turkey’s big economic gamble looks set to continue
CNN
23-05-19 11:58
Turkish President Recep Tayyip Erdogan has pledged to continue cutting interest rates to tackle inflation should he be re-elected, despite falling short of winning 50% of the votes cast in last Sunday’s election. Erdogan’s loss of seats has prompted concern from investors, and Turkey’s lira fell to a record low against the US dollar. City analysts warned that Turkey needs to curb inflation, secure financial stability, and achieve sustainable growth, regardless of the election results.
Turkey’s Erdoğan vows to keep cutting rates to fight inflation if re-elected
CNN
23-05-19 10:46
Turkey's president Recep Tayyip Erdoğan has promised to continue his low interest rates policy if he is re-elected on 28 May. The Turkish lira crashed by more than 40% last year as Erdoğan's economic policies fuelled a jump in inflation. While central bankers across most of the world's biggest economies have been raising rates at a rapid clip to control surging prices, Turkey has been doing the opposite. "Please do follow me in the aftermath of the elections, and you will see that inflation will be going down along with interest rates," he told CNN's Becky Anderson in an exclusive interview.
UK fintech giant, Revolut, has requested meetings with UK government ministers over stalled payments to the company. The firm has been seeking a UK banking licence for over two years, with reports that an application had been turned down by the Prudential Regulation Authority (PRA) last week. The Bank of England informed the government of its likely decision on the licence. The PRA has not yet officially told Revolut of its decision, with executives expected to meet Treasury officials to discuss economic growth. Founders of other fintech start-ups claim that the PRA is overly cautious about granting licences.
With JPMorgan's Investor Day taking place on Monday, analysts will seek more details about the bank's acquisition of First Republic Bank, as well as Jamie Dimon's succession plan following James Gorman's announcement that he will step down as Morgan Stanley CEO in the next 12 months. The investor day will also provide insight on the bank's plans to integrate First Republic's business into the largest bank in the US, as well as reports on the bank's performance via comments on the economy, growth, deposit growth, strategic opportunities, loan loss provisions and expenses.
US Treasury Secretary Janet Yellen has reportedly told bank CEOs that more bank mergers may be necessary following a series of bank failures. Yellen reaffirmed the strength of the country's banking system in a meeting with bank CEOs, but consolidation was said to have been discussed. The meeting of more than two dozen executives was called by the Bank Policy Institute. The Treasury department readout did not mention bank mergers but sources told CNN that consolidation was discussed.
UK bank bosses have warned of the growing number of customers relying on unregulated or “shadow credit”, including loans from illegal money lenders, for short-term financial support. Despite this, high street banks such as Natwest, Barclays and Lloyds have shown little sign of stress on their balance sheets. However, shadow bankers warned the situation could lead to increased stress on the banking system. Earlier this year, the Financial Conduct Authority gained new powers to regulate the “buy now, pay later” lending sector to better protect consumers who use the credit, which has faced criticism.
Bank of America's Merrill names new leaders to head divisions
Reuters
23-05-19 19:20
Merrill, Bank of America's investment and wealth management division, has named Greg McGauley as its head of private wealth management, international and institutional business. McGauley has worked for the company since 1994 and previously led its private wealth services. The firm also appointed Lydia DiClemente as head of Merrill Banking Enablement and Merrill Financial Solution Advisors, and Erik Vatter as head of advisor development. Brian Ludwick has been named the Pacific coast division executive, while Ken Correa will take on an extended position as head of business and client development.
As JP Morgan Chase's investor days begin, CEO Jamie Dimon must convince investors that the bank, now the largest in the US, can still expand further while still dealing with the damages of two lawsuits related to its relationship with Financier Jeffrey Epstein and fraud accusations related to investment start-up Frank. Nevertheless, JP Morgan's shares have outrivaled the KBW banking index in the past year and have been awarded as one of the winners in the regional banking crisis. Shareholders will also be looking for potential internal candidates for the CEO role should Dimon decide to step down.
The Toronto Blue Jays will aim to avoid a three-game sweep by Baltimore Orioles on 23 May. However, sports fans do not hold out much hope for them, given their recent form. Kevin Gausman is set to start for the Orioles, making it more likely they could beat their visitors. Toronto has seriously underperformed in May and currently ranks at 17th in runs (79) as their power continues to wane. With this backdrop, analysts expect the underdog Baltimore Orioles to do well and have strongly recommended a bet on them winning by 1.5 runs.
UK citizens are being warned about the risks of using mobile banking apps, after discovering that fraudsters are using increasing sophisticated methods to hack into smartphones and gain access to banking apps. Detective Superintendent John Roch, head of economic crime at the Metropolitan Police in London, said that although banking app technology was secure, criminals were exploiting human behaviour and "shoulder surf" victims while they entered their PIN before stealing their mobile phone. Once thieves have access to bank apps, they can see the victim's bank accounts and their savings and investments. Roch commented: "If you start to think of it like that, would you walk into a bar, put it down and turn your back on it? Probably not. The potential outcome is devastating for victims."
Regulators in the UK and US have been accused of covering up a state-led “rigging” of interest rates during the 2008 financial crisis. Banks are understood to have dropped their estimates of interest rates after being pressured by central banks and regulators, as part of a drive to artificially “restore calm”. The rate-rigging measures referred to benchmark rates including the London Interbank Offered Rate (Libor) and Euribor. Evidence of these moves was reportedly kept from jurors in recent trials of smaller-scale rate-rigging. Regulators have declined to comment or, in one case, rebutted the claims.
The allegations emerged following the discovery of partial transcripts of a US Department of Justice interview with Barclays cash trader Peter Johnson in 2010. Johnson claimed he had been pressured by his bosses to submit artificially lower Libor rates, under instruction from the UK government and Bank of England. The transcript reportedly suggests that central banks across the western world were pressurising financial institutions to drop interest rate estimates, suggesting a much wider state-led effort to manipulate interest rates. Many banks have been fined for manipulations of Libor in recent years.
In response to the allegations, senior Conservative MP David Davis suggested that Parliament may have been “misled” over the rate-rigging scandal: “It’s a big and complex issue with hundreds of pages of evidence.”
Economists: US can weather ongoing crises, but recession remains on the table
CNN
23-05-22 04:38
Nearly 60% of US business economists believe it is more likely than not that the US will enter a recession within the next 12 months. However, the NABE Outlook Survey shows the timeframe has shifted later, with a previous forecast of a downturn starting in H1 2019 moving to Q3 or later. The survey of 42 economists also revealed there was little consensus on the potential impact of the banking crisis, debt ceiling uncertainty, and de-dollarisation fears, with most respondents believing these would not cause a crisis, while 55% predicted the debt ceiling would be raised, and almost half expected the Fed to begin cutting rates in Q1 2020.
UK banks are problem-free due to a rising number of people being locked out of formal banking facilities and turning to non-regulated banking operators. Increased regulation is said to be facilitating this trend, as banks strive to avoid the riskier lending from those already recognised as 'higher risk' customers. Citizens Advice however says it has assisted a record number of people in the first four months of 2017. Experts have warned that excluding parts of the population from the formal banking system could produce issues with delayed credit repayment, making banks' policies of financial exclusion unsustainable.
