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IMF warns of higher recession risk in US; 2 SD banks to merge into Minnwest Bank


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IMF warns of higher recession risk in US; 2 SD banks to merge into Minnwest Bank

The International Monetary Fund warned against the negative impact of U.S. tax cuts and increased government spending, saying they increase the risk of a recession within the next couple of years. In a report, the IMF said fiscal stimulus could result in an inflation surprise, which might push the Federal Reserve to raise interest rates more quickly than expected. On June 13, the Fed raised its benchmark interest rate to 1.75% to 2%, and signaled it may take a faster path on rate hikes this year.

In other regulatory news, the Fed finalized a rule that placed a cap on large banks' credit exposures to other banks. U.S. bank holding companies with at least $250 billion in assets that are not deemed systemically important will only face the 25% requirement guarding against their exposure to single counterparties. Meanwhile, global systemically important banks' credit exposure to other systemically important institutions was limited to 15% of their Tier 1 capital. G-SIBs will have to comply with the requirements by Jan. 1, 2020, while others will have until July 1, 2020, to do so.

The Financial Supervisory Service, South Korea's integrated financial regulator, has launched a probe and may fine Goldman Sachs Group Inc.'s branch in Seoul for alleged naked short selling, The Korea Times reports. On May 30, Goldman Sachs International allegedly placed a short selling order for 350 stocks, of which the Seoul branch failed to repurchase 20 stocks in time. This indicated that the 20 stocks were not in its possession at the time, according to the report.

The digital token ether is not a security and the U.S. Securities and Exchange Commission is unlikely to consider regulating it, William Hinman, director of the SEC's division of corporation finance, said at a Yahoo Finance conference. Hinman was also similarly reluctant to describe bitcoin as a security needing regulation.

On the M&A front, South Dakota-based First State Bank and Peoples State Bank — both banking subsidiaries of Northeast Bancorp Inc. — are merging into Minnesota-based Minnwest Bank, reported.

Blank check company Far Point Acquisition Corp. raised $632.5 million in its recently concluded initial public offering.

And first-quarter noninterest mortgage income of U.S. banks and thrifts jumped to $4.31 billion, up from $3.12 billion in the previous quarter and $3.50 billion a year ago. Wells Fargo & Co.'s mortgage servicing assets grew 9.3% quarter over quarter to $16.45 billion, the largest among U.S. banks.

In other parts of the world

Asia Pacific: India to cut stake in IDBI Bank; former chief of Chinese regulator admits guilt

Europe: ECB to halt QE after December; Deutsche Bank off-loads $1B ship loans

Middle East & Africa: Qatar's 3-way bank merger talks collapse; Kenya to repeal interest rate cap

The day ahead

Early morning futures indicators pointed to a lower opening for the U.S. market.

In Asia, the Hang Seng was down 0.43% to 30,309.49, while the Nikkei 225 was up 0.50% to 22,851.75.

In Europe, around midday, the FTSE 100 slipped 0.75% to 7,707.44, while the Euronext 100 rose 0.15% to 1,076.62.

On the macro front

The Empire State Manufacturing Survey, the industrial production report, the consumer sentiment report, the Baker-Hughes Rig Count and the Treasury International Capital report are due out today.

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