Jamie Dimon: This may be the most dangerous time the world has seen in decades.
The boss of JP Morgan has warned that the world may be in the most dangerous time it has seen in decades.
Jamie Dimon fears that the Ukraine war, and the Israel-Hamas conflict, may have “far-reaching” impacts on commodity markets, trade, and geopolitics.
Dimon made his comments as the Wall Street bank reported net profits of $13.15bn for the third quarter of the year, up from $9.737bn a year ago – although down on the $14.5bn in Q2.
Dimon warns there is a risk that inflation remains elevated and that interest rates rise further from here.
He says:
Furthermore, the war in Ukraine compounded by last week’s attacks on Israel may have far-reaching impacts on energy and food markets, global trade, and geopolitical relationships.
This may be the most dangerous time the world has seen in decades. While we hope for the best, we prepare the Firm for a broad range of outcomes so we can consistently deliver for clients no matter the environment.
$JPM | JPMorgan Chase Q3 Earnings:
– EPS $4.33
– Net Revenue $39.874B
– Managed Revenue $40.7B
– Markets & Securities Services Revenue $7.7B, Down 2%
– Banking Revenue $4B, Down 2%
– Investment Banking Revenue $1.6B, Down 6%
– Investment Banking Fees Down 3%
– Credit Costs $1.4B…— Benzinga (@Benzinga) October 13, 2023
JP Morgan’s earnings benefitted from higher interest rates, which boosted its income from loans. Loan losses remained low.
Although, the Bank says that this over-earning on both net interest income and below normal credit costs will “normalize over time”.
Key events
Closing post
Time for a recap…
The JP Morgan boss, Jamie Dimon, has warned the world may be living through “the most dangerous time the world has seen in decades” as Israel prepares to launch an expected ground offensive on Gaza.
Dimon said:
“The war in Ukraine compounded by last week’s attacks on Israel may have far-reaching impacts on energy and food markets, global trade and geopolitical relationships. This may be the most dangerous time the world has seen in decades.”
Anxiety over the Middle East has pushed up gas prices this week by the most in 16 months, due to the Israel-Hamas conflict, the damage to the Finland-Estonia pipeline, and looming colder weather.
The oil price has also pushed higher today, with Brent crude up almost 4% today at over $89 per barrel.
The chancellor, Jeremy Hunt, has warned that the government will need to take “difficult decisions” in next month’s autumn statement after a sharp worsening of the public finances over the past six months.
Bank of England governor Andrew Bailey has predicted that further UK interest rate decisions will be “tight”, speaking at the IMF’s annual meeting in Morocco.
High interest rates have been blamed, in part, for a 17% surge in company insolvencies in England and Wales last month.
The IMF has criticised the UK’s u-turn on its net zero policies.
Nobel prize-winning economist Joseph Stiglitz has called for poor countries to be given $300bn (£246bn) a year from the International Monetary Fund to finance their fight against the climate crisis.
Microsoft has completed the takeover of computer games maker Activision Blizzard, after the UK competition authorities gave their approval to the rejigged deal early this morning….
…and warned other businesses not to follow Microsoft’s approach
The power company owned by the Czech billionaire Daniel Křetínský has been ordered to pay £23m after the energy watchdog found that it unfairly demanded excessive payments for one of the UK’s biggest power stations, increasing customers’ energy bills.
The maker of the meat alternative Quorn dived £15.5m into the red last year amid soaring costs and a slowdown in sales at supermarkets.
Britain’s FTSE 100 share index has closed for the day, down 45 points or 0.6% at 7,599 points.
Novo Nordisk raises full-year guidance again
Novo Nordisk, the world leader in diabetes and weight loss drugs, has raised its outlook for its full-year sales and operating profit for the third time this year.
The move reflects strong demand for its weight-loss drug Wegovy and diabetes medication Ozempic in the United States, which lifted Novo Nordisk to become Europe’s most valuable company last month.
UK high street chain Next has announced it has signed terms to acquire clothing FatFace, for £115.2m.
Once the deal is completed, Next will hold 97% of the equity and FatFace’s management will own 3% of the business.
As we reported this week, Next has already snaffled Cath Kidston, Made.com and JoJo Maman Bébé since the Covid pandemic.
Back in Marrakech, India’s finance minister has said many emerging market countries are concerned about the impact on fuel prices due to the recent crisis in the Middle East.
Referring to the Israel-Hamas war, minister Nirmala Sitharaman said (via Reuters):
“The recent crisis in the Middle East, and concerns about fuel back again, are worries which many countries do hold and they have expressed as well.”
Indis is the chair of the G20, whose finance ministers are meeting on the sidelines of the IMF/World Bank annual meeting in Morocco.
US consumer confidence falls as inflation expectations rise
US consumer confidence has fallen this month as people grow more worried about rising inflation.
The University of Michigan’s monthly consumer morale survey has shown a drop in sentimenf this month.
The Index of Consumer Sentiment has dropped to 63.0, from 68.1 in September, with people gloomier about current economic conditions and economic expectations.
*MICHIGAN PRELIM. OCT. CONSUMER SENTIMENT AT 63.0; EST. 67
Consumer confidence has been trending lower in recent months as their assessment of current and expected conditions have both soured.
Inflation expectations also spiked: 3.8% from 3.2% for 1y ahead and 3.0% vs 2.8% for… pic.twitter.com/L9w5JSxBd1
— Parker Ross (@Econ_Parker) October 13, 2023
Surveys of Consumers Director Joanne Hsu says people’s inflation expectations have jumped this month:
Consumer sentiment fell back about 7% this October following two consecutive months of very little change. Assessments of personal finances declined about 15%, primarily on a substantial increase in concerns over inflation, and one-year expected business conditions plunged about 19%. However, long-run expected business conditions are little changed, suggesting that consumers believe the current worsening in economic conditions will not persist. Nearly all demographic groups posted setbacks in sentiment, reflecting the continued weight of high prices.
Year-ahead inflation expectations rose from 3.2% last month to 3.8% this month. The current reading is the highest since May 2023 and remains well above the 2.3-3.0% range seen in the two years prior to the pandemic. Long-run inflation expectations edged up from 2.8% last month to 3.0% this month, again staying within the narrow 2.9-3.1% range for 25 of the last 27 months. Long-run inflation expectations remain elevated relative to the 2.2-2.6% range seen in the two years pre-pandemic.
(ugh)
Oct University of Michigan Confidence 63.0 vs. 67.0 consensus
Oct University of Michigan Current Conditions 66.7 vs. 70.3 consensus
Oct University of Michigan Expectations 60.7 vs. 65.7 consensus
Oct University of Michigan 1 Year Inflation 3.8% vs. 3.2%
Oct University…
— LogGPT (@loggyrhythm) October 13, 2023
European gas prices on track for biggest weekly gain since June 2022
Back in the energy market, European gas prices are on track for their largest weekly gain in 16 months.
The benchmark month-ahead contract for European gas has surged by 37% so far this week, to around €52.50 per megawatt hour this afternoon, up from €38 per megawatt hour at the end of last week.
That’s the third-biggest wekly jump in the last two years, following the 50% jump in mid-June 2022, and a 121% surge in early March 2022 after the invasion of Ukraine.
Earlier today, European gas prices hit €56/MWh, the highest since the end of February.
As covered in the introduction (see here) supply shortage fears have pushed up the gas price, with Israel having ordered the shutdown of the Tamar platform in the Eastern Mediterranean Sea this week.
Capital Economics say:
The upside risks to oil and gas prices triggered by the conflict between Hamas and Israel will add to the Bank of England’s concerns about whether it has done enough to reduce inflation to the 2% target.
The disruption to the gas pipeline between Finland and Estonia has also alarmed the markets, with Nato pledging action if the damage was deliberate.
Plus, gas demand will rise as the weather deteriorates, with temperatures across Europe expected to fall.
Some important measures of the UK jobs market are being delayed by a week.
The Office for National Statistics has announced that its Labour Force Survey, which provides the official measures of employment and unemployment, has been rescheduled from Tuesday 17 October by a week, to the 24th.
We’ll still get the latest earnings and vacancy data on the 17th, though.
The ONS blames the delay on falling reponse rates for some of its surveys.
The Labour Force Survey is critical to so much of our understanding of the UK. But I hadn’t clocked that response rates had got *this* bad
Raises lots of questions about whether we really know what we think we know on a whole range of issues… pic.twitter.com/Mtkw9lOPKo
— Ian Mulheirn (@ianmulheirn) October 13, 2023
We’ve rescheduled some of our labour market statistics:
– Labour market overview, employment, and regional labour market will now be published on 24 October
– Earnings, vacancies and HMRC data will be published on 17 October as plannedRead our statement https://t.co/4VocTHfiEq
— Office for National Statistics (ONS) (@ONS) October 13, 2023
Back in the gaming world, Microsoft has completed its takeover of Activision Blizzard after winning permission from the UK’s competition regulator this morning (see earlier post).
In a regulatory filing in the US, the company said:
“On October 13 2023, Microsoft Corporation … completed its previously announced acquisition of Activision Blizzard.”
Another Wall Street titan has reported results today, showing that investors have been favouring cash following the rise in interest rates.
BlackRock reported that its clients pulled a net $13 billion from long-term investment funds in the last quarter, the first outflows since the onset of the pandemic in 2020.
Laurence Fink, Chairman and CEO, explained:
“For the first time in nearly two decades, clients are earning a real return in cash and can wait for more policy and market certainty before re-risking. This dynamic weighed on industry and BlackRock third quarter flows.
We have seen periods of uncertainty like this before – as recently as 2016 and 2018.
BlackRock also reported a $1.1tn increase in assets under management over the last year, lifting the total AUM to $9.1tn.
IMF criticises UK over net-zero u-turns
Larry Elliott
Rishi Sunak’s decision to delay the ban on the sale of petrol and diesel car and fossil fuel heating has been criticised by the International Monetary Fund, our economics editor Larry Elliott reports from Marrakesh.
Laura Papi, deputy director of the IMF’s European department said:
“The UK has ambitious climate change targets but some of the measures recently implemented – the ban on the internal combustion engine and fossil fuel heating – make it more difficult to reach its target.
It is important the UK stays the course and builds on its successes.”
Last month, Rishi Sunak announced a watering-down of the UK’s net zero policies, including delaying the ban on the sale of new cars with combustion engines from 2030 to 2035. He also significantly weakened the plan to phase out the installation of gas boilers by 2035.
Papi also defended the IMF’s forecasting record after the chancellor Jeremy Hunt said its predictions for the UK were “more often wrong than right”.
The Treasury has been pushing back against the Fund’s downgrading of UK growth next year from 1% to 0.6%, but Papi said that its estimate was more upbeat than the Bank of England’s. In the recent past, the IMF had not been more pessimistic than other forecasters.
JP Morgan has lifted its forecast for net interest income (NII) this year, as it continues to benefit from higher interest rates.
Bloomberg has the details:
NII was $22.9 billion in the three months through Sept. 30, above analysts’ expectations. The biggest US bank said it now expects to generate $88.5 billion from the revenue source this year.
Net interest income is the amount of money banks claw in from higher borrowing costs which outpace the amount they pay out in interest on deposits (see here for more).
Jamie Dimon’s warning comes as investors prepare for further turmoil in the Middle East in the coming days.
Brent crude, the oil benchmark, has jumped by 4% today, from $86 per barrel to $89.41.
Stephen Innes, managing partner at SPI Asset Management, explains:
The ongoing conflict in the Middle East has compounded the geopolitical concerns for investors. They are already dealing with the repercussions of the Ukraine conflict and preparing for a potential escalation in the Middle East.
Amid the fog of war, traders have been buying gold and oil, in a frenzied fashion, as their primary weekend hedges, anticipating a wider sphere of influence getting drawn into the current Middle East crisis.
Shares in JP Morgan are up 1% in pre-market trading, despite Jamie Dimon’s warning about the geopolitical outlook.
Investors are noting the bank grew its profits by 35% year-on-year, helped by higher net interest margins due to the jump in borrowing costs.
JPMorgan Chase CEO Jamie Dimon warns of multiple threats including military conflicts, high national debt, inflation, interest rates, and reduced liquidity, despite the bank’s strong profits in Q3.
— TLDR Finance News (@tldr_fin_news) October 13, 2023
“This may be the most dangerous time the world has seen in decades.”
Jamie Dimon, CEO, JP Morgan
(In Q3 earnings note – on economic and political challenges) pic.twitter.com/TSyx6fR3Fg— menaka doshi (@menakadoshi) October 13, 2023
