Economy

(Reuters) – U.S. bank stocks fell before the bell on Wednesday, extending a sell-off that started after executives warned of a slower-than-expected recovery in investment banking and the expected hit to interest income from looming rate cuts.JPMorgan Chief Operating Officer Daniel Pinto on Tuesday said forecasts for 2025 net interest income (NII), or the difference between what the bank earns on loans and pays out on deposits, were overly optimistic.JPMorgan fell 0.4%, Morgan Stanley dipped 1.2% and Citigroup fell 0.5%, while Wells Fargo dropped 0.4% in premarket trading.”Bank stocks are getting hammered which seems counter to what I would have expected given the reg capital news out today. Or more likely it has to do with the bank conference going on & execs warning of overly optimistic projections for earnings/NII,” JPMorgan analyst Mark Whitworth said in a note to clients. The Federal Reserve is widely expected to lower its key policy by at least 25 basis points in its meeting scheduled next week. The higher rates boosted banks’ loan income, but easing monetary policy would lead to smaller-than-expected increases.Morgan Stanley on Tuesday also forecast modestly lower interest income in the third quarter, with President Dan Simkowitz noting that mergers, acquisitions and initial public offering activities will remain below trends for the rest of the year.Pinto expects trading revenue to be flat or rise 2% in the quarter, while Goldman Sachs CEO David Solomon anticipates a probable 10% dip due to sluggish conditions in August.Citigroup’s CFO Mark Mason told investors at a conference in New York on Monday that markets revenue is likely to drop 4%.Meanwhile, Bank of America dropped 0.6% before the bell after Berkshire Hathaway (NYSE:BRKa) disclosed it had sold shares in the second-largest lender again.The gloom overshadowed the Federal Reserve’s revised plan to raise big banks’ capital by 9%, down from 19%, on Tuesday. More

Investing.com – After a July pause, the ECB will likely lower interest rates by another 25 basis points on September 12, but unanimity is not guaranteed. While doves are increasingly concerned about growth, hawks continue to emphasize the need for further reassurances before committing to more rate cuts. So, let’s take stock of the situation and see what analysts expect from the upcoming ECB meeting.
Annalisa Piazza, Fixed Income Research Analyst, MFS Investment Management After holding its position in the July meeting and considering signs of moderation in the real economy, we expect the ECB to implement a 25 bp cut in its September meeting. This is justified by updated projections that will likely confirm a return to target inflation levels by the second half of 2025. The cut is widely anticipated and priced in.
Currently, markets are pricing around 2.25% with a gradual rate-cutting cycle as the baseline. Therefore, this week’s decision is unlikely to lead to major market moves unless the ECB hints at a faster pace of cuts in the short term (which is quite unlikely in the current situation). Instead, it’s more likely that the ECB will maintain a data-driven approach, confirming that further evidence of a decline in core inflation is needed before declaring victory.
There are two factors to watch during the press conference. The first is how the ECB assesses the further downside risks to growth (already clearly emerged in the July meeting minutes), and secondly, how firm the positions of the more “hawkish” members remain (Schnabel does not seem to have changed her mind).
With the clear increase in risks to growth, there’s an additional element of disinflation driven by demand that will need to be considered in the future. For how long is the ECB willing to maintain a distinctly restrictive approach, despite growth not meeting the baseline objective of a solid recovery driven by demand? We suspect that September is too early to abandon the data-dependency mantra. October (if inflation in the services sector corrects the August distortions) could be a good time to acknowledge that moving to less rigid positions is necessary to avoid the risk of entering a medium-term disinflationary spiral. The Fed’s communication in September will also be crucial (despite the ECB reiterating its independence from other central banks’ decisions).
Tomasz Wieladek, Chief European Economist, T. Rowe Price

The ECB will cut the deposit rate by 25 basis points this week. This is widely expected and will not surprise financial markets or anyone who followed the ECB’s communication during the summer. The recent weakness in economic growth surveys and the decline in inflation support the decision to cut by 25 basis points at this meeting.
The big question that investors and observers are asking is whether the ECB will provide any hints about the future path of monetary policy. Currently, financial markets have priced in significant monetary easing. Markets believe the ECB will move from a quarterly rate-cutting pace in 2024 to a meeting-by-meeting pace in 2025. Economists also oscillate between these two views. Therefore, financial markets and ECB watchers will carefully examine the statement and the press conference for any clues about what the ECB plans to do in the future.
Data remain volatile. Consequently, we believe the ECB will highlight that its decisions will continue to depend on their trends. We think President Lagarde will emphasize that monetary policy remains dependent on both data and forecasts. Although some survey indicators show that the economy is starting to contract in some sectors, such as manufacturing, it is holding up overall.
At the same time, HICP services inflation has not fallen below 4% since November. The labor market, the main driver of services inflation, remains tight. Negotiated wages in the Eurozone are likely to rise above 4% again in the third quarter and remain at these levels until mid-2025. These volatile data streams will lead the ECB to continue to be cautious in the future. A quarterly cut pace remains the most likely outcome.
Steven Bell, Chief Economist EMEA at Columbia Threadneedle Investments

There is no doubt that central banks are in “rate-cut mode.” The ECB is expected to cut rates this week, the Fed will likely start its easing cycle next week, and the BoE will decide whether to cut again at the end of the month or postpone it to the next meeting. The issue, however, is not so much the direction as the speed and magnitude. By the end of the year, the market expects a total of 45 basis points in cuts for the BoE, 62 basis points for the ECB, and as much as 113 basis points for the Fed. By September 2025, markets anticipate official rates just above 3.5% in the UK, 3% in the US, and just 2% in the Eurozone. All of this translates into substantial cuts and raises the question of whether markets might be disappointed.
In Europe, growth has been anaemic, with recent data showing a sharp decline in wage inflation and overall inflation close to the 2% target. The European Commission is pressuring governments to tighten fiscal policy. In this context, expectations for cuts seem reasonable.
Gilles Moëc, AXA Group Chief Economist and Head of AXA IM Research

The ECB needs to make a decision before the Fed. While we expect the Fed to be quite clear about the general “direction of travel” after its first hike, although data-dependent, we do not believe that the European Central Bank (ECB) will offer much clarity on this front after the second 25 basis point cut on Thursday.
Although there is little doubt about this Thursday’s cut, we expect the market to focus on any hints of “forward guidance” on the next steps from Christine Lagarde. In our view, the President will keep her cards close to her chest since the debate within the Governing Council is still in full swing. However, the latest data flow favours the doves: the details of the Eurozone national accounts for the second quarter confirm that firms are increasingly offsetting the labor cost push by reducing their margins.
David Chappell, Senior Fixed Income Portfolio Manager at Columbia Threadneedle Investments

Recently, the ECB has been cautious, trying to reduce market expectations for consecutive rate cuts in September and October. The current normalisation path envisages a pace of cuts every two meetings. However, the size of the first rate cut by the Federal Reserve, expected on September 18, will influence the ECB’s discussion during the October meeting, regardless of the message accompanying the second cut expected this week.
Alessandro Tentori, Chief Investment Officer of AXA IM Italia

Regarding a potential new cut by the European Central Bank expected this week, it is worth noting that a 25 basis point cut is already fully priced in by the market. However, among the ECB’s Governing Council members, there are some hawks looking for further reassurances before committing to a rate cut, so unanimity is uncertain. Additionally, Chief Economist Philip Lane recently stated that the return to the inflation target is not yet guaranteed, and monetary policy may need to remain in restrictive territory.
After the expected cuts this year and next, one might ask whether monetary policy will remain restrictive or shift towards a more neutral stance. In our view, the ECB’s Governing Council aims for a neutral monetary policy – which neither stimulates nor hinders economic growth – throughout 2025. The challenge is that neither market participants nor central bankers know exactly where the neutral interest rate currently lies. The consensus suggests it is above previous years’ levels, but its precise position – whether 2% or more – remains unknown. To determine this, a trial-and-error approach will be necessary, lowering rates and observing data reactions to assess the required extent of monetary easing.
At the end of the summer, the ECB will begin evaluating a strategy review, with an in-depth debate on issues that go beyond rate hikes or cuts and could significantly impact monetary policy. This debate will focus on two fundamental pillars: the potential definition of rules for future debt purchase programs and the design of action plans against major inflationary shocks. These elements are crucial and represent essential analysis for the future. The European Central Bank must establish rules for its debt purchase plans, whose use, according to recent studies, has had side effects. The associated costs and benefits must be better understood to define a framework for when to use them. This does not mean abandoning these measures as part of monetary policy, but they must be carefully evaluated.
Alex Everett, investment manager at abrdn
After 2021 central banks adopted aggressive tightening, and it worked: inflation is well below its peak, and financial conditions are restrictive. Now it’s time to normalise. For us, a global recession remains unlikely, so excessive rate easing is not necessary. The neutral rate for the United States is around 3%, 2% in the European Union, while the United Kingdom is probably closer to the US than the EU.
Some central banks were too slow to move during the rise, and the risk is that they are too hesitant during the fall.
The ECB committed to cutting interest rates in June and then seemed to regret the decision. The BoE made an uncomfortable cut in August, with four out of nine votes in favour of a hold.
For the ECB, growth and wages have surprised positively this year. That said, wage pressures are easing, and the slowdown in growth in the second half of the year should make the provision of cuts less debated for committee members.
SUBSCRIBE TO INVESTINGPRO NOW AND SAVE!
Take advantage of the DISCOUNTS on PRO, PRO+ and PRO+ 2-year subscriptions ⚠️
Here are all the instructions to get the discount and maximize profits with your investments:
PRO 1 YEAR
CLICK HERE to subscribe to the InvestingPro basic plan at a discount
With this subscription you will have at your disposal:
ProPicks: AI-driven, market-beating stock portfolios.
ProTips: Quick, easy insights that summarize thousands of pages of complex financial data in just a few words.
Fair Value and Health Score: 2 synthetic indicators based on financial data that provide an immediate view of the potential and risk of each stock.
Historical financial data for thousands of stocks: This way, fundamental analysis professionals can dive into all the details.
And many more services , not to mention the ones we plan to add in the near future!
So what are you waiting for?!
Act fast and join the investment revolution: get your DEAL HERE!
PRO+ AT 1 OR 2 YEARS
Alternatively, you can CLICK HERE and sign up for PRO+ our complete subscription with DISCOUNTS UP TO HALF PRICE, in addition to all the features of the Pro subscription , it offers you:
Advanced stock screener , with which you can search for the best stocks based on your expectations
Access to over 1,200 key data points
10 years of financial data on over 180,000 companies (that’s practically every stock in the world!)
Data export for offline work
Valuation of securities with over 14 proven financial models
Fundamental Charts
Useful Widgets and Dividends to Earn from Dividends
⚠️ All this costs you half of having a coffee at the bar and opens the doors to all the secrets of the world of investments! ( CLICK HERE TO SUBSCRIBE TO PRO+ FOR 1 YEAR ) ⚠️
To take all your worries off your mind and save a little more, there is also the option of subscribing to Pro+ for 2 years, taking advantage of a MAXI-DISCOUNT of 40% ): Click here to take advantage of the special two-year Pro+ rate.
CHOOSE THE PLAN THAT’S RIGHT FOR YOU:
PRO 1 YEAR – PRO+ 1 YEAR – PRO+ 2 YEARS More

(Reuters) -Rentokil Initial warned of lower annual profit on Wednesday after weaker than expected sales in its largest market North America, sending shares of the British pest control company as much as 20% down.This is the third warning about weakness in its North America business in the past year. In a conference call with analysts and investors, CEO Andy Ransom expressed disappointment in the execution of the group’s strategy, launched in March, to improve revenue growth. He, however, added that he had confidence in the plan and would not change it.The company’s shares, which have lost about a third of their value since the first North America warning in October last year, were down 20% to 380 pence at 0800 GMT. The stock was the biggest loser on the FTSE 100 index. Rentokil, which made about 60% of its revenue in North America last year, said it would cut an undisclosed number of jobs in its U.S. workforce to address cost overruns.Rentokil now expects full-year adjusted pretax profit to be about 700 million pounds ($916 million), versus the 766 million pounds it reported last year.Analysts at RBC Capital Markets had expected pretax profit of about 777 million pounds. North America sales in July and August came in lower than anticipated, organic revenue growth is now expected to grow about 1% in the second half.The company had previously expected revenue growth to be at the lower end of a 2-4% growth range. Rentokil, which bought U.S rival Terminix in 2021, has been struggling to integrate its business and said on Wednesday it saw a modest disruption to organic growth from the deal.About 5.4 billion pounds have been wiped from the pest control company’s market capitalisation since it issued its first profit warning in October 2023.”The profit warning will raise further questions on management control and visibility in the region,” Jefferies’ analyst Allen Wells said in a note.The company has also increased its spending on marketing in a bid to attract more customers in North America. Activist investor Nelson Peltz’s Trian Fund Management has built a stake in the company and in June said it was interested in discussing “ideas and initiatives”.Rentokil and rival Rollins (NYSE:ROL) account for roughly half of the U.S. pest control market, with Rentokil the larger player following the Terminix deal.($1 = 0.7642 pounds) More

The broad move will strictly approve the establishment of new insurance agencies, and improve the overall quality of the sector.The government will also support qualified enterprises to participate in the reform of insurance organisations to resolve risks and will support eligible foreign insurance institutions to set up legal entities and branches in China, according to the statement. More

Increasing demand for property, especially in the luxury space, is boosting prices not just of homes but of everything else in the city as the United Arab Emirates is expected to be the world’s top wealth magnet for the third consecutive year.
For Hussain Sajwani, chairman of Dubai property giant Damac, that’s both good news and bad.

DUBAI, United Arab Emirates — Dubai’s property scene is showing no sign of cooling off, as 2024 is on track to be another record year in terms of sales figures and property values, according to local real estate firms.
Increasing demand for property, especially in the luxury space, is boosting prices not just of homes, but of everything else in the city — just as the United Arab Emirates is expected to emerge as the world’s top wealth magnet for the third consecutive year.

For Hussain Sajwani, chairman of Dubai property giant Damac, that spells both good and bad news.
“What concerns me a little bit in Dubai is that [it’s] becoming an expensive city, and I’ve said this in the past, that Dubai [is] going to be [an] expensive city. Because whenever there is so much demand, and especially when talented people, average people are coming, they create more demand,” Sajwani told CNBC’s Dan Murphy from Riyadh on Tuesday.
“So today, to get a seat in a school is difficult … and of course, the business is going to raise prices, and inflation [is] going to be high, so Dubai is going to be an expensive city,” the chairman said. “And I hope [the] government find ways and means. And it’s not easy to find ways and means when there is a continuous influx of people to the city.”
The latest Dubai property market numbers tell a story of burgeoning demand. In July of 2024, property sales reached 49.6 billion dirhams ($13.5 billion), a 31.63% increase from the same period in 2023, according to locally-based brokerage firm Elite Merit Real Estate.
“The first half of 2024 alone saw over 43,000 property transactions valued at approximately AED122.9 billion, marking a 30% increase from the previous year,” the firm’s report released on Sept. 10 wrote, adding that the growth is due in part to the “rapid absorption of new inventory.” Around 80% of the units launched since 2022 have already been sold, the report estimates.

Aerial view of cityscape and skyscraper at sunset in Dubai Marina.
Lu Shaoji | Moment | Getty Images

“The Dubai property market is doing extremely well, and I think we’re going to continue to do well, because the demand in Europe is amazing,” Sajwani said. “Everybody wants to go to Dubai, from the taxi driver to the waiter to the businessman … Dubai now is attracting a lot of not only wealthy people, but a lot of talented people. And it’s growing in a different level from pre-Covid.”
The Damac founder noted the way in which the Covid-19 period supercharged Dubai’s popularity as a place to live: while much of the world remained in lockdowns, the emirate encouraged tourism and attracted new residents with the help of visas for remote workers and entrepreneurship.
“Dubai today is a global city, by all means, and attracting a lot of talent and a lot of businesses, we’re going to continue to grow,” Sajwani said.
Dubai has experienced a volatile boom-and-bust cycle in the past, most notably during its 2008-2009 crisis period, when the emirates’ property market crashed, and numerous investors had to default on their debts. Asked if he was worried about a similar cycle repeated itself, Sajwani expressed confidence that the system was different now.
Asked if Dubai is more stable now, Sajwani replied: “100%.”
“One of the key reason for that is that the regulations the Dubai government brought in after [the] ’09 or ’08 crash has been very good regulations. Very, very strict on developers, on customers, and on zoning,” he said. “So that regulation is helping — not everybody just can come and enter the market and just launch a project … There is very strict escrow, so the customer’s money is very much protected, and that’s what makes the market very efficient.”
Correction: This article’s headline has been updated to reflect Hussain Sajwani’s title as chairman of Damac. More

WASHINGTON (Reuters) – U.S. bank investors, analysts and executives were trying to figure out on Wednesday how lenders would fare under revised hikes in capital requirements, with considerable uncertainty over what specifics will emerge from the Federal Reserve and other regulators, and the presidential election a looming wild card. The Fed’s regulatory chief Michael Barr on Tuesday outlined a plan to raise big bank capital by 9%, easing an earlier proposal to hike capital 19%. It was a major concession to Wall Street banks that had lobbied to water down the “Basel” draft.The central bank is expected to publish the new version and start taking on industry feedback in coming weeks.Despite the apparent industry victory, analysts, executives and two regulatory sources said the plan was still mired in uncertainty, with key details unclear and the Nov. 5 election casting doubt over whether it would survive a new administration. Speaking at the Brookings Institution, a Washington think tank, Barr said on Tuesday he was not rushing to finalize the rules before the election. Vice President Kamala Harris, the Democratic candidate, has called for strong bank rules, while Republican candidate Donald Trump has pledged to cut red tape.If he won, Trump could quickly appoint Republican officials at the banking agencies who could shelve the entire plan, while a Harris administration would almost certainly finalize — if not strengthen it, analysts and industry officials have said. “The future of this proposal is very closely tied to the presidential election,” said Ian Katz, managing director of policy research firm Capital Alpha Partners. “A Basel agreement might be possible under Republican regulators, but it would look different and almost surely be easier on the banks.”The revised plan failed to buoy bank stocks on Tuesday, with the S&P 500 banking index closing down 2.88% on worries over economic growth, the trajectory of Fed interest rate cuts, and banks’ earnings outlook. “The new capital requirements are measurably lower than initially proposed. [That] should improve some thinking around better earnings growth, but all of that energy is getting sucked away,” Brian Mulberry, portfolio manager at Zacks Investment Management which holds several bank stocks, wrote in an email.In public campaigns and conversations with Washington lawmakers and regulators, Wall Street banks have argued more capital reserves are unnecessary and will hurt the economy. They have threatened to sue to kill the final rule on grounds the U.S. central bank and other agencies did not follow the proper procedure.In response, Fed Chair Jerome Powell said this summer that regulators will make “material” changes, and that the new draft should be re-proposed for public feedback. Fed officials have been at loggerheads with their counterparts at the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC), who have wanted to finalize the rule before the election, Reuters reported in June.   While Barr said on Tuesday the Fed board would vote for his revised plan, it remained unclear if the OCC and FDIC would do the same. In separate statements, FDIC Chairman Martin Gruenberg and acting Comptroller Michael Hsu said Barr’s plan reflects their joint work revising the proposal, and both were committed to ensuring the work is completed. They did not lay out how they would proceed.Jonathan McKernan, a Republican member of the FDIC board, told Reuters he would not vote for Barr’s plan because it did not go far enough to fix all the problems. A confused or unconventional roll out of the proposal would make the final rule vulnerable to litigation, lawyers have said.”Likely legal challenges and the post-election timeline for finalization” makes the future of the rule uncertain, wrote Ed Mills, an analyst with Raymond James. Still, he said “the proposals outlined today should be viewed as a material positive for the banking sector.”In a sign of that uncertainty and the sizeable capital hikes banks still face, industry groups did not claim victory on Tuesday. Most said they would study the new draft once it is published. They have spent a year fighting the Fed over the fine print of the rule, and have argued that the central bank has dramatically understated its capital burden on big lenders.Barr laid out broad changes in how the new draft would measure banks’ credit, market and operational risks, but executives and regulatory sources said the precise language would dictate which banks would win or lose, which will depend on each bank’s business model.”The devil will be in the details for this proposal, and we will need to see the actual proposal before making any final assessment as to the impact,” said Mills. More

Save over 65%$99 for your first yearFT newspaper delivered Monday-Saturday, plus FT Digital Edition delivered to your device Monday-Saturday.What’s included Weekday Print EditionFT WeekendFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysis More

AU$31 per 3 months10% off your first year. The new FT Digital Edition: today’s FT, cover to cover on any device. This subscription does not include access to ft.com or the FT App.What’s included FT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysis More