Official figures from the Office for National Statistics (ONS) indicate that the UK economy grew more slowly than first estimated in the first three months of the year as the key services sector appears to have lost momentum. Economic growth for the quarter slowed to 0.2% which was down from the original estimate of 0.3%. The ONS commented that there had been a slowdown in consumer-focused industries, such as retail sales and accommodation, partly due to rising prices. In the last quarter of 2016 the UK economy had expanded by 0.7% but many economists have been expecting it to slow this year as they predict consumers will cut back on spending in the face of accelerating inflation.
In contrast the U.S. economy grew at a faster pace than initially thought in the first three months of the year. The latest official figures indicated that the economy expanded at an annual pace of 1.2% in the quarter which was up from the previous estimate of 0.7%. The change came after upward revisions to business and consumer spending. The initial estimate had been seen as a blow to US President Donald Trump who had pledged in his election campaign to raise growth to 4.0%. However the revised figure still represents a slowdown from the 2.1% annual growth rate recorded in the final quarter of 2016. The report also revised down the previous year’s estimates for wages and salaries which analysts believe could mean U.S. consumers have less of a financial cushion going forward.
A group of small shareholders have reached a settlement with the Royal Bank of Scotland (RBS) over claims that they were misled about the bank’s financial state before it asked investors for £12.0bn in 2008. The 9,000-strong RBS Shareholders Action Group has confirmed that it has accepted an offer of 82p a share which is almost double the original offer made by RBS. Although the amount is lower than investors had hoped it is understood that Trevor Hemmings, the leisure magnate who bankrolled the action, has decided to accept the offer and so is no longer willing to fund the action.
The price of the existing small publicly-traded shares of Allied Irish Banks p.l.c. (AIB) once again rose sharply over the week by 19% on growing expectations that the Irish Government will shortly approve the long-awaited re-flotation of the bank in order to return it to the private sector. This could raise between €2.5bn and €3.0bn according to analysts.
Moody’s has downgraded the long-term credit and bank deposit ratings for six Canadian banks as part of a general rating action, citing a more challenging operating environment for banks in Canada for 2017 and beyond which they believe could lead to a general deterioration in the banks’ asset quality. Moody’s point to weakening credit conditions in the domestic economy including an increase in private-sector debt to a hefty 185% of the country’s gross domestic product (GDP) as well as elevated house prices. In Moody’s view this is likely to leave Canadian banks and consumers more vulnerable to the downside risks facing the Canadian economy than they have been in the past. The banks affected by the rating action are Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada and Toronto-Dominion Bank who were all downgraded by one notch with “negative” outlooks.
Moody’s has also downgraded its sovereign credit rating on China which has added to worries about the global impact of slowing growth and rising debt in Asia’s economic powerhouse. Moody’s has cut China’s rating by one notch to A1 from Aa3 in its first downgrade of the country in nearly 30 years as it expects the financial strength of the economy to erode in coming years as growth slows and debt continues to rise. China’s massive debt has been at the centre of concerns among economists for some time as they believe that Beijing is walking a fine line as it tries to contain financial risks. China’s finance ministry have commented that the downgrade by Moody’s is unjustified as they believe it is based on inappropriate methodology and exaggerated difficulties facing the economy while underestimating reform efforts. Chinese authorities have stepped up regulatory curbs in recent months to defuse financial risks and have cracked down on risky lending practices with the central bank moving toward tighter policy. But economists regard the steps taken as erring too much on the side of cautious in order to avoid a sharp brake in economic growth.
|5-YEAR CDS SPREADS AND SHARE PRICES|
|Movements over the Last Week|
|Date:||30th May 2017|
|5-Year CDS Spreads (bps)||Equity Share Prices|
|ABN AMRO Groep N.V.||n/a||n/a||n/a||23.41||23.57||-0.7%|
|Parent: Aldermore Group plc|
|Aldermore Bank plc||n/a||n/a||n/a||246||257||-4.0%|
|Allied Irish Banks||44||44||0.0%||8.60||7.20||+19.4%|
|Parent: Arbuthnot Banking Group plc|
|Arbuthnot Latham & Co.||n/a||n/a||n/a||14.82||14.92||-0.6%|
|Aust and NZ Banking Group Ltd||65||60||+9.2%||28.22||28.50||-1.0%|
|Banco Bilbao Vizcaya Argentaria S.A.||91||85||+6.9%||7.45||7.41||+0.5%|
|Parent: Barclays plc|
|Barclays Bank plc||59||60||-1.6%||212||214||-1.0%|
|BNP Paribas S.A.||52||56||-7.9%||66.39||65.67||+1.1%|
|Parent: Close Brothers Group plc|
|Close Brothers Limited||n/a||n/a||n/a||16.12||16.06||+0.4%|
|Credit Agricole S.A.||52||56||-6.7%||14.50||14.32||+1.3%|
|Parent: Credit Suisse Group AG|
|Credit Suisse AG||75||78||-3.2%||13.69||13.56||+1.0%|
|Deutsche Bank AG||97||99||-1.7%||16.49||17.09||-3.5%|
|Parent: HSBC Holdings plc|
|HSBC Bank plc||51||52||-2.8%||675||666||+1.4%|
|Parent: ING Groep N.V.|
|ING Bank N.V.||42||46||-9.7%||15.20||15.09||+0.7%|
|Intesa Sanpaolo S.p.A.||120||121||-0.8%||2.62||2.80||-6.4%|
|Parent: Investec plc|
|Investec Bank plc||n/a||n/a||n/a||623||601||+3.7%|
|Parent: Lloyds Banking Group plc|
|Lloyds Bank plc||52||53||-2.8%||72||72||-0.1%|
|Metro Bank plc||n/a||n/a||n/a||37.20||37.33||-0.3%|
|Nordea Bank AB||39||39||+0.1%||113||115||-1.6%|
|Parent: RBS Group plc|
|Royal Bank of Scotland plc||72||73||-1.3%||262||263||-0.5%|
|Ult. Parent: Banco Santander S.A.|
|Santander UK plc||68||73||-6.3%||5.87||5.83||+0.6%|
|Shawbrook Group plc|
|Shawbrook Bank Limited||n/a||n/a||n/a||341||341||-0.0%|
|Parent: Standard Chartered plc|
|Standard Chartered Bank||68||67||+1.5%||734||736||-0.3%|
|Svenska Handelsbanken AB||36||38||-5.2%||123||125||-1.9%|
|FTSE 350 BANK INDEX||n/a||n/a||n/a||4341||4319||+0.5%|
|SNR FIN ITRAX CDS 5-YEARS||66||69||-3.6%||n/a||n/a||n/a|