Today is Tuesday, September 13, 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 examine the state of the U.S. labor market. The unemployment rate rose to 3.7% in August from 3.5% in July as more people entered the workforce and job growth moderated. Most economists agree that the unemployment rate will rise by the end of 2022 as the Federal Reserve raises interest rates to tame soaring inflation. S&P Global's IHS Markit expects labor demand to weaken in the coming quarters as companies adjust their workforces in response to sluggish output growth. On the supply side, Market Intelligence forecasts a further decline in the labor force participation rate due to changing demographics after a short-term recovery.
High oil and natural gas prices have increased the cash flows of most U.S. shale producers, leaving many of these companies with hefty amounts of cash and with choices to make. The increase in cash balances could drive M&A activity, with analysts pointing to several recent deals in which drillers bought adjacent operators in the Permian Basin and the Haynesville and Marcellus shales.
Globally significant discoveries tantalizingly close to production highlight sub-Saharan Africa's potential to be a major lithium production hub. Zimbabwe, the Democratic Republic of Congo, Ghana, Namibia and Mali have a combined 4.38 million tonnes in lithium resources, ahead of critical minerals aspirants Canada and Germany, according to U.S. Geological Survey data. However, experts warn of vast infrastructure and sovereign risk challenges for projects and investments in the region.
- In Focus: U.S. Labor Market
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US unemployment ticks up as more people enter workforce
The August jobs report reflected a still robust labor market and supported the Federal Reserve's aggressive battle against inflation.
—Read the full article from S&P Global Market Intelligence
US Weekly Economic Commentary: Strong labor markets in August
Labor demand remained strong in August, but a moderation is expected in coming quarters as businesses adjust their workforces, according to IHS Markit.
—Read the full article from S&P Global Market Intelligence
Labor market gains hang in balance as inflation roars, recession looms
A hot labor market has fueled victories for workers, but the battle against inflation could increase unemployment and undermine labor's recent gains.
—Read the full article from S&P Global Market Intelligence
Declining labor participation rate threatens long-term growth of the US economy
The percentage of adult Americans participating in the labor market is declining, compounding reduced immigration and COVID-19 deaths to create severe shortages in the supply of workers.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: Financials
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Largest 50 US banks by assets, Q2'22
Less than half of the 50 largest U.S. banks reported an increase in total assets in the second quarter of 2022.
—Read the full article from S&P Global Market Intelligence
Bank windfall taxes could spread further in Europe amid fight against inflation
More countries, particularly those with high levels of indebtedness, could follow the examples of Spain and Hungary in imposing windfall taxes on banks' profits to help fund their responses to the escalating cost-of-living crisis.
—Read the full article from S&P Global Market Intelligence
The Pipeline: Fed 'bottleneck' prolongs deal closing at banks big and small
The merger of equals between CBTX and Allegiance Bancshares has been pending for over 295 days, while OceanFirst's acquisition of Partners Bancorp has been pending over 300 days, both well above the 168-day median for recent deals of their size.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: Credit and Markets
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China uses commodities buying power to push yuan internationalization
China's growing influence in the market helps it promote greater usage of its own currency, but so far, it is only limited to settlement, not pricing. The country's capital controls remain the biggest hurdle.
—Read the full article from S&P Global Market Intelligence
UK economy slides into contraction in August, prospects darken
Incoming U.K. Prime Minister Liz Truss will be dealing with an economy facing a heightened risk of recession, a deteriorating labor market and persistent elevated price pressures linked to soaring energy costs.
—Read the full article from S&P Global Market Intelligence
Country Risk Premiums Quarterly: August 2022
The highest increases in Country Risk Premiums — the additional investor rate of return needed to compensate for the financial impact of country risk — were in the hydropower, manufacturing and automotive sectors.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: Private Equity
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Fallen euro offers discounts in Europe's private sector
High-growth private companies in Europe's highest risk sector could be on private equity's radar as the eurozone heads for recession and the plunging currency presents discounted valuations.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: Metals and Mining
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Globally significant discoveries position Africa as potential major lithium hub
With West Africa on the cusp of becoming a spodumene producer, observers are tracking how operators of some of the world's biggest deposits will manage sovereign risk and infrastructure challenges.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: Supply Chain
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Pressures driving surge in producer price inflation to fade into 2023
Supply chain problems, surging energy costs and surging consumer demand are starting to ease, reducing a key driver of soaring prices.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: Energy and Utilities
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US energy storage delays amass; climate law could add to pushback
Ensnarled by supply-chain challenges since the onset of the pandemic, U.S. energy storage project developers are facing another year of significant delays, according to S&P Global Market Intelligence data.
—Read the full article from S&P Global Market Intelligence
US shale oil and gas drillers sit on billions of dollars in extra cash
Production companies, endowed with cash from elevated oil and natural gas prices and hemmed in by investor intolerance of too much capital spending, have billions of dollars in free cash and lots of options.
—Read the full article from S&P Global Market Intelligence
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- Deep Dives: Insurance
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Progressive's personal auto rate hikes outpace peers among 'Big 4' in H1
Personal auto insurance rate increases approved in the first half of 2022 are expected to boost Progressive's personal auto premiums by an estimated $2.24 billion, according to an S&P Global Market Intelligence analysis.
—Read the full article from S&P Global Market Intelligence
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- The Week in M&A
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'Come one, come all': Credit unions in triple merger open to bank deals
M&A hot streak in Illinois continues with largest bank deal in the state YTD
EQT cuts $5.2B deal for W.Va. wet gas operator
Indonesian coal deal leads metals, mining M&A for week ended Sept. 2
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IHS Markit is now part of S&P Global.
Written and compiled by Louis Bacani