Fed's policy shift reverberates, IPO window flies open, and Carney's job move lends boost to impact investing: This Week in Finance

Welcome to This Week in Finance, your weekly roundup of the conversations trending among financial professionals on LinkedIn. Click Subscribe above to be notified of each edition. This week:

Fed signals change of tack

The U.S. Federal Reserve signaled a shift in focus to lowering U.S. unemployment, from fighting inflation. Chair Jay Powell, addressing an annual symposium online, said prices had failed to rise even as unemployment fell to historic lows before the coronavirus pandemic hit — sending joblessness to a historic high of 15% in April — and that inflation, of paramount concern for at least three decades, posed less of a threat to the American economy. The strategy shift is likely to mean that significant hikes to interest rates, the central bank's main tool for curbing inflation, is off the table. ?? Here's what people are saying.

• When will the recession end?: The U.S. is stuck in a steep downturn and risks a worsening recession that will last at least another year, according to a survey of the National Association for Business Economics.
• Jobless claims hover around 1M: While new claims have come in around the 1 million mark since March — when they peaked at 7 million — they remain well above pre-pandemic levels of about 200,000 a week.
• Rebound in spending slows: The pace of the rebound in outlays slowed to 1.9% in July, down from 6.2% in June. The expiration of extra jobless benefits this month may portend a further deceleration in spending, which accounts for two-thirds of gross domestic product.
• Are banks pulling back on lending?: In a possible harbinger for other banks, Capital One has reined in borrowing limits for customers by as much as two-thirds. The move by the No. 3 credit-card lender in the U.S. comes as extra jobless benefits for millions of unemployed Americans expire.
• Financing an economic recovery: One way to start? By financing businesses and ideas that empower marginalized communities, argue a growing chorus of investors.
• What's the deal with inflation?: In Canada, the central bank is now explicitly asking the public for its views on inflation for the first time as it looks to renew its inflation target, a key anchor of monetary policy.

Is Europe's economic pain yet to come?

When the pandemic struck, the U.S. and major European nations took different routes to protect their economies. The U.S. relied on benefit payments to workers, with some payroll protections, while it's estimated that a third of Europe's workforce benefited from government-backed furlough schemes to avert mass layoffs. But as the crisis continues, state wage subsidies on the continent are under pressure and may not be enough to stave off a wave of layoffs as companies downsize and jobs are made redundant. ?? Here's what people are saying.

• Why the UK economy was worst-hit: Though spending has started to rise, record retail job losses and the looming end of the government's furlough scheme have analysts concerned.

IPO season is back in force

Buckle up: Companies are ready to go public again. This week saw a flurry of IPO-related filings, from the likes of data-storage provider Snowflake, data-analytics company Palantir, software-management company JFrog, project-management software provider Asana, Unity Software, Sumo Logic, and more. Ant Group, the fintech arm of Alibaba, also filed for an IPO in Hong Kong and Shanghai in what could be the biggest initial public offering of all time.

• To accommodate more IPO alternatives, Nasdaq is seeking to change its rules to allow companies that debut on the stock market through a direct listing to also raise new money, Reuters reported. The New York Stock Exchange this week received approval for such a rule change.
• The blank-check — or SPAC — IPO craze continues as well. Almost 80 SPACs have raised a combined $31 billion on U.S. exchanges this year, topping every previous year with four months still to go in 2020. Ex-Goldman Sachs president Gary Cohn is the latest high-profile dealmaker to join the frenzy.
• Here's what people are saying.

Global dividend payouts drop

Investors worldwide could miss out on as much as $400 billion in dividends this year as firms seek to preserve cash during the pandemic. According to a report from fund manager Janus Henderson, global dividend payments fell by $108 billion to $382 billion in the second quarter of the year — a 22% year-on-year drop. Europe was the most affected region, with more than half of firms slashing payouts and two-thirds of those scrapping them altogether. Banks, miners, and oil companies made big cuts, while payouts in the tech, telecom, and health-care industries were least impacted. ?? Here's what people are saying.

This isn't your parents' Dow

The Dow Jones Industrial Average — the stock-market index comprising 30 companies — is getting its biggest shakeup in seven years. Software-maker Salesforce, biotech giant Amgen, and industrial conglomerate Honeywell will replace Exxon Mobil, Pfizer, and Raytheon Technologies in the 124-year-old blue-chip benchmark. The decision by Apple to undergo a stock split meant that the technology sector's weighting in the average would drop, prompting the decision to add Salesforce. Shares of Exxon Mobil, which has been a component of the Dow for almost 100 years, as well as those of Pfizer and Raytheon fell following the announcement Monday. ?? Here's what people are saying.

Merger forms largest Black-led bank

Two banks on opposite sides of the U.S. announced a historic merger to create the country's largest Black-led lender. City First Bank's and Broadway Federal Bank's combined assets exceed $1 billion. City First CEO Brian Argrett told CNN that the two banks have been working on the deal for a year and expect it to close in the first quarter of 2021. Argrett said the tie-up will "deliver additional resources to our communities," telling the L.A. Times that their focus will be on funding multi-family affordable housing, small businesses, and nonprofits. ?? Here's what people are saying.

Alibaba pauses India investments

Alibaba has put on hold plans to invest in Indian companies for at least six months amid rising Sino-Indian political tensions, Reuters reported. The move could slow fundraising plans for some of Alibaba's portfolio firms in India, including Paytm, Zomato, and BigBasket. The Chinese conglomerate and its affiliates are estimated to have pumped more than $2 billion into Indian companies since 2015. Alibaba is among several Chinese investors that have halted fresh investments in Indian startups after the government amended foreign direct investment rules for neighboring countries. ?? Here's what people are saying.

Japan hits credit-card (digit) limit

Japan is running out of credit-card numbers amid an online shopping boom during the pandemic and a government push last year to go cashless. Some providers are even reusing numbers from canceled cards due to the shortage of new combinations. One proposal is to add another digit, but implementing it could cost between 10 billion and 100 billion yen ($94.5 million to $945 million). The traditionally cash-loving country is attempting to double the proportion of cashless transactions to 40% by 2025. ?? Here's what people are saying.

Carney's new job gives boost to ESG

Mark Carney is taking up a new role. The former governor of the Bank of Canada and Bank of England will head up environmental, social, and governance (ESG) strategy and impact investing at Toronto-based Brookfield Asset Management, one of the world's biggest money managers. Carney is set to focus on funds that generate profit but also help the planet, while continuing his volunteer position as United Nations special envoy on climate action and finance. ?? Here's what people are saying.

?? Editors’ Picks: Must-read articles ??

Each week, editors at LinkedIn select thought-provoking articles that are sparking discussion among financial services professionals on the platform. Join the conversation by reading and commenting on them here.

With Cate Chapman, Riva Gold, Scott Olster, Alexander Besant, Siobhan Morrin, Pieter Cranenbroek, Jake Perez, Shajil Kumar, and Yunita Ong.

Don't miss each edition of This Week in Finance: Click Subscribe above or below to be notified.