Bailey rules out negative rates, warns on outlook | City of London faces post-Brexit uncertainty | UK bank index's slide intensifies
07 August 2020
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Morning Bell
Bank of England governor Andrew Bailey says negative interest rates are a policy option although the bank has no immediate plan to introduce them. The bank eased its projection for UK economic contraction from 14% to 9.5%, but Bailey warned recovery will be slow and some parts of the economy might no longer be viable.
Full Story: Bloomberg (tiered subscription model) (06 Aug.),  Reuters (06 Aug.),  CNBC (06 Aug.) 
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Industry News
The City of London is braced for reduced access to EU markets from the end of the year, as the bloc takes an increasingly hard line on granting equivalence. UK banks, derivatives traders, asset managers and ratings agencies face a range of differing outcomes.
Full Story: Reuters (06 Aug.),  Reuters (06 Aug.) 
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The FTSE 350 Banks Index lost 1.8% on Thursday to reach its lowest level since 1992, amid growing fears of the impact of low or negative interest rates and bad debts. The benchmark has fallen 46% so far this year.
Full Story: Bloomberg (tiered subscription model) (06 Aug.) 
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Europe's banks set aside an estimated $28 billion in the second quarter for loan loss provisions, with UK lenders leading the trend. Around half the 20 largest lenders increased the amount they allocated in the previous quarter.
Full Story: Bloomberg (tiered subscription model) (06 Aug.) 
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Activist investor Edward Bramson has repeated his call for Barclays to overhaul its trading business to maximise shareholder returns. Bramsom argues the coronavirus pandemic has distorted Q2 earnings and analysts should reserve judgement on the bank's performance until the Q3 results are known.
Full Story: Financial News (UK) (subscription required) (06 Aug.),  Bloomberg (tiered subscription model) (06 Aug.) 
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The flood of retail traders into US markets during the coronavirus lockdowns, spurred by the advent of easy-to-use zero-fee trading apps, has kicked off a global trend. "The line between institutional and retail continues to blur, and retail certainly have shown their ability to move markets," says Interactive Brokers' Asia Pacific managing director David Friedland.
Full Story: Bloomberg (tiered subscription model) (06 Aug.),  The Hill (06 Aug.) 
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The collapse of payment processor Wirecard has exposed three European lenders to some €460 million of writedowns through their exposure to a consortium-led €1.75 billion lending facility. Consortium members Commerzbank, Credit Agricole and ING report significant losses from the exposure.
Full Story: BNN Bloomberg (Canada) (06 Aug.) 
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Intercontinental Exchange is acquiring cloud-based mortgage software firm Ellie Mae from private equity group Thoma Bravo for $11 billion. Some 40% of US mortgages are written with Ellie Mae software and the purchase, which is the biggest in ICE's 20-year history, will help the exchange group grow its share of the US mortgage servicing market.
Full Story: Reuters (06 Aug.),  Financial Times (subscription required) (06 Aug.),  Bloomberg (tiered subscription model) (06 Aug.) 
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Spotlight on China
The Trump administration has proposed forcing Chinese companies to comply with US audit requirements or give up their listings on US stock exchanges. Chinese companies already trading on the New York Stock Exchange or Nasdaq Stock Market would be required to comply by 2022, while privately held companies would have to comply before going public on US exchanges.
Full Story: The Wall Street Journal (tiered subscription model) (06 Aug.),  Financial Times (subscription required) (06 Aug.) 
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Tech Trends
Investors have spotted an opportunity offered by Asian technology stocks, which has led to significant market gains for entities such as Tencent, Alibaba and Samsung, replicating the tech rally taking place in the US. The stocks make an attractive alternative to the leading US names.
Full Story: The Wall Street Journal (tiered subscription model) (06 Aug.) 
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There is no such thing as failure, there's just giving up too soon.
Jonas Salk,
virologist, medical researcher
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