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26 May 2017
CFA Institute: Financial NewsBrief
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G-7 contends with changing national positions
G-7 to face changes in national positions
Gentiloni (Mark Wilson/Getty Images)
Four leaders -- British Prime Minister Theresa May, French President Emmanuel Macron, Italian Premier Paolo Gentiloni and US President Donald Trump -- are making their debut at the Group of Seven summit amid significant change in national positions. G-7 leaders were once in broad agreement, but they are expected this year to seek common ground and to strive for trust among themselves as they discuss issues related to the economy, trade, climate change and security.
CNBC/The Associated Press (25 May.),  ABC News/The Associated Press (25 May.) 
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BIS releases FX code of conduct
The Bank for International Settlements' Foreign Exchange Working Group has released a code of conduct with 55 principles that cover ethics, transparency, governance, information sharing, electronic trading, algorithmic trading and prime brokerage. "All of us recognize the need to restore the public's faith in the foreign exchange market," said Reserve Bank of Australia Deputy Governor Guy Debelle, chairman of the working group.
Bloomberg (25 May.),  Financial Times (tiered subscription model) (25 May.),  Politico Pro (subscription required) (25 May.) 
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Tech bubble concerns emerge
The Standard & Poor's 500 index rose almost 8% this year, driven largely by technology shares. The concern is whether investors are jumping into a momentum play, causing a tech bubble.
Financial Times (tiered subscription model) (25 May.) 
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UK, Hong Kong form fintech innovation partnership
The UK's Financial Conduct Authority and Hong Kong's Securities and Futures Commission have launched a partnership to encourage financial-services innovations. The agreement will also foster information exchange, experience sharing and a regulatory referral system.
Finance Magnates (25 May.) 
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Outlook brightens for Chinese bond market
The addition of Chinese bonds to Bloomberg indexes and the planned addition by Citigroup bode well for China's bond market. Foreign ownership of Chinese bonds fell last year.
Bloomberg Professional Services (24 May.) 
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Market Activity
Lower oil prices leave Asian-Pacific markets mixed
Stock markets were mixed Friday in Asia-Pacific as weaker oil prices put pressure on energy companies' shares. Japan's Nikkei 225 fell 0.6%; China's Shanghai Composite was up 2.3%; Hong Kong's Hang Seng Index was flat; Australia's S&P/ASX 200 dropped 0.7%; South Korea's Kospi rose 0.5%; and India's Sensex climbed 0.9%.
The Wall Street Journal (tiered subscription model) (26 May.),  CNBC (26 May.) 
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Retail drives S&P 500, Nasdaq to record highs
Disregarding soft economic data and political upheaval in Washington, D.C., investors drove the Standard & Poor's 500 index and the Nasdaq composite to record highs Thursday morning. The consumer discretionary sector and strong figures from Best Buy and other retailers drove the gains.
Reuters (25 May.),  Financial Times (tiered subscription model) (25 May.) 
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Extension of production cut drives oil prices down 5%
Investors were disappointed by the extension of oil production curbs from OPEC and other producing nations, causing prices to fall 5% Thursday. "Today the bottom evaporated from the market," said Robert Yawger of Mizuho Americas.
Reuters (25 May.),  Bloomberg (26 May.),  The Wall Street Journal (tiered subscription model) (25 May.),  Financial Times (tiered subscription model) (25 May.) 
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Euro overcomes politics, surpasses expectations
Despite political fears over the euro's future, the currency has emerged as one of the top-performing in the Group of 10 nations this year. Foreign investors are buying into eurozone funds and regional economic growth has exceeded expectations.
Bloomberg (25 May.) 
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6 banks to manage State Bank of India's share sale
Six banks, including Deutsche Bank and Bank of America, have been engaged to manage State Bank of India's 150 billion rupee share sale. "There would be good demand for SBI's share sale, as it is the best story among state-run banks in the country," said Hatim Broachwala, an analyst at Nirmal Bang Institutional Equities.
Bloomberg (26 May.),  Reuters (26 May.) 
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WideOpenWest IPO underwhelms
Share sales in cable company WideOpenWest's initial public offering were lower than anticipated. The company raised about $310 million on 18.24 million shares.
Reuters (25 May.) 
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Single bitcoin worth nearly double an ounce of gold
A single bitcoin is priced at about $2,450, nearly twice as much as an ounce of gold, as the cryptocurrency frenzy continues. The situation is prompting concerns about a possible bitcoin bubble.
Bloomberg (25 May.) 
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Economics
Fed minutes hint at asset reduction
The Federal Open Market Committee has outlined a plan to reduce the Federal Reserve's $4.5 trillion balance sheet, including gradual tapering of mortgage-backed securities. JPMorgan Chase economist Michael Feroli says the process could start as early as September.
Reuters (25 May.),  Financial Times (tiered subscription model) (25 May.) 
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South African Reserve Bank maintains key rate
The South African Reserve Bank's Monetary Policy Committee kept its benchmark repurchase rate at 7% for a seventh consecutive meeting. Policymakers said the rand and improving inflation outlook could take a hit from ratings downgrades and politics.
Bloomberg (26 May.),  Reuters (25 May.),  Financial Times (tiered subscription model) (25 May.) 
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UK economy grew 0.2% in Q1
The UK economy expanded 0.2% in the first quarter, slower than widely expected, according to official figures released Thursday. Brexit is seen as a major factor and one expert says that continued weakening in Q2 would be cause for concern.
Bloomberg (25 May.),  Reuters (25 May.),  Financial Times (tiered subscription model) (25 May.) 
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Geopolitical/Regulatory
Basel to standardize capital output floor
The Basel Committee on Banking Supervision will set an aggregate floor on banks' internal regulatory capital models, instead of individual floors for certain risks, Secretary General William Coen says. This decision aims to allow banks more flexibility in modeling risks for each portfolio, although the final floor calibration has yet to be agreed and might be a source of contention.
Risk (subscription required) (25 May.),  Reuters (25 May.) 
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Market calls for more clarity on ETD reporting rule
A European Commission proposal to simplify reporting on exchange-traded derivatives under the European Markets Infrastructure Regulation has not been sufficiently explained, some market participants say. In its recent EMIR review, the commission said the current dual-sided reporting status will be changed so only central clearing counterparties need to report ETD trades, but this gives rise to a number of questions and gray areas, they contend.
Risk (subscription required) (25 May.) 
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PBOC effectively links yuan to US dollar
The People's Bank of China has helped stabilize the yuan by effectively hitching it to the US dollar. The yuan weakened significantly against the dollar last year, while it is up about 1% this year and implied volatility is close to its lowest level in almost two years.
Reuters (25 May.),  The Wall Street Journal (tiered subscription model) (25 May.) 
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MiFID II deadline quietly stretched
Some provisions of the revised Markets in Financial Instruments Directive might be phased in over a longer period of time to let the industry adjust, though the European Commission isn't calling it a delay. Germany has proposed a transition that extends to July 2018.
Bloomberg (25 May.) 
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Financial Products
Investors dive into US-listed ETF dedicated to Pakistani stocks
Pakistan's upcoming entry into MSCI's emerging-market index is prompting investors to buy a US-listed exchange-traded fund focused on the country's stocks. From May 1 to 24, investors poured $11.8 million into the Global X MSCI Pakistan ETF, according to data compiled by Bloomberg.
Bloomberg (25 May.) 
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Editor's Note
Financial NewsBrief will not publish Monday
In observance of Memorial Day in the US, CFA Institute Financial NewsBrief will not publish Monday. Publication will resume Tuesday.
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