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US stocks closed at a record high on May 15, driven by falling inflation and anticipation of subsequent rate cuts.
Inflation dropped to 3.4 per cent in April, resulting in speculation that the Fed will be encouraged to reduce rates at some point this year. The S&P 500 ended the day with a 1.2 per cent increase. The Nasdaq Composite, which is heavy on tech listings, climbed 1.4 per cent with a rally of “meme stocks” including GameStop and AMC.
The rally came as the US labour department released its latest consumer price index data, which was in line with expectations. Inflation fell slightly to 3.4 per cent in April from the 3.5 per cent of the previous month. This resulted in traders in the futures market pricing in the possibility that there would be two rate cuts this year, up from the one to two cuts they had previously expected.
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China’s largest state-owned banks have begun issuing their first TLAC bonds, with the aim to bring the banks in line with the Basel III requirements for bank capital.
Industrial and Commercial Bank of China began by issuing Rmb40bn ($5.5bn) of bonds, and Bank of China launched their own Rmb30bn sale.
The bonds aim to improve the capital reserves of the issuing banks, which hold the highest levels of Tier 1 capital of banks globally, to assist them in the face of a potential financial crisis.
China is home to five of the 30 banks worldwide deemed to be globally systemically important by the Financial Stability Board. To be compliant with FSB rules on bank stability, these banks are required to hold total loss-absorbing capacity equivalent to 16 per cent of risk-weighted assets by the beginning of 2025.
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High levels of public debt are putting Europe in a vulnerable position against adverse shocks, according to the European Central Bank.
In its biannual financial stability review, the ECB highlighted that Europe is at risk of shock from geopolitical tensions and high interest rates, driven by the lack of progress on reducing public debt levels. It pointed specifically to those countries that had not removed the support measures introduced to protect businesses and consumers during the pandemic, and in the early days of the war in Ukraine.
Sovereign debt levels were also noted to likely remain high, with “lax fiscal policies” noted as being the main cause for concern. This combination of loose fiscal policy and high debt levels could deter investors.
The report stated that, by comparison, household and corporate debt levels had now both fallen back to below pre-pandemic levels.
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The European Bank for Reconstruction of Development has re-elected Odile Renaud-Basso as president for a second term at its annual meeting in Yerevan, Armenia.
Renaud-Basso was first elected EBRD president four years ago. The new result means she will retain her role until 2028. She received the double majority of votes required for election, coming from both bank governors’ and members’ votes.
In a statement on the election, Renaud-Basso said: “Leading the EBRD since 2020 has been an honour and privilege, given its vital role in so many different regions in an era of unprecedented geopolitical tension. I would like to thank our shareholders for their support and trust over the last few years and again here in Yerevan. I will now strive to repay their confidence by delivering even more impact, further transforming the bank and expanding co-operation with our partners.”
Under her tenure, the EBRD has moved to support Ukraine through the war, and increased the proportion of support it provides to green projects.
