Technology and health care stocks tend to underperform against the S&P 500 in election years, according to analysis from Dow Jones Market Data. Currently, the strength of the wider US economy is bolstering stock prices while the health care and technology sectors face political headwinds.
Jobs created in the UK in the three months through November increased at the fastest rate in almost a year, potentially weakening the case for the Bank of England to cut interest rates. "The rebound in employment and slightly softer pay growth will give the [Monetary Policy Committee] another reason not to cut rates from 0.75% to 0.5% at their next meeting," Capital Economics economist Thomas Pugh says.
ABN Amro chief executive Kees van Dijkhuizen says negative interest rates are preventing Europe's banking sector from competing effectively against its US rivals. He added it was "important" to consider how tax cuts could improve the business environment for banks.
The rise of exchange-traded funds and new technologies is putting the business model of fixed-income trading at US banks under pressure to innovate in order to survive.
UBS has cut its earnings targets after its investment banking division reported a 50% fall in profits during 2019, bringing annual net income down 5% to $4.3 billion. Several of the bank's US rivals have benefited from exposure to a more dynamic US economy as opposed to European and Asian markets.
Some 60% of banks saw their December revenue grow over November, compared to 14% of non-bank futures commission merchants, according to research from Acuiti. In the UK, 58% of banks achieved higher revenues compared to 15% of non-bank FCMs, while in the rest of Europe 76% of banks saw increases against 5% of non-bank FCMs.
Interest rates appear unlikely to fall further and regulatory pressures are easing, but some global banks now face the possibility of the leveraged-loan market turning sour.
The UK Financial Conduct Authority's establishment of firm deadlines to replace Libor with the Sterling Overnight Index Average signals the regulator's frustration with slow progress, sources say. "On the basis of that frustration, they're now setting tangible time scales, which sets the tone for what's going to be a very pivotal year in the transition," says Nick Kent, Libor transition delivery lead at NatWest Bank.
The European Central Bank and the Bank of England say they and other central banks, with assistance from the Bank for International Settlements, are jointly reviewing potential benefits of issuing digital currencies. BoE Deputy Governor Jon Cunliffe and former ECB official Benoit Coeure are leading the study.
The financial services sector must embrace new technologies such as the blockchain in order to compete effectively against new market entrants, say industry insiders. Crypto Valley president Daniel Haudenschild said 2020 would emerge as "the year of infrastructure" as new players enter the market, encouraged by negative interest rates and a lack of alternative investment vehicles.
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