Insight Weekly: the political position of the Fed; discovered under surveillance; rally in energy stocks


In this edition, we take a closer look at the US Federal Reserve’s stance on monetary policy and its impact on investment decisions. The Fed kept its benchmark federal funds rate near zero on June 16, although most of its officials expect at least one rate hike in 2023. these same assets, signaling that they accept the Fed’s message about maintaining a flexible policy despite higher inflation signals. However, concerns persist about the central bank’s prospects of reducing its monthly bond buying program, bringing up memories of the 2013 “tap tantrum” capital flight from developing economies.

US banks are under pressure from both politicians and competitors to adjust their overdraft fees, which represent a large chunk of income for some lenders. “Federal regulators have been sleeping on the switch too long for allowing additional fees to become the primary business model for a few banks,” said Aaron Klein, senior researcher at the Brookings Institution. “The uncovered gravy train is coming to an end.”

In the energy sector, soaring oil prices and a focus on discipline rather than growth have propelled energy stocks to the top of the S&P 500 since the start of the year. The recovery came as oil and gas companies shifted their approach to finance, shifting towards more prudent balance sheet management and debt repayment over supply growth.

Focus on the Fed

Fed keeps rate close to zero, but majority of FOMC members predict hike in 2023

Thirteen of the 18 members of the Federal Open Market Committee now expect at least one rate hike in 2023, down from just seven in the Fed’s latest quarterly forecast. “The early market reaction showed traders were caught off guard by the hawkish turn in the Fed’s interest rate projections,” one analyst said.

– Read the full article from S&P Global Market Intelligence

Emerging markets seduce US investors as tantrum fears subside

The Fed’s commitment to ease monetary policy will likely benefit emerging market assets, as the yields offered are attractive enough to offset the possibility of a sell off of risky assets.

– Read the full article from S&P Global Market Intelligence

Deep dives

In-depth articles on the impact of major news developments in key sectors.

Finance

US banks facing competitive and political pressure to move away from overdraft

In a recent congressional hearing, politicians asked CEOs of major banks how much overdraft their institutions had collected throughout the pandemic. Bankers expect overdraft revenues to decline as they roll out more user-friendly products.

– Read the full article from S&P Global Market Intelligence

After strong first quarter, global i-bank trading revenue growth expected to slow in second quarter

The normalization of global investment bank trading income will become more visible in the second quarter, as trading volumes of major fixed income and equity products begin to decline and market volatility subside.

– Read the full article from S&P Global Market Intelligence

Indian Banks and Non-Bank Financial Companies Continue Gold Rush in Lending Market

Indian financial institutions have found gold, literally, as the COVID-19 pandemic has triggered an increase in loans against jewelry. Analysts say banks and non-bank financial companies could increasingly exploit Indian consumers sitting on a treasure trove of $ 1.5 trillion of yellow metal.

– Read the full article from S&P Global Market Intelligence

Pandemic-resilient Slovak banks remain strained by low interest rates, credit risk

Slovakian bank profits have fallen by about a quarter in 2020, but local lenders will remain stable and resilient even if the economy or the pandemic worsens, the country’s central bank said in its latest financial stability report. .

– Read the full article from S&P Global Market Intelligence

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Energy and utilities

Road to net zero: investor pressure on oil and gas operators to reduce emissions increases

US companies are lagging behind their European and Canadian counterparts in terms of net zero commitments, risking falling out of favor with funds demanding more progress in reducing greenhouse gas emissions.

– Read the full article from S&P Global Market Intelligence

The Road to Net Zero: Energy and Mining Sectors Critical to Wider Decarbonization

Several new commitments to achieve net zero emissions have emerged from the largest companies in the power generation, mining, oil and gas sectors over the past six months, according to an assembly of climate goals from S&P Global Market Intelligence.

– Read the full article from S&P Global Market Intelligence

As oil prices skyrocket, energy stocks rally after catastrophic 2020

The S&P 500’s energy sector has climbed 44.5% year-to-date through June 11, compared to the 13.08% growth of the S&P 500 as a whole. Over the same period in 2020, the large-cap index’s energy sector was down around 36.2%.

– Read the full article from S&P Global Market Intelligence

ESG

Most ESG funds outperformed the S&P 500 in early 2021 as studies debate why

More than half of the environmental, social, and governance-related funds in this analysis outperformed the S&P 500 in the first few months of 2021. New studies have presented opposing views on the factors driving the trend .

– Read the full article from S&P Global Market Intelligence

Brazilian banking system prepares for new ESG regulations

Brazilian authorities will ask large and medium-sized banks to assess their climate and social risks at the portfolio level, focusing on issues such as soil contamination, water scarcity and the transition to a low-emission economy of carbon.

– Read the full article from S&P Global Market Intelligence

Insurance

Annuity reinsurance battle intensifies with public listing of new Brookfield vehicle

With an upcoming public listing and a $ 2 billion equity commitment, Brookfield’s new annuity reinsurer is targeting large-scale transactions similar to the $ 10 billion tentative deal it reached in 2020 with American Equity Investment.

– Read the full article from S&P Global Market Intelligence

Credit and Markets

June retail market: US sales are below expectations; 4 new bankruptcies

Retail sales in the United States fell in May as stores across several categories reported less activity than the month before, although industry watchers remain bullish on consumer spending as the economy continues to reopen.

– Read the full article from S&P Global Market Intelligence

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Mergers and Acquisitions Week

Cerberus’ purchase of HSBC’s French unit could foreshadow other PE-bank transactions

Read the full article

UAE’s new capital rule could trigger further bank mergers and acquisitions in an ‘overbanked’ market

Read the full article

What a combined Nordax-Norwegian Finans would look like

Read the full article

The great number

Trend

Learn more about S&P Global Market Intelligence and follow @BrianJScheid on Twitter.

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