Date: January 22, 2019
United States:
BofA’s Moynihan Predicts Another Round of U.S. Bank Mergers
Bank of America Corp. Chief Executive Officer Brian Moynihan predicted another round of consolidation in the U.S. that could lead to the emergence of a new competitor. The Charlotte, North Carolina-based lender, which controls about 13 percent of the U.S. retail banking market, came together through the merger and acquisition of hundreds of companies, Moynihan said on a panel at the World Economic Forum in Davos, Switzerland. This sort of thing could happen again, as there are still thousands of banks operating across the U.S., he said. “How does somebody emerge? The same way we emerged,” Moynihan said. “The emergence will come out of the consolidation of another round of people which still has to happen in the United States. There are now 6,000 odd banks, and you’ll find them continuing to consolidate.” The rules that govern banking shouldn’t be rolled back in order to increase competition, said Moynihan, whose lender needed a $45 billion bailout during the 2008 financial crisis. “We know what it will lead to — increased losses of peoples’ money,” he said. “It doesn’t benefit us. It’s the same the reason you have a speed limit on a highway. It’s the rules of operation.”
Europe:
U.K. Wages Are Growing Faster Than Any Time Since 2008
Britons are enjoying the strongest wage growth since the financial crisis a decade ago as the labor market tightens. Average earnings excluding bonuses continued to increase an annual 3.3 percent in the three months through November and unemployment fell to 4 percent, matching the lowest rate since 1975, the Office for National Statistics said Tuesday. Separate figures showed the budget deficit unexpectedly widened in December. With earnings forecast to accelerate further, Bank of England policy makers might normally be preparing to raise interest rates to curb inflationary pressures building in the labor market. But mounting concern that Britain could leave the European Union with no deal is expected to stay their hand. Traders put the chance of a hike this year at less than 70 percent. Wage growth including bonuses accelerated to 3.4 percent in the latest three months, the fastest pace since 2008. The number of people in work jumped a larger-than-forecast 141,000, leaving the employment rate at a record 75.8 percent. Job creation was driven by full-time employment. Unemployment rose 8,000 as economic inactivity fell sharply. Pay is rising in real terms, with basic wage growth outpacing inflation by a 0.9 percentage-point margin — the widest since the end of 2016. CPI inflation slowed further in the fourth quarter, handing a boost to households still recovering from a protracted earnings squeeze. Hanging over the outlook is a cooling world economy and Brexit, with Parliament deadlocked over the way forward less than 10 weeks before Britain is due to leave the European Union.
Asia:
China’s Unlikely to Rebound From Its Slowdown Anytime Soon
China isn’t set to come to the rescue of a weakening world economy even amid signs policy makers are successfully cushioning some of its slowdown. A wave of data released on Monday showed December gauges of consumption and factory output in the world’s second-largest economy accelerated and investment held up even as expansion in the fourth quarter dipped to 6.4 percent, the softest since 2009. The upshot of all the numbers is that while a slump may for now be avoided, the government’s preference for drip-feed stimulus means a rebound in growth is also unlikely too. That risks disappointing the investors and business leaders descending on Davos for the World Economic Forum’s annual meeting and who are already concerned by trade wars, the U.S. government shutdown and Brexit. “If China continues with its measured and piecemeal approach to stimulus, global growth will continue to lose momentum,” said Katrina Ell, an economist with Moody’s Analytics in Sydney. “The big unknown is how far China will go. Beijing’s preference has been to avoid repeating previous massive stimulus support, but they may be forced into more aggressive action if momentum continues to wane.” China’s economy, which contributes about a third of global growth, is on a long-term slowing trajectory as it shifts from the investment-led model of the past while carrying a heavy debt load. The government’s response with targeted stimulus measures is also being tested by the standoff with U.S. President Donald Trump over trade at a time when the global expansion is already looking shakier. Capital Economics estimates slower China expansion will shave about 0.2 percentage point off global growth this year, compared to 2018, while Citigroup Inc. warned in a Jan. 14 note that the China slowdown may “blow the global economy off course.”