Last Week in Review: A Financial Roundup
Monday?
Bank of England 'risks worsening UK recession if no interest rate cuts soon'
Former Bank of England chief economist Andy Haldane warns that the UK risks worsening its recession unless the central bank reduces interest rates promptly.?
UK GDP decreased by 0.3% in Q4, more than anticipated, driven by declines across all major sectors and a significant drop in retail sales before Christmas. This marks a second consecutive quarterly decline, meeting the technical definition of a recession. Markets anticipate rate cuts starting in summer from the current 5.25%, with a 17% chance of cuts happening in May and a 50% chance of June cuts.???
Bank of England officials caution about persistent inflationary pressures, steady at 4% in January after peaking at 11.1% in October 2022, poses ongoing risks. Governor Andrew Bailey and three committee members are set to testify before the Commons Treasury Committee regarding monetary policy.?
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Tuesday
Barclays leads FTSE after unveiling plan to return ￡12bn of capital
Barclays stood out in the FTSE 100 its shares surged due to a ￡2bn cost-cutting initiative and plans to return ￡12bn to shareholders over three years.
Although annual pre-tax profits declined to ￡6.6bn from ￡7bn, slightly more than anticipated, the bank outlined a plan targeting ￡1bn in gross efficiency savings for this year and ￡2bn by 2026.
Despite this, concerns persist as the stock has remained stagnant for five years, with CEO CS Venkatakrishnan facing pressure.
Analysts expressed scepticism about Barclays' growth prospects, particularly in its investment banking division amid challenging market conditions. While Barclays' outlook is optimistic, miners' stocks fell due to worries about China's interest rate cut, keeping the FTSE 100 subdued.
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Wednesday?
Global debt surges to record high as borrowing costs bite
Global debt reached a record high of $313 trillion in 2023, with developing economies experiencing a surge in debt-to-GDP ratios.?
The Institute of International Finance (IIF) reported a $15 trillion increase in global debt year-on-year, with mature markets like the U.S., France, and Germany driving much of this growth. While the global debt-to-GDP ratio slightly declined to nearly 330%, some emerging markets, including India, Argentina, China, Russia, Malaysia, and South Africa, saw their debt ratios rise.
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The IIF highlighted potential volatility due to Fed rate cuts and uncertainties in U.S. policy, especially for countries reliant on external borrowing. Despite this, the global economy shows resilience, with growing borrowing appetite in emerging markets and increased sovereign bond issuances.?
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https://www.telegraph.co.uk/business/2024/02/21/global-debt-surges-record-high-borrowing-costs-bite/
Thursday?
UK retail traders get to buy gilts at same price as banks
UK retail investors can now buy gilts at primary market prices through platforms like Hargreaves Lansdown and Interactive Investor, expanding access to government bond markets in Europe.
This initiative responds to increased retail investor demand and aims to diversify government funding sources amidst higher financing costs and reduced central bank support.?
Hargreaves Lansdown initiated this move due to rising client demand. Retail investors will submit bids prior to auctions and pay the average accepted price afterward.?
Retail investors previously had access to gilts at primary market prices through the Debt Management Office’s Retail Auction Facility. However, this was suspended at the start of the pandemic.
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Friday?
UAE dropped from financial crime watch list in win for nation
The UAE, including Dubai, has been removed from FATF's 'grey list' due to previous scrutiny for money laundering and terrorism financing.
Having previously been under scrutiny for money laundering and terrorist financing risks, the European Union still considers the UAE high-risk. The move questions the efficacy of FATF's list, with transparency concerns.?
This delisting is significant for the UAE, potentially bolstering investor confidence and reducing banking costs. They’re expected to continue strengthening its anti-money laundering measures including increasing financial investigations, enhancing international cooperation, and aligning virtual asset regulation with global standards.
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