Share Prices & Company Research


17 June 2024

Market Round-Up

The US Bureau of Labor Statistics has published preliminary data on the number of US job openings for the month of April. The total stood at 8.1m, a decrease of about 300,000 from the previous month, with April’s figure being the lowest on record for the past three years. This highlights the cooling of the US labour market, with vacancies gradually decreasing from a peak of 12.2m in March 2022.

Previously, the tightness of the US labour market has helped maintain strong wage growth and provided a boost to consumption as well as economic activity. However, robust growth has sustained pricing pressures, with inflation stubbornly refusing to fall down to the Federal Reserve’s (Fed) 2% target. The slight cooldown in the American jobs market may provide some comfort to traders anticipating a Fed interest rate cut in the latter half of 2024, if the current downwards trajectory continues. However, more favourable inflation data needs to be released before the Fed commits to its first rate cut decision since 2019. Markets have already scaled down their rate cut expectations multiple times this year, with the earliest Fed cut now anticipated in September.

London-based fintech (financial technology) ‘neobank’ Monzo has recorded its first annual profit since it was founded in 2015. In the year to March, it reported a £15.4m pre-tax profit, compared to a £116.3m loss the previous year. Higher interest rates are partly responsible for this, facilitating a 167% surge in net interest income, as Monzo’s earnings from interest-bearing assets, such as loans, increased more than expenses on interest-bearing liabilities, such as customer deposits. Consequently, total revenue grew by £524m to £880m.

Revenue growth can also be attributed to an expanding customer base, with Monzo’s customer deposit balance rising by 88% to £11.2bn, an eightfold increase compared to the 2020 financial year. This rise in popularity can be explained by Monzo’s effective provision of app-based banking, offering convenient access to users’ finances as well as other spending features, such as bill splitting or fee-free travel payments, in turn helping to set higher standards for digital banking.

Despite this, Monzo, and other fintech banks for that matter, have failed to challenge the dominant position of traditional lenders. Take for instance Lloyds Bank, which managed customer deposits to the tune of £470bn in 2023 alone. Clearly, when it comes to primary accounts or significant life transactions such as mortgages, UK consumers continue to prefer more established banks and lenders. In contrast, fintech banks are still predominantly used for payment management. To combat this headwind, Monzo is attempting to diversify by returning to the States, having failed to obtain a banking licence there in 2021, with an expansion into the European market, initially via Ireland, also planned further down the line.

Please note that this communication is for information only and does not constitute a recommendation to buy or sell the investments mentioned. Investments and income arising from them can fall as well as rise in value. The information and views were correct at time of publication but may have changed at point of reading.
Market Round-Up
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