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Month: May 2023
Your Friday Update
Negotiations over the U.S. debt limit are intensifying as the deadline for a deal approaches. President Biden has agreed to have his staff meet directly with Speaker Kevin McCarthy’s aides, and the chances of getting a deal to increase the borrowing limit now seem higher. Republicans have demanded that any deal must include stricter work requirements for social safety net programs, which has drawn a backlash from liberal congressional Democrats. If Congress does not increase the debt ceiling, the government may run out of money as early as June 1, potentially defaulting on its debts and sending the financial markets and economy into chaos.
The Pentagon has significantly reduced its estimate of the value of weapons it has sent to Ukraine, freeing up at least $3 billion to supply Ukrainian troops with arms. The Biden administration has faced intensifying pressure to explain how it intended to continue supporting Ukraine without asking Congress to replenish its budget.
In other news, Syrian President Bashar al-Assad is expected to attend an annual summit of Arab leaders for the first time in 13 years. He was shunned for brutally suppressing in 2011 his country’s Arab Spring uprising, which morphed into a grinding civil war. The Biden administration has made it clear that the U.S. has no plans to re-establish relations with Syria, and Human Rights Watch has urged the Arab countries normalizing ties with the Assad government to at least push for accountability and reforms.
The U.S. debt limit deadline is looming, and the consequences of not reaching a deal could be dire. The Biden administration is also facing pressure to explain how it intends to continue supporting Ukraine without asking Congress to replenish its budget. Meanwhile, Syrian President Bashar al-Assad is making a remarkable comeback, attending an Arab summit for the first time in 13 years. It is a reminder of the complex political crosscurrents at play in the world today.
Zelensky to Participate in G7 Summit in Japan
President Volodymyr Zelensky of Ukraine is set to attend the G7 Summit in Hiroshima, Japan this weekend. This audacious trip halfway across the world is intended to win commitments for continued arms and aid from the world’s wealthiest democracies. Zelensky is also hoping to demonstrate the stability of his own government and to make it more difficult for other nations to remain reluctant to support Ukraine. The backdrop of Hiroshima serves as a reminder of the catastrophic costs of war, and Zelensky is confident that he will accomplish his task of maintaining international support and communication for Ukraine.
Examining the Impact of Investment Banking Fluctuations on European Employment.
By Sinead CruisernrnThe European financial services industry has seen a rapid redrawing of the jobs map this year, with banks in the region opportunistically targeting high-flyers affected by the impending takeover of Switzerland’s second largest bank by its domestic rival UBS. Recruitment firms report receiving more resumes from finance staff concerned about being ousted by such new hires.
Applications for financial services roles globally rose by 67% in the first quarter of 2023 against the same period last year, according to eFinancialCareers. Recent high-profile moves include veteran Credit Suisse dealmaker William Mansfield, head of M&A in EMEA, who is joining Deutsche Bank, while his ex-colleague Cathal Deasy, took a role as co-head of investment banking at Barclays.
Smaller financial firms are also expected to benefit from the rise in jobseekers, with some priced out of the hiring market in recent years by competitors with bigger pockets. The jobs shake-out is expected to put pressure on salary and bonus growth over the medium term but for now, ambitious banks will likely pay up for big-name hires, cutting back-office or non-client facing roles to find the cash.
Worries about possible contagion triggered by the frailty of the U.S. regional banking system have also put some bank staff on a quest for more secure employment. Duncan Finlayson, managing director of the FinTech & Financial Services practice at Raines International, said some wanted meetings with chief financial officers to better understand the financial health of prospective employers.
Assessment of Potential Impact of US Debt Ceiling Agreement on the Mega-Cap Stock Market Rally and Aviation Safety
The U.S. debt ceiling has been a source of worry for investors this year, but a potential deal could spur money managers to shift out of the tech and growth stocks that have been havens and into the rest of the market. Megacap tech stocks have been responsible for all of the 8.3% year-to-date gain in the S&P 500 through Wednesday’s close, according to Deutsche Bank research. A deal could mean the market broadens out and outperforms that group, while investors may also look to healthcare stocks as a haven during troubled economic times. President Joe Biden and top U.S. congressional Republican Kevin McCarthy both expressed confidence Wednesday that a deal would be reached, and a survey of global fund managers from BofA Global Research showed that 71% believe a deal to raise the debt ceiling will be reached before the X-date. A resolution could mean the market broadens out and outperforms the tech and growth stocks, while investors may also look to healthcare stocks as a haven during troubled economic times.
Asian Stock Markets Rise Led by Japan’s Nikkei, Despite China and Federal Reserve Concerns
Asian stock markets rose on Friday, with Japan’s Nikkei 225 index leading the way, as investors bet on a deal to raise the U.S. debt ceiling and avoid a default. The broader TOPIX index also hit record highs. South Korea’s KOSPI, Taiwan Weighted index, and Australia’s ASX 200 index all added gains. However, concerns over a slowing economic recovery in China and hawkish signals from the U.S. Federal Reserve kept gains limited. China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes were flat, while Hong Kong’s Hang Seng slid 1%. Alibaba Group tumbled 5.3% after its first quarter revenue missed estimates. Hawkish signals from U.S. Federal Reserve officials also rattled markets, as more policymakers warned that sticky inflation could keep rates higher for longer. Investors will be looking to a panel discussion with Chair Jerome Powell later in the day for more cues on monetary policy.
Nikkei in Japan Reaches Record High Last Seen During 1990s ‘Bubble’ Period
Japan’s Nikkei share average surged to its highest level since August 1990 on Friday, driven by a confluence of positive factors from strong earnings to optimism over a U.S. debt ceiling deal. The benchmark index jumped as high as 30,924.57 shortly after the open, on course for a seventh straight winning session.
The broader Topix extended its climb to as high as 2,171.37, smashing through the post-bubble milestone on Tuesday. The Nikkei’s rally has been powered by a string of strong corporate results, a weaker yen, an economy that is starting to show signs of a post-COVID consumption revival, foreign buying, and a push for better corporate governance by the Tokyo Stock Exchange.
The Nikkei’s final push to a 33-year peak drew additional momentum from gains in global stocks, as investors turned more optimistic that U.S. lawmakers can soon reach a deal to raise the debt ceiling and avert a potentially catastrophic default.
Chip-related shares had a volatile session, with chip-testing equipment maker Advantest climbing 3.35% at the open to hit a new record high, before erasing those gains and turning sharply lower. Ricoh led Nikkei gainers with a 6.65% jump after announcing it was considering joining forces with a Toshiba unit to develop and manufacture copiers and printers.
Overall, services led with a 1.46% rise, followed by precision machinery and machinery with gains of about 1% each. Investors are now considering whether the Nikkei rally will continue, with the word ‘overheated’ being front of mind.
The Impact of the G7 Oil Price Cap on Russia’s Revenue Streams
The Group of 7 leaders are meeting this week in Hiroshima, Japan, to celebrate the success of a novel effort to stabilize global oil markets and punish Russia. The Biden administration proposed capping the price that Moscow could command for every barrel of oil it sold on the world market. Since the price cap took effect in December, official and market data suggest it has achieved its twin initial goals. Russia’s oil revenues have dropped, forcing budget choices that administration officials say could be starting to hamper its war effort. Drivers in America and elsewhere are paying far less at the gasoline pump than some analysts feared. The success of the price cap is a source of relief for President Biden as high inflation continues to hamper his approval among voters.
Myanmar Residents Await Desperately Needed Cyclone Relief
Four days after Cyclone Mocha made landfall in Myanmar, aid groups are still awaiting approval from the junta to deliver much-needed supplies to survivors. The death toll is estimated to be over 450, and is expected to rise without swift aid. Survivors are facing food shortages, disease, a lack of clean water, and the threat of unexploded land mines. The junta has not publicly addressed its decision to block international aid groups from affected areas, and the military is reluctant to let outsiders into the area. Activists are worried about the risk from military land mines and unexploded bombs exposed by the storm. The United Nations Office for the Coordination of Humanitarian Affairs has asked for unrestricted access to affected communities, and for the junta to relax travel authorization requirements and expedite customs clearances for commodities. Without swift aid, the number of deaths could climb, as was the case after Cyclone Nargis in 2008.
Brazil’s Americanas Invites Offers for Fruit and Vegetable Division
Brazilian retailer Americanas SA has announced that it will begin seeking potential bidders for the acquisition of its Hortifruti Natural da Terra (HNT) business unit. The company has hired Citigroup Global Markets Brazil as the financial adviser for conducting the process. Americanas has also started evaluating strategic alternatives for its financial services arm Ame, including preliminary contacts with potential interested parties.
The retailer entered bankruptcy protection this year and is struggling to find funds to deal with billions of dollars in debt. To this end, it proposed a recovery plan in late March that included the sale of some of its assets. Americanas has also hired Citi Bank as a financial adviser to conduct the sale process of Grupo Uni.co, a gift shop group.
The sale of these assets could bring additional funding for the troubled company and help it leave the bankruptcy restructuring process as soon as this year.