Today is Tuesday, June 28, 2022, and here’s your weekly selection of essential intelligence on financial markets and the global economy from S&P Global Market Intelligence. Subscribe to be notified of each new Insight Weekly.
In this edition, we take a close look at soaring inflation in the U.S. Consumer prices jumped 8.6% year over year in May, the biggest rise in more than 40 years. In response, the Federal Reserve tightened monetary policy more aggressively than anticipated, delivering its largest rate hike since 1994. Expectations for more rate increases have caused the S&P 500 to tumble into a bear market, led by a slump in consumer-discretionary stocks. Retail sales also unexpectedly fell month over month in May, as inflation hit consumers ' pockets.
U.S. commercial property transaction volumes fell year over year in April, the first decline since February 2021, prompting concerns about the effect of inflation and rising interest rates on the sector. The commercial real estate market is facing challenges that will significantly impact underwriting, investor sentiment and capital market trends in the medium term. Investors that rely more heavily on debt may be the first to back away from making deals.
A record year for technology M&A could cool as interest rates climb and markets turn sharply bearish. The unprecedented 2022 volume has also been heavily reliant on megadeals, with eight agreements surpassing $10 billion between January and May. Examples include Microsoft's proposed $74 billion acquisition of Activision Blizzard, Broadcom's $61 billion bid for VMware and Elon Musk's $44 billion takeover offer for Twitter.
- In Focus: US Inflation
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Rate hikes steepen as US Fed combats runaway inflation
The rate-setting Federal Open Market Committee approved a 75-basis-point hike after inflation data came in higher than expected.
—Read the full article from S&P Global Market Intelligence
Short interest in consumer discretionary stocks hits highest level since 2020
With prices continuing to rise, short sellers are betting that the fall in consumer discretionary stocks is not anywhere near over.
—Read the full article from S&P Global Market Intelligence
Retail market: May sales miss expectations as inflation, gas prices hit spending
Retail and food services in the United States decreased 0.3% in May from April, below the forecast 0.1% increase.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: Financials
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Bank stress tests likely to further cool shareholder payouts
Lenders may curb buybacks, with JPMorgan Chase and Wells Fargo having both said their stress capital buffers may go up.
—Read the full article from S&P Global Market Intelligence
9 US banks grow total assets beyond $10B in Q1
A further nine community banks sat right below the threshold, reporting more than $9 billion in total assets at March 31.
—Read the full article from S&P Global Market Intelligence
Climate stress test exposes vulnerability of UK banks' mortgage books
Seven lenders projected an increase of between 40% and 170% in aggregate mortgage losses in the Bank of England's climate stress test.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: Insurance
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US homeowners industry posts big premium gains, loss ratio declines in Q1
Total homeowners insurance premiums rose to $27.50 billion in the first quarter from $24.84 billion in the prior-year period.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: Real Estate
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US real estate sector braces for transaction slowdown as interest rates rise
National commercial property transaction volumes fell in April, potentially signaling the beginning of a sector slowdown.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: Fintech
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Rampant cyber fraud targeting fintechs is testing banks' risk controls
The pandemic accelerated digital transformation in banking, as well as incidents of cyber fraud targeting banks' financial technology company partners.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: Credit and Markets
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Japan's $148B green transition bonds plan will be tough sell to investors
Investors will likely demand higher returns and greater disclosure of the use of the proceeds for this relatively new class of debt instrument, which is used by heavy-polluting sectors to cut environmental emissions.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: Technology, Media and Telecommunications
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Megadeals buoy tech M&A totals, but how long can it last?
The megadeals in 2022 are coming in higher than those announced in 2021, suggesting that the record months of 2022 are more dependent on one-off massive deal values.
—Read the full article from S&P Global Market Intelligence
Theater stocks buoyed by return of big-budget blockbusters
From Batman to dinosaurs, Hollywood is increasing the pace of big-budget blockbusters that hit silver screens. While the shape of the recovery remains uncertain, it is so far outpacing many expectations.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: Metals and Mining
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Chile at risk of missing lithium boom amid political, policy instability
Chile has been struggling to grant companies rights to extract its vast lithium reserves for years. Now the country has backslid even further as it rewrites its constitution, and its window may be closing.
—Read the full article from S&P Global Market Intelligence
China's tin smelters slash output, but metal's downward trend will continue
Chinese tin producers, which account for more than 70% of the country's refined tin production capacity, have announced production cuts, but these may not be enough to support falling tin prices, analysts said.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: Energy and Utilities
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Solar market braces for new US trade restriction on China
No one outside the U.S. government knows for sure how the Uyghur Forced Labor Prevention Act will be enforced. Height Securities warned initial implementation could be chaotic.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: ESG
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Activists suffer blows in proxy fight to speed up Big Oil's emissions cuts
The share of oil and gas investors backing an activist's campaign calling for stronger climate targets fell in 2022. Advocates attributed a large part of the decline to ongoing geopolitical volatility and increased focus on energy security.
—Read the full article from S&P Global Market Intelligence
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- The Week in M&A
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First Bancorp to acquire GrandSouth Bancorp. in all-stock deal worth $181.1M
Jyske Bank expects 25% pretax profit growth with Handelsbanken Denmark purchase
Oil, gas deal tracker: Merger value plunges in May YOY despite $3.9B deal
$186M uranium deal leads metals, mining M&A for week ended June 17
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Written and compiled by Louis Bacani