June 23, 2017
U.S. banks get a clean bill of health, Brexit’s a year old, and the Qatar quarrel takes an interesting turn. Here are some of the things people in markets are talking about today.
Every bank subject to the first round of annual Federal Reserve stress tests exceeded minimum thresholds, although Morgan Stanley trailed the rest of Wall Street on a key measure of leverage — the second year it performed worse than peers. Swap markets suggest that glowing report cards may be a sign of things to come, with traders betting on a liquidity wave from the easing of financial regulations. In a reminder of bank stresses gone by, Ireland’s raised $3.4 billion by returning a bailed-out lender to the market.
It’s exactly one year on from the Brexit vote, and only a portmanteau of a portmanteau will do. The latest developments suggest the hard toil for the U.K. begins now: Theresa May presented a proposal to EU leaders on Thursday evening to safeguard the rights of their citizens, in a move that got a tepid reception at home and abroad. Meanwhile, the European Central Bank made a move on London’s lucrative clearing industry. The City is presently the site of $574 billion in euro derivatives trades every day.
Weeks after President Donald Trump accused Qatar of funding terrorism, the nation’s flagship airline has made a surprise overture to acquire a major stake in American Airlines. Meanwhile diplomats predict Qatar will refuse to comply with Saudi Arabia’s steep list of demands, and the country’s riyal peg is getting tested.
With front-month futures down 4.3 percent since last Friday, crude was poised for a fifth week of declines as the supply glut shows no signs of ending. Saudi Arabia, Russia, and their allies are reducing output, but supply that’s beyond their control keeps rising. This week’s moves put prices back below where they were when the Organization of Petroleum Exporting Countries first struck its historic deal to cut supplies last year.
Stocks do the shuffle
Today is likely to be one of the busiest of the year for U.S. equity traders as the annual Russell reshuffle takes effect. The FTSE Russell’s rebalancing of stock indexes reliably boosts liquidity, although — for similar reasons — it’s rarely marked by big price swings. Outside the U.S. this morning, equities were mixed after Federal Reserve speakers did little to alter projections for the path of interest rate hikes, although Chinese stocks swung higher amid speculation of support from state funds.