Big banks face headwinds as dealmaking slows and recession prep escalates. Plus: European assets are on sale, more regulators move on crypto, and more

Welcome to?This Week in Finance , your weekly digest of the top news, conversations, and voices trending among financial professionals on LinkedIn. Click 'Subscribe' to be notified of each edition. This week:

More economists see recession risk

A clear majority of economists surveyed by The Wall Street Journal now say they expect the U.S. to enter a recession within the next 12 months. The latest tally shows 63% predicting a recession in the next year, a jump from July's 49%. The darkening picture doesn't end there: Economists now expect gross domestic product to keep contracting through the first two quarters of 2023, which is a shift in their predictions of soft growth from the last quarterly survey. They expect employers to respond with job cuts in the second and third quarters. ?? Here's what people are saying.

• IEA rebukes OPEC+ supply cut : OPEC+'s oil supply cut threatens to be "the tipping point for a global economy already on the brink of recession," the International Energy Agency said.
• Recession may be a 'necessary evil' : The head of capital market economics at Scotiabank says the Bank of Canada is willing to trigger a recession but "they will never say it."
• Luxury goods appear recession-proof : While many consumers are trying to curb spending in the face of high inflation, the wealthiest shoppers continue to snap up luxury goods at a record pace.

U.S. investors bargain-hunt in Europe

The dollar's strengthening against the pound and the euro has made Europe an ideal destination for American investors, boosting their purchasing power for European businesses . High inflation and a looming recession have also diminished company valuations throughout the UK and Europe, making entry prices more attractive. U.S. private equity firms had already been behind a number of deals with UK companies in recent years, including the acquisitions of supermarket chain Morrisons and security group G4S . ?? Here's what people are saying.

• UK inflation at 40-year high of 10% : The jump to 10.1% is higher than economists had predicted, largely driven by rising energy prices and soaring food costs.

Goldman profit drops amid reorg

Goldman Sachs’s profit fell to $3.07 billion last quarter from $5.38 billion a year earlier, dragged lower by a 57% drop in dealmaking. Investment banking also fell at other major lenders, but its centrality to Goldman put the bank under more pressure as economic uncertainty and volatile markets kept clients away from transactions. The bank also confirmed a restructuring that would place more emphasis on asset and wealth management, units less exposed to economic headwinds. The results cap big banks' earnings, in which a combined $2 billion was set aside for possible bad loans as recession fears mount. ?? Here's what people are saying.

• Profits fall at JPMorgan, other banks : The biggest U.S. bank set aside an additional $808 million for potential loan losses in the last quarter amid ample warnings by CEO Jamie Dimon about an impending recession.

Are fintechs losing staff to banks?

The war for talent between fintechs and traditional banks is heating up, the Financial Times reports . While some fintech startups appear to be doing well , certain crypto and buy-now-pay-later firms that boomed early on in the pandemic have been forced to institute layoffs in recent months and cut spending. Traditional banks, on the other hand, are optimistic about their finances as interest rates rise. "A lot of people [in fintech] are moving back into the banking world," said Sam Burks, executive director at recruitment agency Nicoll Curtin, adding that they view the big banks as a safer environment. ?? Here's what people are saying.

• Is Stripe preparing to cut jobs? : Managers at fintech giant Stripe are being pressured to give employees lower scores on performance reviews, sources tell Forbes, which could lead to workers being fired or feeling pressure to quit.

FTC eyes Visa, Mastercard: report

Visa's and Mastercard's security tokens are under scrutiny from the U.S. Federal Trade Commission, The Wall Street Journal reports , citing unnamed sources. The FTC is investigating whether the tokens — the number assigned to online purchases and sent to payment networks — make it more difficult for other networks to handle transactions, with Visa and Mastercard allegedly prioritizing their own networks, netting the transaction fee and sidelining others. For the past few years, the FTC has also been investigating whether the two companies were restricting merchants' routing choices. Visa and Mastercard claim security tokens help prevent fraud. ?? Here's what people are saying.

• Mastercard to help banks trade crypto : The pilot program is being offered next year in the U.S., Brazil, and Israel, and could pave the way for thousands of banks to offer the kind of trading for which customers have been clamoring.

FTX, CEO probed by Texas regulator

Texas's securities regulator is investigating FTX and its founder, Sam Bankman-Fried, over the crypto trading platform's yield-bearing accounts. At issue is whether or not the accounts — which let users earn a yield by staking — are illegal securities offerings. Texas argues the accounts are similar to securities and should be registered with the state before being offered to residents. The regulator says FTX should put off its plans to buy the assets of bankrupt crypto lender Voyager for $1.4 billion until a resolution is reached. Bankman-Fried has been scooping up distressed assets amid a steep crypto downturn. ?? Here's what people are saying.

South Africa to regulate crypto assets

South Africa has classified crypto assets as financial products , which will allow them to be regulated by the government. Though the assets are not issued by a central bank, they are capable of being traded, transferred, and stored electronically for making payments, and therefore the government says it aims to prevent theft and money laundering. Africans' adoption of cryptocurrencies is among the highest in the world , and more countries globally are pushing to regulate digital assets . ?? Here's what people are saying.

• Japan to further ease crypto rules : Things will soon be easier for crypto exchanges operating in Japan. Regulatory authorities plan to allow them to list virtual coins without going through a lengthy screening process unless the tokens are new to Japan's market, reports Bloomberg.

Where will the housing bubble burst first?

As real-estate markets worldwide are expected to decline on the back of rising interest rates and recession fears, analysts say the key question isn’t “when ” but “where.” German cities Frankfurt and Munich were found to have the second- and fourth-highest risk, respectively, of a housing bubble in a study by UBS. Topping the list: Toronto.

• Looking at figures such as price-to-rent and price-to-income ratios, as well as mortgage payments and construction spending, the study also found bubble risks in Zurich, Amsterdam , and Vancouver .
• Twelve more cities were considered to have an “overvalued housing market,” among them Stockholm, Paris, and Sydney as well as Geneva, London, and Madrid.
• Lowest-ranked Warsaw was in fair-valued territory together with Milan, Sao Paulo, and Dubai.
• Here's what people are saying.

Ballmer to place $400M with Black investors

L.A. Clippers owner and former Microsoft CEO Steve Ballmer has announced a $400 million investment to help address the shortage of funding for Black-led startups. The investment — made with his wife, Connie — will go to Black fund managers in venture capital and growth equity, who will be required to invest at least 30% in Black entrepreneurs. The Ballmers committed $250 million to funds launched by Ariel Investments and Fairview Capital, two Black-led U.S. asset managers; $150 million will go to new vehicles managed by Goldman Sachs and GCM Grosvenor. ?? Here's what people are saying.

And the latest from earnings season:

• Tesla's record revenue still a miss
• Netflix's blockbuster comeback
• Snap's growth is stalling
• IBM beats Wall St. expectations
• Strong dollar hits P&G earnings
• J&J mulls job cuts amid inflation

With?Jake Perez ,?Jessica Hartogs ,?Jessy Bains ,?Harriet Sinclair , Manas Pratap Singh , Sam Shead ,?Cate Chapman ,?Solange Uwimana , Adrian Tay ,?Saundra Latham , and Ilan Goren .

What's your take on the week's news and other developments impacting you or your business? Join the conversation in the comments below.