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NEW YORK (Reuters) – Bargain hunters are swirling around beaten-down shares of U.S. banks, even as skeptical investors say the sector’s problems are likely to persist for some time. The S&P 500 bank index is down around 11% in 2023, a year that began with the failure of Silicon Valley Bank and several other lenders in the worst banking crisis since 2008. The broader S&P 500, by contrast, is up around 15%.Bank stocks are at an all-time low compared with the S&P 500 based on relative prices, according to data from BofA Global Research. That tumble has made their valuations attractive to some investors: the sector trades at eight times forward earnings, less than half of the 19.7 valuation of the S&P 500. “Right now, you can’t say for sure whether the attractive valuations are merely a value trap,” said Quincy Krosby, chief global strategist at LPL Financial (NASDAQ:LPLA), referring to a term describing stocks that are cheap for good reason.One key factor for bank stocks is whether the Federal Reserve is close to wrapping up a monetary tightening cycle that has brought the highest U.S. interest rates in decades. Elevated rates allow lenders to charge customers higher interest. But they also increase the allure of short-term bonds and other yield-generating investments over savings accounts, while hurting demand for mortgages and consumer lending.Few investors believe more rate increases are in store. Yet signs the Fed may keep rates around current levels through most of next year have weighed on bank stocks. Nevertheless, some contrarian investors appear to be moving into the sector: the Financial Select Sector SPDR Fund received net inflows of $694.59 million in the week ending on Wednesday, its best weekly showing in more than three months. This month, analysts at BofA Global Research said investors should “selectively” add exposure to bank stocks in anticipation of an interest rate peak. Most risks to the sector stem from higher rates, they said, including margin pressure due to rising deposit costs and problems with commercial real estate. Famed investor Bill Gross said last week he believed the sector had hit bottom and added he was holding a number of regional bank stocks, fueling sharp rallies in their shares. “We think there is a lot of hidden value in banks if you are selective,” said Neville Javeri, a portfolio manager at Allspring Global Investments who is overweight banks relative to the S&P 500 in the portfolios he manages. Javeri believes larger banks have significantly cut costs and are poised to raise dividends and increase buybacks, helping them weather a period of slower loan growth.Among stocks recommended by BofA’s analysts are shares of Goldman Sachs and Fifth Third Bancorp (NASDAQ:FITB). Investors are awaiting U.S. consumer price data next week, for a glimpse of how the Fed is faring in its fight to keep lowering inflation from last year’s multi-decade highs. A sharper than expected fall could bolster the case for the central bank to cut rates sooner. Many investors and analysts remain pessimistic on bank stocks.Historically high mortgage rates have weighed on lending. Overall, about 61% of all outstanding mortgages have an interest rate below 4%, according to the Apollo Group, leaving consumers little incentive to refinance or move. The average contract rate on a 30-year fixed-rate mortgage dropped in the week ended Nov. 3 by a quarter percentage point to 7.61%, the lowest in about a month.Meanwhile, analysts have been cutting growth estimates for financials, which includes not only banks but insurance companies, as the Fed maintains it will keep rates higher for longer. This could hurt mortgage loan growth. The financial sector is expected to post earnings growth of 6.2% in 2024, nearly half of prior estimates from April that showed 11.4% earnings growth, according to LSEG data. “You don’t have any certainty that you’ve seen the worst of it and things are getting better,” said Jeff Muhlenkamp, lead portfolio manager at Muhlenkamp & Company. More

Skittish financial markets are stuck in an “endless loop” as traders’ reactions to comments from central bankers make it more complicated for those policymakers in their battle with inflation, say analysts and fund managers. In recent months central bankers have signalled that the series of aggressive interest rate rises to curb price pressures may shortly be over. That would bring an end to policies that have seen benchmark lending rates in the US and Europe hit their highest levels in more than a decade.But as the cycle of rate rises draws to a close, policymakers are finding that firmer guidance for the market is creating a Catch 22 situation.Any indication that rates will start falling has triggered a rally in bond prices, pushing yields lower. This lowers borrowing costs, which in turn can ease the tight financial conditions that central bankers have been trying to create in order to bring inflation back to target. That puts the onus back on to policymakers to consider extended higher rates, investors and analysts say.Markets now find themselves in “an endless loop where everyone is frustrated”, said Dario Perkins, head of global macro at research firm TS Lombard. “I guess we just bump around until we get some clarity on whether it’s a hard or soft landing [for the US economy].”Central bankers and markets have found themselves in such a loop in recent weeks.In quick succession, the US Federal Reserve, the Bank of England and the European Central Bank kept borrowing costs on hold.The Federal Reserve’s move in particular helped fuel sharp market rallies on both sides of the Atlantic. Treasury yields suffered their biggest weekly decline since the collapse of Silicon Valley Bank in March last week, while Wall Street’s S&P 500 stocks index rose for eight consecutive sessions from October 27, its best run in a year.Those moves were the equivalent of a 0.5 percentage point interest rate cut, according to Goldman Sachs analysts. An index of US financial conditions — a proxy for market conditions that determine borrowing costs for companies — eased to the lowest level since April 2022 for the week ending November 3, according to an index compiled by the Chicago Federal Reserve.After the ECB left rates at 4 per cent, president Christine Lagarde stressed that it was “totally premature” to consider rate cuts. Nonetheless markets are pricing in more than 0.8 percentage point of cuts by the end of 2024.“This seems to be a bit excessive and we are now facing a co-ordinated effort by ECB policymakers to push against those market-implied rate cuts,” said Christian Kopf, head of fixed income at Union Investment.The ECB is not alone. Andrew Bailey, governor of the Bank of England, warned on Wednesday it was “too early” to think about rate cuts, days after his chief economist Huw Pill suggested it was reasonable for markets to expect rates to fall from the middle of next year.Fed chair Jay Powell on Thursday told markets not to be “misled” by good data on prices, sparking a sell off in bond markets that pushed up 10-year Treasury yields by 0.08 percentage points this week. German Bund yields, the eurozone benchmark, have risen 0.1 percentage point since Monday.Some analysts say that Powell’s hawkish comments suggest the Fed would prefer to tighten financial conditions through higher Treasury yields rather than through further rate increases. But this creates a dilemma for the Fed, because any signal that higher yields are doing the job of bringing down inflation could prompt investors to buy bonds in anticipation of lower rates. This fall in yields then negates what the central bank was trying to achieve.“Buying bonds in anticipation of the Fed ending its tightening cycle because high bond yields have done the tightening for it is a self-defeating strategy,” said Benjamin Picton, senior macro strategist at Rabobank.While the market and central bankers try to second guess each other, falling yields may begin to ease the credit conditions for companies that have been tightened by higher interest rates.Before Thursday’s sell-off, the rapid decline in benchmark yields had helped to pull down borrowing costs for risky US companies. The average yield on US junk bonds now sits at roughly 9 per cent, according to Ice BofA index data, down from more than 9.5 per cent just three weeks ago.Some investors worry that central banks want to see further evidence of the impact of sustained rate rises before declaring the tightening cycle is over, particularly as it takes several months to feed through to their economies.Compounding the problem for policymakers, market sentiment and underlying lending conditions can diverge. The Fed’s latest Senior Loan Officer Opinion Survey showed that “significant net shares of banks reported having tightened standards on [commercial and industrial] loans to firms of all sizes” over the third quarter of 2023.Next week’s inflation data in the US and the UK will give the latest indication of the extent to which tighter policy is starting to feed through.Mark Dowding, chief investment officer at BlueBay fixed income, said the US reading could be stronger than the market expects. “We continue to operate in an environment of macro uncertainty, and it feels that there is plenty still in play before 2023 is done,” he said.But as inflation numbers decline, conviction that interest rates have peaked is only likely to grow, encouraging the market to anticipate interest rate cuts — making it more difficult for central bankers to be taken at their word.The recent “risk-on environment” in markets and the corresponding easing of financial conditions “is not a good thing from the Fed’s perspective, which is why I think we got that hawkish Powell language [on Thursday] around the fact that the Fed’s not convinced it has nipped inflation in the bud”, said Kristina Hooper, chief global market strategist at Invesco.“We’re going to get more hawkish Fed speak. But . . . it’s very performative,” Hooper added. More

Macklem emphasized the need for fiscal and monetary policies to work in tandem to effectively combat inflation. However, the current economic approach by the government is drawing scrutiny over its impact on Canadians’ ability to secure affordable mortgages. The Bank of Canada’s aggressive strategy to quell inflation has involved hiking interest rates ten times within a span of 19 months. This measure has led to a substantial increase in mortgage payments, which have skyrocketed by 150% since 2015 for an average family home.The financial strain on Canadian households was highlighted in a survey by Edward Jones Canada, which pointed out the growing stress among citizens due to the current economic conditions. Adding to this, a community-wide mortgage survey conducted by MP Tracy Gray revealed that many respondents are struggling with their mortgage payments. The survey indicates a concerning trend of increased mortgage defaults and forced sales, with some individuals fearing the loss of their homes due to unaffordability.Despite promises made back in 2015 by the Prime Minister to enhance the availability of affordable housing, the reality has been starkly different. Since then, rents, mortgage payments, and down payments have all doubled. Compounding these challenges is a report from the Canada Mortgage and Housing Corporation indicating a decrease in housing starts nationwide. This decline exacerbates the housing crisis and reflects poorly on the government’s ability to follow through on its commitments.For those who fail to meet stringent mortgage stress tests but are desperate to retain their homes, high-interest alternative lending has become an increasingly common recourse. Additionally, construction costs have surged due to high interest rates and a weak Canadian dollar, placing further pressure on Canada’s housing market.In light of Remembrance Day, Tracy Gray urged Kelowna-Lake Country residents to honor veterans by visiting Kelowna’s City Park’s Field of Crosses memorial and purchasing poppies to support local veterans and their families. Gray also shared a Remembrance Day video tribute from the National War Memorial in Ottawa through her social media platforms.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

Key components of the index showed a significant downturn, with the gauge for current economic conditions falling to 65.7 and expectations for the next six months dropping to 56.9, both reaching their lowest points in half a year. This drop in confidence comes despite the United States experiencing its fastest third-quarter economic growth in over a decade, excluding years affected by the pandemic.Inflation expectations have also risen to 4.4%, influenced by lingering effects from a gas price increase late in the summer. Although the official inflation rate is currently at 3.7% based on the consumer-price index, experts like Damian McIntyre from Federated Hermes (NYSE:FHI) are pointing out the tough spot consumers find themselves in, caught between inflation pressures and higher borrowing costs.Despite these concerns reflected in consumer sentiment, stock markets showed resilience today with both the Dow Jones Industrial Average (DJIA) and the S&P 500 seeing gains during trading sessions. Economists are advising caution, however, as they anticipate potential economic slowdowns due to the impact of increasing interest rates on growth momentum.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

In February 2021, following a forensic auditor’s report, the NSE had instructed Kotak Mahindra Bank not to invoke a pledge in Arcadia’s account until there was clarity on the ownership of the shares in question. Subsequently, Central Depository Services (India) Ltd (CDSL) imposed a debit freeze on Kotak, which is not a trading member of the exchange.Kotak Mahindra Bank challenged these directives at the SAT, which in August 2022, overturned both the NSE’s and CDSL’s orders. The SAT’s decision pointed out that the NSE and CDSL had overstepped their jurisdictional boundaries.The NSE contested SAT’s ruling at the Supreme Court, arguing that the tribunal had misinterpreted the provisions of its standard operating procedure. Furthermore, NSE claimed that SAT had underestimated its legislative power to regulate financial relationships with investors and the general public on its platform.Justice Sanjiv Khanna, leading the Supreme Court bench, dismissed NSE’s appeal against this ruling. The dismissal reinforces SAT’s position that regulatory bodies must operate within their prescribed limits and underscores the importance of clear jurisdictional authority in financial market regulation.As we delve deeper into the financials of Kotak Mahindra Bank (KTKM), InvestingPro’s real-time data and tips provide us with some interesting insights.InvestingPro highlights that KTKM yields a high return on invested capital and has consistently increased its earnings per share over the past few years. These are positive indicators of the bank’s ability to generate profits relative to the capital it has invested in its business.On the flip side, InvestingPro also points out that KTKM is quickly burning through cash. This could potentially lead to a reduction in dividends, despite the bank having raised its dividend for three consecutive years.Moreover, KTKM is trading at a low P/E ratio relative to its near-term earnings growth. This suggests that the market may be undervaluing the bank’s growth prospects.The InvestingPro platform offers numerous other tips and data points for investors looking to delve deeper into KTKM’s financials. Given the bank’s current legal tussle, these insights could prove valuable for investors trying to understand the bank’s financial health and future prospects.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

This article is an on-site version of our Disrupted Times newsletter. Sign up here to get the newsletter sent straight to your inbox three times a weekToday’s top storiesEuropean Central Bank president Christine Lagarde warned that falling eurozone inflation could yet rebound and that it would take more than “the next couple of quarters” for the ECB to start cutting interest rates. Israel’s prime minister Benjamin Netanyahu admitted that the war against Hamas in the Gaza Strip was taking longer than expected as the country faced growing pressure over the soaring Palestinian death toll and its ultimate objectives from the military operation. Israel-Hamas war: Full coverageJoe Biden will press Xi Jinping on the need to revive communications between the two powers’ militaries when the US and Chinese presidents hold a summit ahead of the Asia-Pacific Economic Cooperation forum next week.For up-to-the-minute news updates, visit our live blogGood evening.New data showing the UK economy stagnating and productivity at “alarming levels” underline the challenge facing chancellor Jeremy Hunt as he seeks to restore growth in his upcoming Autumn Statement.Gross domestic product was unchanged in the three months to September, down from an expansion of 0.2 per cent in the previous three months, slightly better than economists had expected and in line with Bank of England forecasts. The monthly rise of 0.2 per cent was also better than expected and eases some concerns that high interest rates were pushing the economy into recession.The figures leave the UK towards the bottom of the league table of major economies relative to pre-pandemic levels.Hunt said his statement on November 22 would “focus on how we get the economy growing healthily again by unlocking investment, getting people back into work and reforming our public services so we can deliver the growth our country needs.” He is being pressured by some Tory colleagues to announce tax cuts but others have warned him not to fund them by cutting benefits for the poorest.The scale of the struggle facing Hunt was underlined yesterday by official data showing UK productivity, the key driver of rising living standards over the longer term, has basically been flat since the financial crisis. Trade looks unlikely to come to the rescue, with serious economists united on the damage done by Brexit, even if, as Peter Foster details in his latest Britain after Brexit newsletter (for Premium subscribers only), government ministers attempt to deny its impact. Many SMEs have simply given up trading with the EU because it is too complicated, he writes.The Bank of England is fairly gloomy about the outlook. Governor Andrew Bailey warned last week there was a long way to go before policymakers could relax about inflation and on Wednesday reiterated that it was too early to start talking about interest rate cuts. Last week it kept rates on hold at 5.25 per cent, the highest level since the financial crisis. Higher borrowing costs have had a huge impact on activity in sectors such as construction, which survey data this week showed contracted in October after the 11th consecutive monthly fall in housebuilding.Cost of living pressures are also still hurting consumers. Motorists, for example, have not benefited from falling wholesale fuel costs because of weak forecourt competition. And many of those who can afford to put money away are likely to face a tax charge for the first time this year as higher interest on savings accounts pushes their earnings beyond the tax-free threshold. On the positive side, sector data this week showed grocery inflation slowing to single digits for the first time in 16 months.The big picture from today’s data however was “still one of a stagnating economy” according to Thomas Pugh of consulting group RSM UK. “We doubt growth will materially pick up until towards the end of next year, meaning that the spectre of recession will hang over the UK economy for a long time yet.”Need to know: UK and Europe economyThe Bank of England asked 53 major financial institutions to model the impact of a sharp rise in sovereign and corporate bond yields around the world in a stress-testing exercise. A “massive” new government package of tax subsidies for German industry worth up to €28bn by 2028 to help manufacturers cope with high energy costs is likely to draw criticism from Brussels.Ukraine warned that political squabbling between EU capitals on €50bn of support for Kyiv was putting the country’s “macro-financial stability” at risk, adding to concerns about future funding from the US. The European parliament yesterday voted against big cuts in petrol engine emissions in a new setback for Brussels’ green agenda. It did however agree to regulate for the first time the amount of microplastics shed from tyres and brakes.The needs of Russia’s army and its weapons factories are leaving civilian sectors with painful labour shortages as well as destabilising the broader economy. Russia has added at least Rbs3.4tn ($37bn) to its budget for this year, further aggravating inflationary risks.Need to know: Global economyUS Federal Reserve chief Jay Powell echoed his ECB counterpart by warning against being “misled” by good data on prices, saying the goal of returning inflation to its 2 per cent target had a “long way to go”. Falling pork prices dragged China back into deflation as the consumer price index dipped at an annual rate of 0.2 per cent in October. CPI in China was unchanged in September.Kim Jong Un is back. A new Big Read details how the North Korean dictator has built up alliances with Russia and China and continued to develop nuclear weapons. “He survived [Donald] Trump, he survived the sanctions and he survived the pandemic,” said one academic. “Who in his position would not feel triumphant?”Need to know: businessICBC, China’s largest bank, is trying to minimise losses after a ransomware attack disrupted the US Treasury market by forcing ICBC’s clients to reroute trades. Allen & Overy, the UK-based law firm, has also fallen victim to a ransomware hack. Columnist Gillian Tett says criminals are increasingly targeting US corporations but the White House wants them to stop paying.Apple was dealt a blow in its €14.3bn tax dispute with Brussels after an adviser to the EU’s top court said an earlier ruling over its business in Ireland should be shelved. The iPhone maker is also in trouble over its alleged favouring of immigrant workers over US citizens and green card holders.Switzerland’s Richemont, owner of the Cartier jewellery brand, became the latest luxury group to signal a slowdown in the market as it reported first-half profits of €1.51bn, short of a forecast €2.17bn.The story of how Carlsberg lost Baltika, its Russian business, is a return to the 1990s in more ways than one: the Kremlin’s moves to reward loyalists with seized western assets could constitute the biggest shift of wealth since the birth of the oligarchy in the early days of Russian capitalism. Science round-upThe Copernicus European Earth observation agency said the earth was on track for its hottest year ever after a record-breaking October. The world is now edging closer to the 2015 Paris agreement goal of limiting the rise in average temperatures to ideally 1.5C, or well below 2C, since the industrial era.You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.US beef prices hit a record high as droughts in the south and west turn green pastures into dust fields and fuel higher feed costs. Scientists say the US is facing its worst dry spell in 1,200 years.An unprecedented drought in the Amazon rainforest region, caused by a combination of the El Niño weather event and an unusual patch of warm water in the Atlantic Ocean, has extreme implications for the planet’s climate. As extreme heat and water shortages kill trees and spark fires, the forest releases carbon dioxide, fuelling the process of global warming that was a key factor behind the drought in the first place. France, Germany and Italy agreed to pump an extra €340mn a year into the troubled Ariane 6 heavy-lift rocket programme in an attempt to ensure Europe’s future in space. Wegovy, Novo Nordisk’s obesity drug, has for the first time a direct competitor: Eli Lilly’s injectable tirzepatide. It is already sold under the name Mounjaro in the UK as a diabetes treatment but in the US it will be sold for weight loss as Zepbound. AstraZeneca is also entering the market with an oral obesity drug.A UK minister has demanded the dissolution of an advisory committee on equality, diversity and inclusion at the leading research funding agency because of some members’ views on the war in Gaza. Commentator Anjana Ahuja says cool heads must now prevail to stop science becoming a new front in a damaging culture war.Some good newsDespite policy roadblocks and the seemingly inexorable rise in temperatures (see above), economics commentator Chris Giles offers some reasons to be cheerful. Progress towards decarbonisation is still moving rapidly, he argues, helped by a continued sharp reduction in the costs of mitigating global warming. Recommended newslettersWorking it — Discover the big ideas shaping today’s workplaces with a weekly newsletter from work & careers editor Isabel Berwick. Sign up hereThe Climate Graphic: Explained — Understanding the most important climate data of the week. Sign up hereThanks for reading Disrupted Times. If this newsletter has been forwarded to you, please sign up here to receive future issues. And please share your feedback with us at [email protected]. Thank you More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Official lenders led by the IMF and Beijing, have questioned a deal to restructure nearly $4bn-worth of Zambia’s debt, in a major setback for attempts by the country to move on from a 2020 default. Zambia’s finance ministry said on Friday that multilateral agencies and governments, including its biggest lender, China, had “expressed reservations” about an agreement in principle that the government had reached with private creditors last month. It did not disclose details, but said the reservations had been aired in recent days. The finance ministry added that Zambia would “continue to discuss” a deal with its creditors. The disclosure comes after analysts pointed out that the deal struck last month meant private creditors could receive sizeable amounts of cash in the first years after a restructuring. President Hakainde Hichilema’s government needs creditor deals in order to exit a payment default dating back to the end of 2020. Without a deal, the IMF could need to reassess a $1.3bn bailout agreed last year. Zambia’s woes have highlighted the flaws in a “common framework” for sovereign debt workouts, agreed by G20 countries during the early stages of the global Covid-19 pandemic. The lack of consensus among an ever more complex cast of creditors also underlines the co-ordination difficulties in resolving emerging-market debt crises.After China and other bilateral creditors finally agreed to relief on their $6.3bn debts this year, the holders of $3bn in US dollar bonds reached an agreement in October to extend maturities and reduce the face value of claims that grew during the default.The bondholder committee agreed to directly forgo $700mn of postdated interest as part of the deal, unlike official creditors, which have preferred to avoid writedowns in favour of reducing the cash flow or economic value of their loans.Bondholders and official creditors both agreed to restructure Zambia’s debts on the condition that the IMF would revisit the health of its economy in a few years. Should the economy recover sufficiently, repayments would then increase. However, a $2bn restructured bond that is not part of this potential uplift would receive $500mn of payments in 2024 and 2025 regardless of whether Zambia met the later targets. It still has a relatively high coupon compared with official debt.The overall cut to cash flows in the bondholder deal, which still needs approval later this year, has not been disclosed by Zambia. Official creditors agreed to a roughly 40 per cent reduction.Debt Justice, a UK charity, and Zambian civil society groups said on Friday that they estimated the bondholders would take an economic hit of about one-third, if the uplift is not triggered, and based on a 5 per cent discount rate to take account of inflation. Analysts have said the plans for bondholders to recoup cash earlier than the official sector could increase tensions, should official creditors judge that it is being made possible by the money they have given up and the IMF’s bailout loans.A steering committee for bondholders declined to comment. The IMF said: “We welcome the good faith efforts on all sides and the authorities’ commitment to reaching agreements consistent with programme parameters.“Further discussions and modifications are needed to bring this initial proposal more fully into line with the requirements of the programme.” More