North American Morning Briefing: Stock Futures -2-

Deposit Crisis Sets Up a Tough First Quarter for All But the Biggest Banks

Bigger is better for banks this earnings season.

A deposit run that felled Silicon Valley Bank and Signature Bank has hurt small banks much more than big ones, draining low-cost funding that has fueled their profitability in recent years.

Track How U.S. Banks Are Faring in First-Quarter Earnings

In March, banks experienced one of their worst months this century. The collapse of Silicon Valley Bank and Signature Bank sparked widespread fears about potential deposit runs and declining values of bonds and loans.

Now attention will turn to how the banks are doing and what comes next. The Wall Street Journal will break down some of the critical numbers investors will be watching in first-quarter earnings over the coming weeks. Stay tuned for further updates.

Banks Keep Pouring Cash Into Fossil Fuels. U.S. Lenders Lead the Way.

The world's biggest banks continued to channel billions of dollars into boosting fossil-fuel production capacity in 2022 despite growing calls to scale back lending in response to global warming, finds a new report.

The annual Banking on Climate Chaos report, authored by a group of nonprofits, including Rainforest Action Network, said banks provided $673 billion in finance to the fossil-fuel industry last year. Canadian banks are providing a rising share of the money, though U.S. lenders are still the dominant player.

Banks Keep Pouring Cash Into Fossil Fuels. U.S. Lenders Lead the Way.

The world's biggest banks continued to channel billions of dollars into boosting fossil-fuel production capacity in 2022 despite growing calls to scale back lending in response to global warming, finds a new report.

The annual Banking on Climate Chaos report, authored by a group of nonprofits, including Rainforest Action Network, said banks provided $673 billion in finance to the fossil-fuel industry last year. Canadian banks are providing a rising share of the money, though U.S. lenders are still the dominant player.

Chinese Exports Surge as Trade With Russia and Southeast Asia Jumps

HONG KONG-China's exports bounced back sharply in March, a surprise that reflects greater demand in Asia and Europe as well as improved supply chain conditions.

Another major reason that was behind the unexpectedly strong result: A more than doubling of Chinese exports to Russia in March from a year earlier, highlighting warming economic ties between the two like-minded neighbors.

More Junk-Rated Companies Are Facing Credit Downgrades and Defaults

The prospects of U.S. companies with significant leverage or rated several notches below investment grade have turned bleaker in recent months, credit-rating firms say, and default rates for junk-rated companies could more than double by early next year.

While highly rated companies are proving largely resilient during the postpandemic economic turbulence, businesses with lower credit ratings and floating-rate debt are increasingly struggling with steep increases to debt-servicing costs and a possible recession as the Federal Reserve continues interest-rate hikes. What's more, still-steep inflation and softer demand are also expected to erode some companies' profit margins, the ratings firms said.

Property Has an Open-Ended Problem

An old design flaw in the commercial real-estate industry is back, and this time it is bigger and broader.

Property investment funds have ballooned in size since the 2008 global financial crisis, and not just in the U.S. According to the European Central Bank, eurozone real-estate funds had assets under management of 1.04 trillion euros at the end of 2022, equivalent to $1.14 trillion and up from EUR200 billion in 2007. Some 80% of these funds by value are open-ended, giving investors the option to cash out daily, weekly or quarterly.

Chinese State-Owned Enterprises Are Hong Kong's Hottest Stocks

China's stodgy state-owned companies have become the stars of Hong Kong's stock market.

At the Communist Party Congress in October, President Xi Jinping said state-owned enterprises needed to "get stronger, do better and grow bigger." Investors are taking heed. State-owned property developers are trouncing their debt-laden private sector rivals. Shares of the country's largest homegrown semiconductor maker are up by more than a third.

UK Economy Stagnated in February After Labor Strikes Hit Activity

The U.K. economy stalled in February after public-sector strikes hit activity in the services sector, adding to concerns the economy is struggling amid sky-high inflation and rising interest rates.

The country's gross domestic product held steady on month in February, easing from an upwardly revised 0.4% rise in January, data from the Office for National Statistics showed Thursday.

White House Works to Satisfy Senate Democrats in Fed Vice Chair Search

WASHINGTON-The White House is working to secure the support of key Capitol Hill allies as officials deliberate over whom to nominate for the No. 2 job at the Federal Reserve, according to people familiar with the matter, with Democrats' slim majority in the Senate hanging over the search.

Last month, some administration officials privately identified Janice Eberly, a finance professor at Northwestern University, as the leading candidate for the Fed vice chair. But Sen. Robert Menendez (D., N.J.), a senior member of the Senate Banking Committee, has continued to mount an aggressive campaign to pressure the White House to nominate a Latino economist for the job.

Property Has an Open-Ended Problem

An old design flaw in the commercial real-estate industry is back, and this time it is bigger and broader.

Property investment funds have ballooned in size since the 2008 global financial crisis, and not just in the U.S. According to the European Central Bank, eurozone real-estate funds had assets under management of 1.04 trillion euros at the end of 2022, equivalent to $1.14 trillion and up from EUR200 billion in 2007. Some 80% of these funds by value are open-ended, giving investors the option to cash out daily, weekly or quarterly.

UK Economy Stagnated in February After Labor Strikes Hit Activity

The U.K. economy stalled in February after public-sector strikes hit activity in the services sector, adding to concerns the economy is struggling amid sky-high inflation and rising interest rates.

The country's gross domestic product held steady on month in February, easing from an upwardly revised 0.4% rise in January, data from the Office for National Statistics showed Thursday.

White House Works to Satisfy Senate Democrats in Fed Vice Chair Search

WASHINGTON-The White House is working to secure the support of key Capitol Hill allies as officials deliberate over whom to nominate for the No. 2 job at the Federal Reserve, according to people familiar with the matter, with Democrats' slim majority in the Senate hanging over the search.

Last month, some administration officials privately identified Janice Eberly, a finance professor at Northwestern University, as the leading candidate for the Fed vice chair. But Sen. Robert Menendez (D., N.J.), a senior member of the Senate Banking Committee, has continued to mount an aggressive campaign to pressure the White House to nominate a Latino economist for the job.

North Korea Fires Ballistic Missile Toward Japan

SEOUL-North Korea fired a ballistic missile on Thursday, nearly a week after the country's military stopped responding to calls on an inter-Korean military hotline and days after leader Kim Jong Un vowed to strengthen the military's capabilities.

The missile was launched at a lofted trajectory around 7:20 a.m. from an area near North Korea's capital of Pyongyang, traveling for more than 600 miles before landing in waters east of the Korean Peninsula, according to South Korea's military. Japan sent out an alert warning residents in the country's northernmost island of Hokkaido to take shelter but later said the missile didn't land in Japan's territory or its exclusive economic zone.

Government Looking for Leaker in Ukraine Documents Probe

WASHINGTON-The U.S. government is treating the apparent disclosure of classified material surrounding the war in Ukraine as an insider's leak, people familiar with the matter say, but hasn't yet homed in on key suspects for a massive intelligence breach that has exposed the challenges of safeguarding sensitive U.S. information and tested ties with some of America's closest allies.

The bulk of the more than 60 documents, if genuine, appear to originate from the Central Intelligence Agency's Operations Center and the Pentagon's Joint Chiefs of Staff. Such documents are typically briefed to senior-level decision makers at the Pentagon in an environment protected from electronic surveillance and secured against leaks.

Sen. Dianne Feinstein Rejects Calls to Resign After Being Sidelined With Shingles

Longtime California Sen. Dianne Feinstein said she would temporarily leave the Judiciary Committee but not resign from the Senate, responding to pressure from some fellow Democrats to step down rather than serve out the rest of her final term.

Mrs. Feinstein underwent treatment for shingles in February and has been absent from the Senate since then, missing dozens of votes, and hasn't provided a timeline for returning to Washington, fueling speculation about her plans. In her statement Wednesday, she said she had intended to get back to the Capitol in March but had been delayed by medical complications.

Write to paul.larkins@dowjones.com TODAY IN CANADA

Earnings:

Cogeco Commun 2Q

Corus Ent 2Q

Opsens 2Q

Economic Calendar:

None scheduled

Stocks to Watch:

Ascot Resources Announces C$4M Non-Brokered Flow Through Private Placement

---

(MORE TO FOLLOW) Dow Jones Newswires

April 13, 2023 06:13 ET (10:13 GMT)

Copyright (c) 2023 Dow Jones & Company, Inc.