Tags: trading | earnings | investment | banks

Trading Skid Will Limit Earnings for Global Investment Banks

By    |   Thursday, 09 January 2014 07:04 AM

Global investment banks are paying the price for the slump in various financial markets, including bonds, commodities and currencies.

Banks have cautioned that when they start reporting fourth-quarter earnings next week, those weak markets could lead to declines in fixed-income, currency and commodity (FICC) trading revenue for the quarter, The Wall Street Journal reports.

That would represent the fourth straight decrease and the 11th in the last 16 quarters for the industry, according to the paper.

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The commodities super-cycle that began in 2000 has now clearly ended. Meanwhile, trading volume in the currency market has shrunk markedly from its 2008 high, according to The Journal. And investors have opted for plain-vanilla government bonds over complicated fixed-income securities.

At the same time, stricter regulations have pushed banks out of businesses such as energy trading and storing and transporting commodities, which used to be big money makers for them, The Journal reports.

Some experts wonder whether the trend of lower trading revenue is here to stay.

"I think it is worrying," Oppenheimer bank analyst Chris Kotowski, tells The Journal. "You can't turn around a fundamental trend . . . if that's what this is."

Others express similar concern. "We expect FICC weakness to be an ongoing structural theme--not a temporary issue--in a rising U.S. long interest-rate environment," Societe Generale analysts write in a report obtained by Bloomberg.

Investment money will gravitate toward stocks "as investors veer away from the bond bear market," they add.

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Global investment banks are paying the price for the slump in various financial markets, including bonds, commodities and currencies.
trading,earnings,investment,banks
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2014-04-09
Thursday, 09 January 2014 07:04 AM
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