Some U.S. politicians have been calling for companies to back away from China, over concerns about national security and human rights. But Wall Street banks are instead deepening their ties. Both the U.S. and Chinese governments have cracked down on Chinese companies listing their shares in New York, hurting a lucrative business that was driven from Hong Kong. But U.S. banks that want a piece of the world’s second-largest economy – and second-biggest issuer of equities – are shifting gears to take on China’s top lenders on their own turf. (Bloomberg Businessweek | Jan 5)
Federal Reserve officials said a strengthening economy and higher inflation could lead to earlier and faster interest-rate increases than previously expected, with some policy makers also favoring starting to shrink the balance sheet soon after. Minutes published Wednesday of the Dec. 14-15 meeting of the Federal Open Market Committee showed officials were fully on board with plans to accelerate the withdrawal of the massive bond-buying program adopted at the onset of the pandemic. (Bloomberg Economic | Jan 5)
Investors dumped shares in many of the technology companies that surged during the pandemic as the looming specter of higher interest rates prompted them to buy into businesses more tightly linked to the economic recovery. With yields on U.S. government debt climbing, the appeal of many unprofitable companies – including some that had only recently gone public – has been knocked. Their valuations are dependent on potential earnings in the future and therefore sensitive to rising rates. (Financial Times | Jan 5)
Fannie Mae and Freddie Mac will raise guarantee fees for high-cost loans and second-home loans in April the Federal Housing Finance Agency said Wednesday. Starting April 1, the companies will charge fees between 0.25 percent and 0.75 percent higher for mortgages with high balances, depending on the loan-to-value ratio. The fee for mortgages on second homes will rise between 1.125 percent and 3.875 percent. (Housing Wire | Jan 5)
As 2022 begins, the overriding message from almost 50 financial institutions across Wall Street and beyond is that conditions still look good, but the rip-roaring rallies powered by the reopening are history. Growth will ease. Returns will moderate. Risks abound — but so do opportunities. (Bloomberg | Jan 3)
