You’ve had Black Friday. Now get ready for… Super Tuesday! No, it’s not a pre-Christmas bargain bonanza – it’s far more exciting than last week’s retail spree. Well, for bank enthusiasts it is.
Super Tuesday, as some City analysts have decided to call it, brings together the Bank of England’s annual MOT of banks’ financial strength with its twice-yearly assessment of risks to the financial system. It’s not to be confused with Super Thursday – the Bank’s quarterly bombardment of economists with information on inflation and interest rates.
Central banking used to be rather a dull business, but the dry data releases and policy pronouncements are now treated almost like the announcement of Adele’s next tour. Mark Carney, the Bank’s governor, is supposedly either a rock star or a George Clooney lookalike, depending on who you talk to.
The so-called stress tests cover the high street banks – HSBC, Royal Bank of Scotland, Barclays and Lloyds – plus Santander UK, Standard Chartered and Nationwide building society.
Analysts don’t think any of the lenders will fail the main test. The real action could be a clampdown on consumer lending after the Bank’s chief economist, Andy Haldane, said the Bank was keeping an eye on rising household debt. Maybe Tuesday won’t be all that super for the banks.
Fed fever
Central bank fever will shift to the US and eurozone on Thursday when the chiefs of the Federal Reserve and the European Central Bank face questions on monetary policy.
Fed chair Janet Yellen will appear at the joint economic committee of Congress for her annual session on the economic outlook. Interest will be much higher than normal because Yellen will be speaking less than two weeks before the Fed’s final monetary policy meeting of the year. Economists expect it to announce the first interest rate rise for almost seven years, and will inspect every syllable of Yellen’s testimony for clues about policymakers’ thinking.
Yellen, ranked the world’s second most powerful woman by Forbes, said earlier this month that a rate rise in December was a “live possibility”. Economists had expected rates to rise from near zero in September but the Fed held fire amid market turmoil from China’s slowdown.
Earlier on Thursday, that other star of the central banking firmament, “super” Mario Draghi, is expected to announce further monetary easing in the eurozone to drive inflation back towards the 2% target.
Aberdeen flounders
What links Janet Yellen, Aberdeen and China? Aberdeen Asset Management, that’s what. The Scottish investment group rose to prominence as it placed bets on fast-growing emerging markets over the past decade. That strategy appeared to pay off: China and other Asian economies were unstoppable while the dull old US and UK struggled in the financial crisis.
But Aberdeen, under chief executive Martin Gilbert, has come a cropper this year as markets have been gripped by concern about China’s slowdown. The company’s shares have fallen by a third since hitting a peak of 507p in April, and investors have withdrawn billions of pounds of funds.
The flight of capital from emerging markets caused by China’s woes has been exacerbated by mounting expectations of a rate rise in the US, which is where Yellen comes in. In July, Gilbert vowed to maintain Aberdeen’s investment approach, saying: “It’s painful watching those outflows. Our style of investing is out of fashion. Hopefully people will love emerging markets again at some stage.”
But rumour had it last month that Gilbert was looking for a buyer for the company he set up in 1983. Analysts will get the chance to ask Gilbert about all this and more when Aberdeen reports results on Monday.