Today is Tuesday, November 01, 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 of Insight Weekly, we take a look at how the U.S. midterm elections could shape the government's response to a looming recession. In the upcoming elections, the Republicans are poised to take control of the House of Representatives while the Democrats are likely to hold the Senate. This scenario will see a divided government, limiting President Biden’s ability to pass new laws to support the economy. According to new S&P Global PMI data, the economic downturn gathered significant momentum in October, led by a downward lurch in services activity and a near-stalled manufacturing sector. Consumer spending remains strong, but major U.S. credit card issuers report a continued rise in delinquency rates.
The median ratio of operating expenses to total revenue for U.S. nonfinancial, investment grade-rated companies fell to 82.9% in the second quarter from 83.1% in the previous quarter, according to data from S&P Global Market Intelligence. The lower ratio indicates that companies are achieving returns more efficiently even as expenses continue to rise.
Sales of nonperforming loan portfolios, or NPLs, in the United Arab Emirates may become more common as lenders clean up their books and regulatory improvements make such deals attractive to buyers. Currently, Abu Dhabi Commercial Bank is selling $1.1 billion of bad debt, the largest NPL sale of its kind in the country.
- In Focus: U.S. Midterm Elections and Economy
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Divided US government would shape recession response
If Republicans take control of the House and Democrats keep control of the Senate, the odds of passing legislation will get worse.
—Read the full article from S&P Global Market Intelligence
Flash US PMI falls sharply into contraction territory in October
The October S&P Global flash PMI surveys present a picture of the economy at increased risk of contracting in the fourth quarter as inflationary pressures remain stubbornly high. Forward-looking indicators have also deteriorated.
—Read the full article from S&P Global Market Intelligence
Credit card delinquency ticks up as inflation tests consumer resilience
Delinquency rates rose for all the major credit card issuers in September as some in the industry suggested consumer borrowing was normalizing, despite levels remaining well below pre-pandemic numbers.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: Credit and Markets
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Revenues at US corporates outpaced expenses in Q2 even as costs climbed
U.S. companies continued to improve their operating margins in the second quarter of 2022 despite rising costs of doing business.
—Read the full article from S&P Global Market Intelligence
Yen has more room to collapse from dollar as central banks in Japan, US diverge
The dollar has strengthened relative to the yen to levels not seen since 1990 with more to come.
—Read the full article from S&P Global Market Intelligence
Capital Markets: Emerging markets continue generating mixed signals
Investment grade EM borrowers continue to achieve positive demand.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: Financials
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Flurry of U.S. credit union conservatorship, closure activity late in quiet 2022
The National Credit Union Administration put two credit unions into conservatorship and closed another in a one-week span between Sept. 30 and Oct. 7.
—Read the full article from S&P Global Market Intelligence
Abu Dhabi Commercial bad loan sale may give UAE distressed debt market liftoff
The sale of about $1.1 billion of bad debt would be the largest of its kind in the United Arab Emirates and give investors confidence that improving regulation is helping boost activity in the region's nonperforming loan market.
—Read the full article from S&P Global Market Intelligence
APAC finance sector M&A to stay muted in near term as buyers exercise caution
Deals in the region's finance sector fell to 138 in the third quarter from 193 in the prior-year period, dragged by a slowdown in activity in the financial technology and insurance sectors, according to S&P Global Market Intelligence data.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: Insurance
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Metlife, Prudential, Aflac expected to face Q3 headwinds from Japan COVID claims
The vast majority of the top 15 publicly traded U.S. life insurers are expected to post year-over-year decreases in earnings in the third quarter, according to analyst estimates compiled by S&P Global Market Intelligence.
—Read the full article from S&P Global Market Intelligence
UK pensions insurance market set to soar in 2023 after bond yield rises
More defined benefit pension schemes can now afford to transfer their risks to insurers due to increases in U.K. government bond yields, but recent market volatility has thrown up some short-term barriers.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: Real Estate
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Canadian REIT capital offerings nosedived YOY in Q3'22
Publicly traded Canadian REITs raised C$156.4 million through capital offerings in the third quarter of 2022.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: Private Equity
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Private equity's share of terminated M&A deals up YOY in Q3
The average share of terminated M&A deals involving private equity or venture capital stood at 10% in 2021, while for the first three quarters of 2022, the average share of terminated deals stands at 13%.
—Read the full article from S&P Global Market Intelligence
Private equity deal value in Asia-Pacific sans Japan drops in Q3
Transaction value in the July to September period plunged 72.9% to $6.89 billion from $25.39 billion a year ago, S&P Global Market Intelligence data shows.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: Energy and Utilities
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Political risks loom over European utilities ahead of Q3 earnings
Most utilities are forecast to post higher earnings in the third quarter, according to analysts' estimates. At the same time, the STOXX Europe 600 Utilities index is down 21.33% year to date.
—Read the full article from S&P Global Market Intelligence
US Midterms 2022: State elections could redraw battle lines over gas bans
A nationwide effort to prohibit local governments from restricting natural gas use in new buildings has run out of steam, but GOP victories in upcoming statehouse and gubernatorial elections could help breathe new life into the lawmaking push.
—Read the full article from S&P Global Market Intelligence
Inflation, rising customer bills in focus as gas utilities report Q3'22 earnings
Analysts expect many gas utilities to post year-over-year earnings growth, but Wall Street will be listening for commentary on rising labor and materials costs and higher customer bills.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: Metals and Mining
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China tops metals, mining IPOs in Q3'22 as offers sink to lowest since Q1'20
China-headquartered companies were the shining light in an otherwise bleak third quarter for metals and mining initial public offerings as the total amount offered fell to a 2.5-year low.
—Read the full article from S&P Global Market Intelligence
Agnico Eagle nabs top spot from Rio in 2022 nonferrous exploration budget ranks
Exploration budgets are on the rise in 2022, bolstered by planned spending in the search for battery metals and gold.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: Technology, Media and Telecommunications
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Amazon drivers push for higher pay amid heightened pressure ahead of holidays
While Amazon is likely to find the drivers it needs in the immediate term, retention is becoming a long-term risk, labor experts said.
—Read the full article from S&P Global Market Intelligence
Recession fears, bleak ad market dim expectations for Snap after revenue miss
Snap's recent third-quarter performance and the lack of fourth-quarter guidance created concern among analysts about the company's ability to navigate in a weaker economic environment.
—Read the full article from S&P Global Market Intelligence
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- The Week in M&A
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Deal Profile: Ohio-based Peoples Bancorp to acquire Kentucky-based Limestone Bancorp for $208M
Deal Profile: Bank of Princeton to acquire Pennsylvania-based Noah Bank in $25.4M deal
Deal Profile: Missouri-based BTC Bank acquires Merchants and Farmers Bank of Salisbury
Cybersecurity M&A bustling again in Q4 after a bleak Q3
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Written and compiled by Alex Virtucio