🏦 Are Banks Under Pressure Again?

Good morning. US stock futures ticked lower in Friday morning trading as investors awaited the latest jobs report.

🏦 US banks facing possibility of ratings downgrade

📝 Our report: Moody’s is warning that at least six US regional banks heavily tied to commercial real estate loans might soon see their debt ratings take a nosedive. The long-term ratings of First Merchants Corp., F.N.B. Corp., Fulton Financial Corp., Old National Bancorp, Peapack-Gladstone Financial Corp. and WaFd were placed on review for downgrade by the ratings provider.

 🔑 Key points:

• Regional banks with a substantial concentration in commercial real estate loans face ongoing asset quality and profitability pressures as higher-for-longer interest rates heighten longstanding risks, especially during cycle downturns, Moody’s said in separate statements.

• During the low-interest-rate environment that prevailed prior to the onset of the Federal Reserve’s rate-hike cycle, many regional banks chose to build and maintain meaningful concentrations in commercial real estate, which is a “volatile asset class,” according to Moody’s.

• The risk of downgrades brings to question the impact of commercial real estate loan portfolios that have been hit hard by higher rates on the wider banking system.

💡 So what: If Moody's downgrades six US regional banks due to their heavy exposure to commercial real estate loans, it could have significant implications for both the banks and the broader economy. The affected banks might face higher borrowing costs, reduced investor confidence, and stricter regulatory scrutiny, which could hamper their ability to lend and invest. This downgrade could also spark concerns among depositors, potentially leading to withdrawals and liquidity issues. Furthermore, the real estate market might suffer as these banks become more cautious in issuing new loans, thereby slowing down development projects and impacting businesses reliant on commercial real estate financing.

Friday - Consumer Credit, US Unemployment Rate

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💰 What’s the state of your financial health?

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🤖 US launches antitrust probe against tech giants

WHAT: The U.S. is diving into antitrust probes of tech giants Microsoft and Nvidia over their AI dominance, sources say, likely hoping to keep the AI playground fair for everyone. The investigations will be led by the US Department of Justice and Federal Trade Commission according to individuals close to the matter.

WHY: The country’s two antitrust agencies also agreed to divide responsibility over AI. The Federal Trade Commission will handle the inquiry into Microsoft’s ties with OpenAI, while the Justice Department will probe Nvidia’s dominance in AI chips, said the people, who asked not to be named discussing inter-agency negotiations.

⚖️ Amazon hit with billion dollar lawsuit in UK

WHAT: Amazon is up against a £1 billion ($1.3 billion) lawsuit from British retailers, who claim the e-commerce giant played dirty by misusing their data to pump up its own profits. The suit, brought by the British Independent Retailers Association, alleges that Amazon made use of non-public data provided by retailers selling goods on Amazon's Marketplace to offer cheaper rival products for sale directly to consumers.

WHY: Britain's Competition and Markets Authority (CMA) said in 2022 that it was investigating Amazon, including the way it selects the products placed within its "Buy Box" feature on its website.

📦 “No-tariff” shipments likely to hit speedbump in US

WHAT: A new U.S. crackdown on customs brokers managing billions in cheap online orders from giants like China-linked Shein and Temu is set to cause delivery delays and bottlenecks, industry experts warn. U.S. Customs and Border Protection announced it suspended "multiple" brokers from an expedited clearance program for those duty-free, direct-to-consumer imports partly over concerns that contraband was being brought into the country this way.

WHY: The crackdown comes as more than 1 billion packages, averaging around $50 in value, are forecast to arrive in the U.S. this year driven by robust consumer demand for fast-fashion made by Chinese factories, among other things.

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