Today is Tuesday, October 25, 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 put a spotlight on the potential recession. Global business activity contracted for a second successive month in September, according to the PMI survey data compiled by S&P Global. In contrast to the worsening growth trends in the Eurozone and the U.K., the rate of decline moderated in the U.S. during September. As inflation continues to soar to four-decade highs and the domestic labor market remains stubbornly tight, shorter-duration bond yields are expected to climb further and faster than longer-dated yields, creating further inversion and increasing the likelihood of a deep recession. The number of IPOs throughout the world fell more than 45% year-over-year in the third quarter. There have been a 1,254 IPOs in the first nine months of the year, way down on the 2,343 launched in the first three quarters of 2021.
Global private equity and venture capital exit transactions slide further in the third quarter as macroeconomic headwinds continued to hit financial markets. Private equity exit routes including IPOs, secondary and trade sales totaled $12.78 billion during the third quarter of 2022, down from $63.95 billion in the same period a year ago, according to data from S&P Global Market Intelligence. The slowdown in the rate of exit transactions is expected to continue due to economic uncertainty and market volatility.
The volume of M&A transactions among European financial companies hit its lowest quarterly level in two years in the three months to Sept. 30, Market Intelligence data shows. Due to tight monetary policy across Europe, higher interest rates are causing increases in the cost of borrowing, making it difficult for companies to find financing for dealmaking. Dealmaking increased in September from August, but the total of 65 deals recorded was below the 92 registered in September 2021.
- In Focus: Potential Recession
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Flash PMI data to highlight recession risks and varying inflation trends at start of fourth quarter
October flash PMI data will provide much needed insight into the risk of some of the world's major economies falling into recession.
—Read the full article from S&P Global Market Intelligence
Yield curve inverts further as rate hike speculation stokes recession fears
Shorter-term bond yields are climbing above interest rates on longer-dated bonds, with the gap now approaching a more than 40-year high.
—Read the full article from S&P Global Market Intelligence
IPO activity fell sharply in Q3 as stocks dipped, recession fears climbed
The number of IPOs launched in the third quarter globally was down more than 45% year over year.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: Financials
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Treasury nearly finished allocating funds to depositories in community program
The U.S. Treasury Department has awarded a large majority of the funds in a program meant to offer a cheap source of capital to community development financial institutions and minority depository institutions.
—Read the full article from S&P Global Market Intelligence
China's bad banks face rising liquidity risks with limited funding choices
China’s distressed debt managers are struggling to trim their highly leveraged balance sheets and will find it hard to take on more stressed assets, especially from the property sector.
—Read the full article from S&P Global Market Intelligence
European financials dealmaking hits 2-year low in Q3
Only 209 deals were reached in the third quarter, S&P Global Market Intelligence data showed.
—Read the full article from S&P Global Market Intelligence
Street Talk: KBW CEO offers optimism for bears fearful of bank liquidity, credit
In the latest Street Talk podcast, KBW CEO Tom Michaud said banks are poised to report positive operating leverage but noted that bank stocks remain on sale as investors worried about potential credit and liquidity problems in the future.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: Insurance
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Underwriting profitability remains elusive for auto insurtechs
The combined ratios of personal auto insurtechs such as Root and Clearcover Insurance remain elevated as they search for rate increases amid inflationary pressures.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: Real Estate
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US REIT average short interest barely up in September
The advertising sector had the largest gain in average short interest, up 3.1 percentage points, while the "other retail" segment posted the biggest drop, falling 82 basis points as of Sept. 30.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: Private Equity
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PE exit transactions slide further in Q3
Exit transactions are expected to continue to slow in the foreseeable future as concerns of a prolonged recession loom, executives at Baird and Apex Group said.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: Credit and Markets
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Institutional selling crosses $300B while hedge funds bet on recovery
As institutions continue to sell, retail investors remain the stock market's top buyers.
—Read the full article from S&P Global Market Intelligence
Flat US retail sales in September miss economists' expectations
Default risk for retailers rose, while bankruptcy filings remain at a 12-year low.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: Energy and Utilities
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Short interest in energy stocks climbs to highest level since October 2020
Short interest in the energy sector reached 3.9% at the end of September.
—Read the full article from S&P Global Market Intelligence
US Midterms 2022: Hydrogen lawmaking gains traction in statehouses
S&P Global Commodity Insights identified 78 hydrogen-related state bills introduced in 25 statehouses over the past two years, offering insight into the policy pathways that state lawmakers are pursuing to develop hydrogen industries.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: Metals and Mining
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US Midterms 2022: Republicans to target permit times, mineral imports
U.S. Republicans are laying out party priorities for mining policy that could pass if they capture the House of Representatives in the U.S. midterms. Some see opportunities for bipartisanship in permitting reform.
—Read the full article from S&P Global Market Intelligence
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- The Week in M&A
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Prosperity still hungry for M&A after announcing 2 deals at once
Deal Tracker: Media, telecom M&A activity slumps to YTD-low in September
Tech M&A progressing under 'brand new environment' – S&P podcast
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Written and compiled by Roma Arora