Markets rise on Fed interest rate cut; UK banks face increased FCA ...
Global stock markets have rallied in response to the Federal Reserve’s 0.5 percentage point interest rate cut on Wednesday, its first easing since the beginning of the Covid-19 pandemic in 2020.
US stocks on Wednesday initially rose by as much as 1.1 per cent but ended slightly lower. US regional bank bank stocks hit their session highs, with State Street’s S&P Regional Banking ETF rising by 3.3 per cent, putting it on course for its best day since August last year.
In Europe, the Stoxx Europe 600 index gained 1 per cent and the UK’s FTSE 100 rose by 0.8 per cent in early Thursday training.
According to market commentators, the substantial half-point reduction indicates that the US central bank aims to pre-empt potential weaknesses in the economy and labour market, following more than a year of maintaining rates at their highest level since 2001. The federal funds rate now ranges from 4.75 to 5 per cent.
“The US economy is in a good place and our decision today is designed to keep it there,” Fed chair Jay Powell said at a news conference on Wednesday. “This recalibration of our policy stance will help maintain the strength of the economy and the labour market and will continue to enable further progress on inflation as we begin the process of moving towards a more neutral stance.”
The Fed's “dot plot”, a quarterly updated chart that shows the individual projections of policy-makers for future interest rates, anticipates a policy rate of 4.25 to 4.5 per cent by the and of the year, which suggests another large half-point reduction at either of the two remaining meetings this year or two quarter-point reductions.
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The UK’s Financial Conduct Authority has increased pressure on banks to offer more attractive interest rates on customer deposits.
In an FCA update on cash savings published on Wednesday, the regulator warned that it may take “appropriate action” including warnings or fines if banks fail to provide “fair value” on savings products.
Addressing concerns that banks might be quicker to pass on rate cuts to customers than they were to reflect rate increases, the FCA stated it would “continue to closely monitor firms’ future savings rate changes” and expect “clear explanations” if savings rates are adjusted significantly more rapidly in response to rate reductions compared with increases.
Average easy-access savings accounts rates have risen from 1.66 to 2.11 per cent over the past year, but the FCA identified that many large banks still offer below-market rates on their standard products.
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UniCredit chief executive Andrea Orcel has ruled out the possibility of a hostile takeover of German lender Commerzbank.
In an interview with Italian daily Il Messaggero, published on Thursday, Orcel dismissed the idea of launching an unsolicited tender offer to acquire other investors’ stakes in Commerzbank, stating: “No, it would be an aggressive move.”
“The German government has sold UniCredit a 4.5 per cent stake in Commerzbank because it sees it as a reliable and suitable investor,” he added.
On Monday, Orcel, who has openly acknowledged that he is in favour of a possible takeover, told German newspaper Handelsblatt that a merger of the two banks could add value and create a stronger financial institution.
Commerzbank chief executive Manfred Knof has since said that while he will review any proposals from UniCredit regarding a possible merger, he has his own plans for the bank and hopes it could stay independent.
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JPMorgan has established a new global role to oversee its junior bankers in an effort to better manage their workload following the death of a Bank of America associate in May, which has prompted Wall Street to reassess its treatment of its youngest employees.
As reported by CNBC on Wednesday, the bank has appointed Ryland McClendon as its global investment banking associate and analyst leader, according to a memo seen by the news outlet that was sent to employees earlier this month.
McClendon has worked at JPMorgan for nearly 14 years and was recently head of the bank’s talent and career development experience.
In this newly created role, McClendon “will help to support [employees’] wellbeing and success, as well as equip and enable them to deliver for our business, clients and each other”, the memo stated.
