Banking liquidity crunch; G-4 growth picks up; battery-makers turn to iron
Today is Tuesday, April 04, 2023, and here’s your weekly selection of essential intelligence on financial markets and the global economy from S&P Global Market Intelligence. Subscribe to be notified of each new Insight Weekly.
In this edition of Insight Weekly, we keep the spotlight on the liquidity crunch in the banking sector. US bank bond portfolios remained deeply underwater in the fourth quarter of 2022, reducing banks' access to liquidity in the fist quarter of 2023. Amid funding concerns, bank borrowing from the Federal Reserve's newly created Bank Term Funding Program jumped to $53.67 billion through March 22, up from $11.94 billion the week prior. The recent failures of Silicon Valley Bank and Signature Bank, both of which had large amounts of uninsured deposits, have prompted debate about the future of deposit insurance limits. In Europe, large banks entered the industry turmoil with liquidity levels that were well above regulatory minimums and that improved, on average, in the most recent quarter.
S&P Global's provisional Purchasing Managers' Index survey data for March points to resilience of economic growth across the four major developed world economies. Business activity rose across the G-4 economies for a second successive month, with growth accelerating at the fastest rate since May 2022. Growth hit 10-month highs in the US and the eurozone, while a nine-month high was recorded in Japan.
Energy storage and electric vehicles suppliers are turning to batteries rich in iron amid concerns over looming shortages, prices and sustainability of other essential energy transition feedstocks. Lithium-iron-phosphate batteries will rise to nearly 50% of global demand for EV batteries by 2027, according to a new report from S&P Global Commodity Insights.
Liquidity Crunch in Focus
Bank failures raise questions about future of FDIC deposit insurance limit
The recent failures of Silicon Valley Bank and Signature Bank have prompted debate about if deposit insurance limits should be raised or if the Federal Deposit Insurance Corp. should take a more unusual approach to address uninsured deposits.
—Read the full article from S&P Global Market Intelligence
European banks show liquidity strength amid market turmoil
Strong liquidity at Europe's banks, together with coordinated action by central banks, has shored up confidence in the continent's lenders.
—Read the full article from S&P Global Market Intelligence
Deep Dives
In-depth features looking at the impact of major news developments in key industries.
Financials
Silicon Valley Bank buy stands to double First Citizens' tangible book value
The discount in the deal is larger than the one New York Community Bancorp received in its recent acquisition of failed lender Signature Bank.
—Read the full article from S&P Global Market Intelligence
Fatigue, regulation will break up US bank M&A logjam
Banks will remain cautious about M&A in the near term but will increase consolidation again to better deal with heightened regulatory requirements, industry observers said.
—Read the full article from S&P Global Market Intelligence
US bank troubles may decouple Asian central banks from the Fed
While a few central banks in Asia were already close to the end of their rate hike cycle, the possibility of fewer hikes in the US will help Asian central banks pause their tightening cycles.
—Read the full article from S&P Global Market Intelligence
Insurance
US insurers' investment exposure to failed banks, other regionals under $5B
US-based insurance underwriters hold trillions of dollars in investable assets overall and only $4.61 billion in direct investment exposure to regional banks that have recently failed or been put under review for potential ratings downgrades.
—Read the full article from S&P Global Market Intelligence
Fintech
Fate of Signature's blockchain platform unclear; customers seeking alternatives
Some customers of Signet, a real-time blockchain payment network, are pursuing alternatives after the platform was not included in the sale of Signature assets to Flagstar Bank, a unit of New York Community Bancorp.
—Read the full article from S&P Global Market Intelligence
Real Estate
CorEnergy suspends, 7 other US REITs slash dividends
About 40% of publicly traded US equity real estate investment trusts still have lower dividends compared to their pre-pandemic levels, while 60% of REITs now have equal or higher dividend payouts than before.
—Read the full article from S&P Global Market Intelligence
Credit and Markets
Flash PMI data signal accelerating developed world economic growth in March
Business activity rose across the US, UK, eurozone and Japan for the second month in a row in March.
—Read the full article from S&P Global Market Intelligence
Overheated job market defies Fed's rate push even as construction openings fall
Although signs point to construction jobs peaking, there is a long way to go to reverse the tightness in the sector and the broader US labor market.
—Read the full article from S&P Global Market Intelligence
Banking turmoil drives investors to mega-cap tech stocks
The Nasdaq 100, a group of large, mostly tech companies, is up 16.7% since the start of 2023.
—Read the full article from S&P Global Market Intelligence
Assessing the debt market fallout from banking sector instability
Bond market conditions have improved following UBS's takeover of Credit Suisse and with US authorities providing further guidance designed to ease fears of loss among corporate and larger high net worth depositors with regional banks.
—Read the full article from S&P Global Market Intelligence
Recommended by LinkedIn
Energy and Utilities
Holiday 2022 winter storm raises reliability, generation diversity questions
Unplanned outages in wholesale markets prevented utilities in the US Southeast from importing power when demand soared during a cold snap Dec. 23–24, 2022.
—Read the full article from S&P Global Market Intelligence
Weekly Pricing Pulse: Commodities down amid market turmoil
Oil prices declined after the collapse of Silicon Valley Bank amid market concerns that the fallout will hit economic growth and lower demand for oil.
—Read the full article from S&P Global Market Intelligence
Institutional investors cautious on renewable energy stocks in Q4 2022
Institutional investors bought a net 1 million shares of 10 renewable energy companies tracked by S&P Global Market Intelligence during the fourth quarter of 2022.
—Read the full article from S&P Global Market Intelligence
New US wind power capacity plummeted in Q4 2022, fell 56% annually
Despite the slowdown, the US wind industry has a five-year project pipeline of 77.2 GW through 2027.
—Read the full article from S&P Global Market Intelligence
Technology, Media and Telecommunications
451 Research: Mobile World Congress 2023: Trends and Observations
Mobile World Congress got back on its feet with full stands and extensive crowds. Discussions on the floor felt more pragmatic than years past, especially on topics like Open-RAN or Open Radio Access Network technology.
—Read the full article from S&P Global Market Intelligence
Metals and Mining
Metals and mining Research: Mining M&A in 2022 – Copper targets favored over gold
Reversing a four-year trend, buyers spent more on base metals than on gold, with copper driving the difference.
—Read the full article from S&P Global Market Intelligence
Iron age: Battery-makers turn to most mined metal on Earth
Makers of lithium-ion and alternative batteries are parlaying the advantages of iron into a wave of new US factories and contracts, leveraging new federal manufacturing incentives.
—Read the full article from S&P Global Market Intelligence
The Week in M&A
New York Community accelerates transformation with Signature Bridge Bank deal
Deal for failed Silicon Valley carries record estimated cost to FDIC at $20B
Brookfield fund's Australian utility deal builds decarbonization portfolio
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Written and compiled by Roma Arora.