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    Global equity funds see first weekly outflow in four weeks

    According to Refinitiv Lipper data, global equity funds observed a net $2.67 billion worth of net selling in the week ended July 19, booking their first weekly outflow since June 21.China’s economy grew at a frail pace in the second quarter, pointing to overall momentum faltering rapidly due to weakening demand at home and abroad.Additionally, expectations of rate hikes strengthened following a report from the U.S. Commerce Department indicating strong core retail consumption.Investors withdrew $3.04 billion from U.S. equity funds while purchasing Asian and European equity funds to the tune of $609 million and $336 million, respectively.Sectoral equity funds attracted collective inflows of about $1.78 billion, with investors piling up tech, financial and industrial sector funds of $1.05 billion, $904 million and $793 million, respectively.Meanwhile, global bond funds saw $5.29 billion worth of net purchases as inflows extended into a fourth successive week.Global high-yield bond funds received a net $2.97 billion, the biggest amount since April 5. Government and corporate bond funds attracted $627 million and $724 million worth of inflows, respectively.Investors also purchased money-market funds of about $2.86 billion, after a net $28.8 billion worth of selling in the previous week.Data for commodity funds showed that investors exited $295 million worth of precious metal funds in the eighth straight week of net selling. They also sold energy funds worth a marginal $2 million. Meanwhile, data for 24,134 emerging market funds showed equity funds received $1.1 billion, the biggest weekly inflow since May 3, while bond funds obtained about $568 million, marking a third straight weekly inflow. More

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    US banks’ second quarter earnings: the results in charts

    (Reuters) – U.S. banks benefited from higher interest rates in the second-quarter, driving a rally in major indexes, but lower consumer spending, slower loan growth and the increased costs of retaining deposits cloud the outlook for the sector.The results follow a tumultuous first quarter in which Silicon Valley Bank and two other lenders failed. Signs of a revival in the investment banking sector, as higher rates and economic uncertainty have hampered deals and trading, also drove share gains. The upbeat results sparked a rally in bank stocks with the S&P 500 Banks Index gaining 9.3% and the KBW Regional Banking Index rising 13.7% month-to-date. Here are four charts that explain major banks’ second quarter: NET INTEREST INCOME Net interest income, the difference between what banks charge on loans and pay out on deposits, at the largest U.S. lenders rose on higher U.S. Federal Reserve interest rates, but analysts cautioned that the benefit might soon fade as the central bank nears the end of its tightening cycle. INVESTMENT BANKING U.S. banking giants reported mixed results for investment banking in the second quarter, but investors have bought their stocks in the expectation of a second half revival in deal-making. An outlier, Bank of America (NYSE:BAC) outperformed rivals by reporting a surprise gain in investment banking fees in the quarter. DEPOSIT LEVELS Deposits at most large lenders edged lower. The cost of retaining deposits is under investor scrutiny after bank runs led to the collapse of three lenders earlier this year, leading customers to move their cash to big banks or higher yielding alternatives.Banks will likely face pressure to pay higher rates on deposits to lure or retain customers, which would erode their profits, analysts have said. PROVISIONS FOR CREDIT LOSSESWorries around the health of the economy accelerated earlier this year following the banking crisis. Commercial real estate (CRE) loan portfolios have also emerged as a concern for the banking industry. The anxiety centers around office loans, as financing costs rise for many buildings that have seen big vacancies as staff continue to work from home.Here are three charts on mid-sized banks’ second-quarter results: DEPOSIT LEVELS While regional bank earnings in recent days have reassured investors that the crisis has subsided, regional banks are being squeezed as they pay customers more to retain their deposits.NET INTEREST INCOME Interest income at most banks rose over the prior year on higher rates, but declined sequentially, with analysts saying that the tailwind from higher borrowing costs that have boosted profits in recent quarters is nearing its end. INDEX PERFORMANCE Bank stocks were crushed during the first quarter crisis but have started to rebound. The KBW Regional Banking Index has rallied 13.4% month-to-date but remains down 13.6% so far this year. In comparison the benchmark S&P 500 has gained nearly 19% year-to-date. More

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    America’s identity crisis

    Hello Swampians, I’m swapping slots with Ed this week, who is busy at the Aspen Security Forum. When I raise the topic of America’s identity crisis, I’m not talking about identity in the woke sense (though I’m planning to write my column next week about how companies are coping with consumer activism around identity politics). Rather, I’m talking about how Americans see themselves and their country, versus how foreigners do.My gut instinct would have been that Americans are far more optimistic about themselves and their home than others are. But in fact, it’s just the opposite.While just over half of Americans believe that the world holds negative opinions of them, about six out of 10 of those polled in advanced economies have a favourable view of the US, according to the Pew Research Center. Poland, Israel and South Korea are particularly gung-ho, with favourability ratings in the high 80s or 90s, but 60 per cent or more of those surveyed in most big European nations, as well as Canada, had positive views of the US.A lot of this is down to the current administration; global attitudes towards the US have improved significantly since Joe Biden became president. A large majority of those in rich countries believe the US is a reliable partner which supports democratic values like personal freedom. That said, there are worries about the future of American power, and its ability to defend the world.There is also a strong sense that the US has serious problems at home, such as dealing with falling living standards, a terrible healthcare system, and racial discrimination.Indeed, it may be those very issues that have led Americans to have a more negative view of themselves in the world than many allies do. Gallup data shows that only 37 per cent of Americans are satisfied with their country’s position in the world, versus a high of 71 per cent in 2002. This decline has led to an inwardness on international issues such as trade and global security, according to Pew.This is especially so among Republicans. Amazingly, less than half of them now see trade as an opportunity, compared to 72 per cent of Democrats, according to Gallup. Likewise, three times more Republicans than Democrats believe that the US is doing too much for Ukraine. Both sides increasingly believe that China is an enemy, and co-operation will be impossible.This is a grim picture, obviously. It’s particularly interesting to me that America’s problems at home seem to have amplified its desire for isolation from the rest of the world. This may pose an opportunity for the Biden administration if it can just tell a different story about the state of things at home and abroad.Certainly, there’s plenty of good news to tout. Inflation is down, and wage growth is still pretty robust, which means the cost of living crisis is abating (at least for some). Biden chalked up big wins at the recent Nato summit, with Sweden allowed to join the alliance and new security guarantees for Ukraine. According to the newsletter, “What Could Go Right?” emissions in the US are falling, Danes are building new wind farms here, chemical weapons stockpiles are being destroyed and aid for families is improving. Indeed, MSNBC’s Joe Scarborough has an entire essay in The Atlantic celebrating American achievements. The FT’s Simon Kuper this week also pointed out that we have many things about which to be cheerful, despite our proclivity to think we’re heading for the apocalypse.So my question to you Ed is, why doesn’t all the good news seem to land with the force of the bad?Recommended readingI have just started reading Kai Bird and Martin Sherwin’s amazing book American Prometheus about Robert Oppenheimer. So, so well crafted. The pages fly by.A really interesting piece in The New York Review of Books about the work of Japanese animator Hayao Miyazaki, who made films such as Spirited Away (one of my all-time favourites), Ponyo and My Neighbour Totoro, which are just as delightful for adults as for children. It’s really tough to make good art about the experience of being a child, but I think he nails it.In the FT, I enjoyed my colleague Pilita Clark’s piece on why women must learn to use the word no more often, and don’t miss Oren Cass on the struggle of American conservatives to find a new and more thoughtful way forward. I’d also suggest reading him as a guide to the best thinking of a nascent new right.Edward Luce responds Rana, I think that’s an interesting and complex question. Often when we think of big US political shifts, we look to the country’s history to give us some clues. The past may be particularly useful in trying to figure out why Republicans have turned so anti-internationalist in the past few years, as opposed to Democrats, who, as you say, have broadly held firm in their positive ratings for global engagement.In the late 1940s, a large chunk of the Republican party turned broadly isolationist, led chiefly by the Ohio senator Robert Taft. His leading in-party opponent, Arthur Vandenberg — the Mitt Romney, or perhaps John McCain, of his time — spoke up for the internationalist wing. Harry S Truman was returned to office in 1948, though it was a close-run election (and the Chicago Tribune famously miscalled it for Thomas Dewey). By 1952, much of the Republican isolationist fever had broken and the party nominated Dwight Eisenhower, who was the personification of the Atlanticist American. The isolationists, meanwhile, had morphed into the McCarthyite red scare crowd, which wrought such damage to the state department, Hollywood and much of academia.Why did the isolationists lose and what can that tell us about today? Partly it was because it became progressively more difficult to deny the threat that the Soviet Union posed. The USSR tested nuclear weapons, it tried to strangle West Berlin, backed the North Koreans to the hilt in the Korean War, and snuffed out whatever nascent non-communist movements had emerged in postwar eastern Europe. And partly it was because big domestic legislation, notably the GI Bill (giving wider access to higher education), drove a rising middle class increasingly towards the Democrats.Democrats held the House almost continuously until 1994. If history were to repeat itself, Donald Trump would lose next year to Biden (though Fox and Newsmax would wrongly call it for Trump), and the reality of what I call the revenge of geopolitics would become US political consensus. Alas, I have no great confidence in things always going right or history repeating itself. As you know, we are also in dispute about whether trade is to blame for America’s relative disenchantment with the world. I think that’s a misdiagnosis, but I acknowledge it has become a rare point of bipartisan consensus in Washington, DC (but not Aspen!). More

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    AmEx keeps profit forecast unchanged after strong results, shares fall

    (Reuters) -American Express kept its forecast for full-year profit unchanged on Friday, disappointing investors and overshadowing its quarterly results that topped estimates on record card member spending by its young and affluent customers. While spending on its cards touched a record high in the second quarter, AmEx’s cautious forecast for the year points to a potential slowdown in consumer spending, which has remained resilient despite a series of interest rate hikes by the U.S. central bank to tame inflation.AmEx shares were down 4% in premarket trading as the credit card giant reaffirmed its per-share profit forecast of $11 to $11.40 for 2023. Analysts on average expect $11.11 per share, according to Refinitiv.Referring to AmEx’s forecast revision during the COVID-19 pandemic in 2020, CFO Jeff Campbell told Reuters that AmEx only alters its outlook if something “wildly different” happens.AmEx’s total provisions for credit losses came in at $1.2 billion in the second quarter, compared with $410 million a year earlier. “Card member spending hit another all-time high,” CEO Stephen Squeri said in a statement. Total network volumes climbed 8% to $426.6 billion in the second quarter ended June 30. AmEx has so far been largely spared from the impact of rising prices for everything from energy to groceries as its young and well-heeled customer base carries on with shopping, dining out and travel. The company said Millennial and Gen Z consumers remained its fastest-growing customer cohort, representing 60% of new consumer accounts acquired globally, while spending by the group increased 21% in the U.S. compared to a year earlier.”Across all demographics, all customer types, all geographies, travel and entertainment spend is just very strong,” Campbell said. The credit card company reported a profit of $2.89 per share in the quarter, beating analysts’ average expectation of $2.81 per share.Total revenue, net of interest expense, rose 12% to a record $15.05 billion but fell short of expectations of $15.48 billion. More

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    Huntington Bancshares beats Q2 profit estimates on interest income strength

    Largely positive reports from big U.S. banks this week have helped restore investor confidence in the industry following the collapse of three banks in the country earlier this year.Huntington’s shares were up marginally in premarket trading.A rate hike campaign by the U.S. Federal Reserve has allowed lenders to charge higher interests on loans, bolstering their net interest income (NII) – the difference between what banks earn via lending and pay out on deposits.Huntington’s NII jumped 7% to $1.35 billion, helping offset the hit from provisions for credit losses that rose 37% to $92 million in the three months ended June 30. Total commercial loans in the quarter were $68.14 billion, up 6% from last year.However, Columbus, Ohio-based Huntington lowered its forecast for annual NII growth, mirroring moves by some of its peers suggesting that high borrowing costs could begin to weigh on loan demand later in the year. The bank now expects NII to increase between 3% and 5% in 2023, compared to its prior forecast of a 6% to 9% growth.Comerica (NYSE:CMA) and Fifth Third Bancorp (NASDAQ:FITB) have also trimmed full-year NII growth forecasts. Huntington earned $0.35 per share in the second quarter versus analysts’ average estimate of $0.34 per share, according to Refinitiv IBES data.Deposits at banks have largely stabilized after a series of bank runs earlier this year. Total deposits at Huntington were $148 billion, up nearly 2% from the first quarter. More

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    Cerebras Systems secures $100M AI supercomputer deal with UAE’s G42

    Cerebras, headquartered in Silicon Valley in the United States, said G42 has committed to acquiring three of its Condor Galaxy systems — an innovative network comprising nine interconnected supercomputers. The first supercomputer in this network, known as Condor Galaxy 1 (CG-1), has a performance of 4 exaflops and comprises 54 million cores.Continue Reading on Coin Telegraph More

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    Investors look beyond Turkey rate hike disappointment, for now

    LONDON (Reuters) – Turkey has under-delivered on rate hikes for a second month, but foreign investors are as yet unfazed and expect fresh money flows, cooling domestic credit and rising currency reserves to provide some breathing space to the battered emerging market.Policymakers hiked interest rates by 250 basis points to 17.5% in their second meeting under new Governor Hafize Gaye Erkan on Thursday, continuing to reverse the low-rates policy that had been favoured by President Tayyip Erdogan and promising more tightening and additional measures. While that leaves the benchmark well short of inflation, which is running at almost 40%, the direction of travel is the right one, fund managers and analysts said. “The country should avoid large balance of payments challenges for now,” said Nick Eisinger, fund manager for emerging markets fixed income at Vanguard. “It is hard to establish when pressure will arise again, but it might not be for a while.”The country’s international bond prices clung to multi-month highs, with shorter-dated bonds trading just below par.Investors were betting the government would try to avert a recession ahead of local elections in March, and were reassessing the timing of much needed further rate hikes, said Liam Peach, senior emerging markets economist at Capital Economics.”There is a huge gap between rates and inflation, but investors still have faith in this policy shift,” Peach said. “They will tolerate a gradual tightening cycle if the key rate rises towards 30% at the end of the year.”International bonds are still widely held by foreign investors, though much less so the domestic ones exposed to the lira currency’s wild swings. However, that might also be changing said Paul McNamara, a London-based investment director at GAM Investments, pointing to the lower trajectory of domestic credit growth – a potential signal that Turkey might be moving away from red-hot growth that had fuelled recent boom-and-bust cycles. “As long as credit growth keeps heading down, we are becoming more positive on Turkey,” he said. “We haven’t put money to work yet, but I’d say we’re an awful lot closer to it.”The central bank on Thursday introduced a 15% minimum reserve requirement for FX-protected lira deposits in a move that bankers estimated would suck 450-500 billion Turkish lira of liquidity from the market.BETTER BUFFERSRising central bank reserves are another positive sign. Net international reserves rose to $13.25 billion in the week to July 14, continuing a rebound from record lows after the bank stopped using them to support the lira. The currency has lost more than 30% so far this year and hit a record low of 27 to the dollar this week.. Investors are focused on Thursday’s central bank’s inflation report, the first under Erkan and the first time she will hold a news conference since her appointment. “I would strongly expect a clear roadmap, especially when there are increased pressures of further inflation,” said Emre Akcakmak, a senior consultant at emerging markets fund manager East Capital. JPMorgan (NYSE:JPM) raised its inflation outlook for Turkey after the rate hike, now expecting year-end inflation at 57% versus 50% previously.Meanwhile, new money flows provide much needed relief. Summer tourism will boost hard-currency revenues though investors want to see more details on new loans from the Gulf, after the United Arab Emirates and Turkey inked several deals estimated to be worth $50.7 billion.”It’s still not clear in what shape and timing the country will get the flows, but it will definitely help,” said Cagri Kutman, senior fixed income sales at KNG Securities. “That is why people are still giving (the government) the benefit of the doubt.” More