The futures contracts of the CAC 40 (France 40) and of the main European indices signal an opening of the rising markets around 8am. On IG’s CFD courses, those of the CAC 40 posted an increase of more than 1% to 4990 points. In Frankfurt, the futures of the Dax 30 are up 0.93% and in London the FTSE 100 is at + 0.86%. The EuroStoxx 50 points to + 1.3%.
Relaxation of the Volker rule
Late yesterday afternoon, US banking regulators announced a relaxation of the Volker rule, providing a rebound in the equity markets. This easing should notably allow financial institutions governed by federal law to invest more widely in venture capital funds, and reduce the amount of liquidity reserves necessary to cover swap operations.
The Volker rule is one of the financial regulations adopted by the Obama administration after the subprime crisis. Drawing on the lessons learned from the Goldman Sachs scandal, which had bet lower on subprime loans while encouraging its clients to invest in these mortgage loans, this rule prohibited banks – with certain exceptions – from investing in speculative activities for own account and acquire hedge funds or private equity funds.
Fed Caps Dividends From Major US Banks
The news of its easing supported indices and bank stocks late in the afternoon, but they were then weighed off the market by another announcement, this time from the Fed, which indicated that the dividends of the big banks would be capped and share buybacks frozen at least until 4e quarter 2020. For the next two periods, banks will not be able to pay a dividend amount greater than that paid on 2e quarter, and this amount may not exceed their average profits calculated over the last four quarters.
The Fed’s decision follows a series of stress tests carried out on 34 establishments: according to simulations carried out on the basis of a “W” recovery scenario, the Fed estimated that these banks could suffer some 700 billion dollars in loan losses.
The situation of the coronavirus in the United States also remains worrying. Despite an optimistic tweet from Donald Trump this morning, assuring that the country will not be confused, some southern states continue to see the number of contamination cases accelerate. In Texas, the governor announced the postponement of the scheduled deconfinement phases.
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Economic calendar
Today, the session will start with a speech by Christine Lagarde at 9 a.m. after the publication of the French consumer confidence index at 8:45 a.m. (consensus: 95). The expenditures and incomes of American households for the period of May will be published at 2:30 p.m. (consensus: 9% and -6%). Followed by the Michigan consumer confidence index for June (consensus: 79), then the number of American drilling rigs (Baker Hughes) at 7 p.m.
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