ECB to create interest-rate benchmark | China's debt growth prompts S&P to cut credit rating | EU regulators foresee Brexit financial stability risk
22 September 2017
CFA Institute: Financial NewsBrief
Top Stories
May to propose 2-year post-Brexit transition
May to propose 2-year post-Brexit transition
May (Jack Taylor/Getty Images)
UK Prime Minister Theresa May will call for a transitional arrangement lasting two years after Brexit to ensure the UK's departure from the EU is carried out smoothly, according to excerpts from her upcoming speech on the matter that were released by the government. She is expected to propose that the UK pay €20 billion over two years to settle its financial obligations to the EU.
BBC (22 Sep.),  The Guardian (London) (21 Sep.),  Politico (22 Sep.) 
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ECB to create interest-rate benchmark
Responding to deteriorating confidence in existing benchmarks for interest rates for the euro, the European Central Bank said it plans to develop its own overnight reference interest rate no later than 2020. The new reference rate is intended to serve as a backstop for existing private-sector benchmarks, the ECB said.
Reuters (21 Sep.),  The Wall Street Journal (tiered subscription model) (21 Sep.),  Politico Pro (subscription required) (21 Sep.),  Risk (subscription required) (22 Sep.) 
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China's debt growth prompts S&P to cut credit rating
S&P Global Ratings downgraded China's credit rating to A+ from AA- citing increased debt. Ratings on HSBC China, DBS Bank China and Hang Seng China were also lowered.
Bloomberg (21 Sep.),  Reuters (22 Sep.),  Financial Times (tiered subscription model) (21 Sep.) 
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EU regulators foresee Brexit financial stability risk
The UK's loss of access to the EU single market poses a threat to financial stability as the continuity of contracts between EU and UK counterparties is disrupted, the three European Supervisory Authorities reported. The financial regulators also predict a loss of market confidence during what will be a lengthy transition to European-based financial services.
Politico Pro (subscription required) (22 Sep.) 
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Trade agreement between EU, Canada takes effect
A trade deal that removes customs duties on 98% of products that the EU and Canada sell to each other took effect Thursday. The EU hopes the document will become the model for agreements with Australia, Japan and New Zealand.
Deutsche Welle (Germany)/Agence France-Presse/Deutsche Presse-Agentur/Reuters (21 Sep.) 
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Investment banks brace for poor earnings reports
Analysts warn that major investment banks' third-quarter earnings in the US and Europe look likely to be disappointing, with some predicting falls of as much as 25% in fixed-income trading. Several managers say conditions might be equally difficult through the rest of this year.
Financial News (UK) (tiered subscription model) (21 Sep.) 
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Expert proved right about Russian banking troubles
Russia's central bank is nationalizing B&N Bank, the regulator's second bank bailout in a matter of weeks. Sergei Gavrilov, an investment adviser at Alfa Capital, had warned clients bank rescues were on the way.
Bloomberg (21 Sep.),  Financial Times (tiered subscription model) (21 Sep.) 
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Market Activity
N. Korean weapon threat drags on Asian-Pacific markets
Most Asian-Pacific stock markets declined Friday as traders reacted to a downgrade in China's credit rating and North Korea's statement that it might test a nuclear weapon in the Pacific Ocean. Japan's Nikkei 225 slid 0.3%; Hong Kong's Hang Seng Index lost 0.8%; Australia's S&P/ASX 200 gained 0.5%; China's Shanghai Composite slipped 0.2%; South Korea's Kospi dropped 0.7%; and India's Sensex was down 1.4%.
CNBC (22 Sep.),  The Economic Times (India) (22 Sep.) 
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Boeing wins $11B order for 40 planes from Turkish Airlines
Turkish Airlines has ordered 40 Boeing 787-9 airliners for almost $11 billion. Turkish President Recep Tayyip Erdogan has said he wants Istanbul to be one of the world's major hubs for air travel.
Bloomberg (22 Sep.) 
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Hong Kong IPO raises $1.5B for Chinese insurer ZhongAn
The Hong Kong initial public offering for China's ZhongAn Online Property & Casualty Insurance brought in $1.5 billion after shares priced at the top of their suggested range. Trading in the shares on the Hong Kong exchange is set to begin Thursday.
Reuters (22 Sep.) 
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Maersk to divest tanker operation in $1.17B deal
A.P. Moeller-Maersk, the world biggest operator of container ships, said it will sell its tanker business to its controlling shareholder, APMH Invest, for $1.17 billion. After the transaction closes, APMH plans to form a consortium with Japan's Mitsui to hold the tanker business.
Fox Business/Dow Jones Newswires (21 Sep.) 
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Global trade growing faster than expected, WTO says
The World Trade Organization said global trade will increase 3.6% this year, up from its previous forecast of 2.4%. The WTO warned that geopolitical tensions and protectionist rhetoric could compromise the trade recovery.
Deutsche Welle (Germany)/Deutsche Presse-Agentur/Reuters (21 Sep.) 
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Draghi: Monetary policy alone won't correct imbalances
Draghi: Monetary policy alone won't correct imbalances
Draghi (Raigo Pajula/AFP/Getty Images)
Mario Draghi, speaking in his capacity as head of the European Systemic Risk Board, said financial and business cycles can become imbalanced amid low inflation, but added that monetary policy cannot be used to correct them. Emerging property bubbles are being identified in some cities, but Draghi says these issues need to be addressed at a local level.
Reuters (21 Sep.) 
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Report: Number of broker-dealers in US drops
The number of independent broker-dealers in the US declined 28% from 2005 to 2015, according to a report from Fidelity Investments. Broker-dealers' operating margins fell to 3% last year from 12% in 2006, encouraging small firms to become branches of major broker-dealers, the report said.
InvestmentNews (tiered subscription model) (21 Sep.) 
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ECB opens consultation on fintech licensing
The European Central Bank is inviting views on how financial-technology firms can apply for banking licenses and register themselves as lenders, with the aim of establishing harmonized and appropriate standards. The ECB has issued a pair of draft guides and has requested comments by Nov. 2.
Politico Pro (subscription required) (21 Sep.) 
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FCA to examine investment firms' trade reporting
The UK Financial Conduct Authority plans to take a close look early next year at investment firms' compliance with the strengthened reporting requirements imposed by Europe's revised Markets in Financial Instruments Directive, which takes effect in January, said Stephen Hanks, a markets policy manager. He said the FCA plans to move swiftly on reporting requirements because it is easier for firms to correct deficiencies when a new requirement takes effect than later.
MLex (subscription required) (21 Sep.) 
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Poll: 52% of people in UK support remaining in EU
A survey by BMG Research found that 52% of UK respondents favor staying in the EU, while 48% want Britain to leave. Two months ago, respondents were equally divided on the same question.
The Independent (London) (tiered subscription model) (21 Sep.) 
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FSOC to review AIG's SIFI designation
The Financial Stability Oversight Council is scheduled to discuss dropping AIG's designation as a systemically important financial institution. AIG has reduced assets from $1.048 trillion in 2007 to $499.76 billion in June and has divested dozens of businesses.
The Wall Street Journal (tiered subscription model) (21 Sep.) 
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Proposed change to G-SIB rule threatens bank capital
A proposed change to the Federal Reserve's FR Y-15 reporting rule requiring the eight US global systemically important banks to include cleared derivatives transactions would increase client-cleared notional by an estimated $46 trillion. Banks that have worked to reduce G-SIB scores but stand at the upper limit of surcharge categories, including Citigroup, JPMorgan Chase and Morgan Stanley, would be at risk of being pushed into the next bucket.
Risk (subscription required) (21 Sep.) 
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Financial Products
VanEck readies ETF investing in real assets
VanEck has filed with the Securities and Exchange Commission for an actively managed exchange-traded fund exposing investors to real assets, which the company defines as commodities, real estate, natural resources and infrastructure. The VanEck Vectors Real Asset Allocation ETF would invest primarily in other ETFs.
ETF (21 Sep.) 
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Alpha and Gender Diversity (18-19 September 2017; Toronto, Ontario, Canada)
Fixed-Income Management 2017 (12-13 October 2017 Boston, Massachusetts, United States)
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