Studies: Brexit uncertainty slows investment plans | Electronic bond trading rises ahead of MiFID II | Citigroup, Deutsche Bank say Frankfurt move is likely
21 July 2017
CFA Institute: Financial NewsBrief
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Exxon sues US over $2M fine
Exxon sues US over $2M fine
Tillerson (Drew Angerer/Getty Images)
ExxonMobil has responded to a $2 million fine from the US Treasury Department by suing the government, calling the fine for a joint venture with Russia's Rosneft unlawful and capricious. The Treasury says Exxon exhibited "reckless disregard" for US sanctions in dealings with Russia three years ago, when Secretary of State Rex Tillerson was CEO.
Reuters (21 Jul.),  The Wall Street Journal (tiered subscription model) (20 Jul.) 
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Studies: Brexit uncertainty slows investment plans
A Confederation of British Industry survey finds almost 40% of financial-services industry participants think Brexit has hampered their investment plans. But a no-deal scenario could prompt "a fall in business confidence, leading to a slowdown in investment," according to a study by think tank The UK in a Changing Europe.
Finance Magnates (20 Jul.),  Politico Pro (subscription required) (20 Jul.) 
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Electronic bond trading rises ahead of MiFID II
A Liquidnet survey of asset managers found that more than half of them have seen a rise in electronic fixed-income trading over the past 12 months. Additionally, 86% of European managers say Europe's revised Markets in Financial Instruments Directive, which takes effect in January, is the main driver behind the move, compared with 39% of US traders.
The Trade (UK) (20 Jul.) 
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Citigroup, Deutsche Bank say Frankfurt move is likely
The CEOs at Citigroup and Deutsche Bank have told staff that they plan to relocate substantial parts of their operations to Frankfurt, Germany, moves that could affect hundreds of jobs. Morgan Stanley made a similar announcement this week, adding to a growing list of major banks choosing Frankfurt as their post-Brexit base.
Financial News (UK) (tiered subscription model) (20 Jul.) 
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Quant funds seek alternative tech
Quant funds are expected to spend $7 billion annually by 2020 in their quest for technology that aids development of investment strategies to get an edge on competitors. Image recognition that monitors and extrapolates information such as the number of customers entering a store, along with extensive use of social media, are among techniques being evaluated, although observers say data extracted might not always prove substantively useful.
Risk (subscription required) (19 Jul.) 
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2 JPMorgan whistleblowers share $61M SEC settlement
The Securities and Exchange Commission is awarding two whistleblowers a total of $61 million for information regarding JPMorgan Chase's steering of affluent clients to investments most profitable to the bank.
Bloomberg (20 Jul.) 
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Market Activity
Most Asian-Pacific markets drop after ECB inaction
Most major Asian-Pacific stock markets were down Friday as the euro remained near a two-year high against the US dollar and the European Central Bank kept silent about tapering. Japan's Nikkei 225 gave up 0.2%; China's Shanghai Composite fell 0.2%; Australia's S&P/ASX 200 dropped 0.7%; South Korea's Kospi rose 0.3%; and India's Sensex eased 0.1%.
RTT News (21 Jul.) 
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Analysts encouraged by Brent crude price rise
The price per barrel of Brent crude breached the $50 mark this week for the first time since early June, with West Texas Intermediate also showing an uptick. Analysts at Accendo Markets attribute the gains to data from the US Energy Information Administration, which show oil production dropping and inventories falling faster than expected.
City A.M. (London) (20 Jul.),  Financial Times (tiered subscription model) (20 Jul.),  The Wall Street Journal (tiered subscription model) (20 Jul.) 
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Investor appetite for European stocks returns
European equity purchases rose more than $3 billion in the week that ended Wednesday, marking revived investor appetite. In the same period, $840 million was withdrawn from US funds.
Financial Times (tiered subscription model) (20 Jul.) 
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Chinese bond yields draw investors worldwide
Access to Chinese bonds through Bond Connect is attracting international investors. Yields of Chinese bonds are outpacing those of Treasurys.
Bloomberg Professional Services (18 Jul.) 
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84% of CFA Institute Investment Foundations Program certificate holders gained greater awareness of the ethical and regulatory context of the investment industry. Bulk registrations are available online. Refer your colleagues or learn more.
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Economics
ECB: No change to quantitative easing for now
ECB: No change to quantitative easing for now
Draghi (Hannelore Foerster/Getty Images)
The European Central Bank has indicated that it has no plans yet to start tapering its bond-buying scheme, with President Mario Draghi saying it will be discussed in the fall. Other central banks such as the Bank of Japan have made similar decisions, as inflation continues to remain low despite a generally brightening economic outlook.
The Wall Street Journal (tiered subscription model) (20 Jul.) 
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PBOC money supply boost highest this year
The People's Bank of China injected 510 billion yuan into the financial system this week, the most in six months. The bank will continue to actively manage liquidity as it works to deleverage the economy, market observers say.
Bloomberg (20 Jul.) 
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Rate hikes could cause recession, Gross says
Rate hikes could cause recession, Gross says
Gross (Mark Wilson/Getty Images)
Historical models are not adequate gauges of post-crisis economies, Bill Gross of Janus Henderson Investors warned global policymakers. Normalization of short-term interest rates could spell recession for overleveraged economies, which include the US, Gross said.
Reuters (20 Jul.) 
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Geopolitical/Regulatory
Regulators' agenda omits pending Dodd-Frank rules
Several US regulators, including the Securities and Exchange Commission, are considering dropping unfinished Dodd-Frank Act rules, including restrictions on executive bonuses and oversight of swaps trading, according to a regulatory agenda. "The agenda gives you a sense of where the agency is going to focus its resources, but it is not dispositive about what it ultimately will or will not do," said Willkie Farr & Gallagher's James Burns, a former SEC official.
The Wall Street Journal (tiered subscription model) (20 Jul.) 
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Lawmakers want Labor to address retirement plan auto-portability
US Sen. Tim Scott and other lawmakers are calling on the Labor Department to issue guidance on the applicability of the Employee Retirement Income Security Act to the auto-portability of retirement savings. They said in a letter to Labor Secretary R. Alexander Acosta that the Employee Benefit Research Institute found a clearinghouse automatically rolling over plan balances to new employers' plans could produce an extra $2 trillion of retirement savings by the time workers reached age 65.
PlanAdviser online (19 Jul.) 
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Taxes on hedge funds' offshore gains come due
A provision of the Emergency Economic Stabilization Act of 2008 allowing hedge funds to defer tax payments on offshore income will sunset in 2018, forcing funds to pay federal, state and local back taxes. The Joint Committee on Taxation estimated in 2008 that the measure would raise $25 billion.
The Wall Street Journal (tiered subscription model) (20 Jul.) 
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Tax-policy nominee gains Senate panel approval
The US Senate Finance Committee has unanimously agreed to advance David Kautter's nomination as assistant secretary for tax policy at the Treasury Department to the full Senate. "David Kautter's experience and knowledge will serve the nation well as we work to unite on comprehensive tax reform," said committee Chairman Orrin Hatch.
The Hill (20 Jul.) 
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MiFID II poised to make waves for US exchanges
The revised Markets in Financial Instruments Directive's equivalency requirement could have far-reaching effects, potentially applying to two-thirds of stocks on both the Nasdaq and the New York Stock Exchange. This could hamper the ability of EU investment firms to send orders to the US market if no equivalence deal is in place.
Bloomberg Professional Services (18 Jul.) 
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Asian banks might be denied simpler FRTB standardization
Market-risk executives at smaller Asian banks say they might be prevented from using the reduced sensitivities-based method of risk calculation, which is designed to offer a simpler alternative to the sensitivities-based approach outlined in the Fundamental Review of the Trading Book. The method appears unavailable for use across the board by banks with overseas subsidiaries, a common setup for many Asian entities.
Risk (subscription required) (21 Jul.) 
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Ethical Decision-Making Webinar Part II: Exploring Additional Case Studies (scheduled to accommodate Asia Pacific Time Zone audience) (12:00-1:00 a.m. EDT 16 August 2017)
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Financial Products
Evolve Funds aims to launch 5 Canadian ETFs
Evolve Funds Group has filed a preliminary prospectus with Canadian regulators to launch five exchange-traded funds. Among them are ETFs investing in gender diversity, cybersecurity and the next generation of automobiles.
The Globe and Mail (Toronto) (tiered subscription model) (20 Jul.) 
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