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14 December 2012

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Obama and Boehner's "fiscal cliff" meeting yields no result
President Barack Obama and U.S. House Speaker John Boehner gave no indication that they made any progress toward averting the "fiscal cliff" after a Thursday meeting that Treasury Secretary Timothy Geithner joined. The White House and Boehner released statements saying "the lines of communication remain open." However, Boehner did not rule out a House vote before year-end on extending Bush-era tax cuts for the middle class. The New York Times (tiered subscription model) (13 Dec.), The Washington Post (13 Dec.), The Columbus Dispatch (Ohio) (13 Dec.)

Central banks extend currency cooperation
A currency-swapping arrangement among leading central banks that was due to expire Feb. 1 is being extended another year. The European Central Bank, the Federal Reserve, the Bank of England, the Swiss National Bank and the Bank of Canada are participating, while the Bank of Japan is considering joining. The idea is to make sure each bank has quick access to the currency it needs as the world continues to wrestle with consequences of the financial crisis. The Washington Post/The Associated Press (13 Dec.), Reuters (13 Dec.), The Wall Street Journal/Dow Jones Newswires (13 Dec.)

Europe's banking-union deal provides relief to London
European finance ministers hammered out a deal on a banking union that removes an immediate threat to London's financial center. The deal gives oversight authority to the European Central Bank, but it includes crucial concessions that protect London's status as a global financial hub. Reuters (13 Dec.), Financial Times (tiered subscription model) (13 Dec.)

Sprint offers $2.1B for remaining stake in Clearwire
Sprint Nextel offered to pay $2.1 billion for the remaining equity stake in wireless partner Clearwire. Sprint owns 51% of Clearwire but under a 4-year-old agreement, can't control a majority on its board of directors. The Kansas City Star (Mo.) (14 Dec.), Computerworld/IDG News Service (13 Dec.)

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Market Activity

China a high performer among mixed Asian-Pacific markets
Asian-Pacific markets were mixed Friday, with China's Shanghai Composite taking the lead and rising 4.3%, helped by encouraging news from HSBC's China manufacturing Purchasing Managers Index, which rose to a 14-month high this month. Hong Kong's Hang Seng Index was up 0.7%. Australia's S&P/ASX 200 finished the session marginally higher. Japan's Nikkei 225 close down 0.1%. South Korea's Kospi was down 0.4%. Taiwan's Taiex gave up 0.8%. India's Sensex increased 0.5% at midafternoon. MarketWatch (14 Dec.), The Economic Times (India) (20 Dec.)

Nasdaq cancels some premarket trades because of glitch
Shares in nine companies, including Citigroup and Goldman Sachs, fluctuated significantly right before the market opened Thursday, prompting Nasdaq OMX Group to cancel some trades. It was the latest in a string of glitches among exchanges and prompted concerns about the frequency of such issues. Bloomberg (13 Dec.), Financial Times (tiered subscription model) (13 Dec.), The Wall Street Journal (13 Dec.)

Signs and expectations point to bright 2013 for equities
Next year could mark the beginning of a five-year cycle of increased issuance in equity capital markets, with a 20% rise predicted by Barclays and Bank of America. Investors appear to be turning away from a recent preference for bonds and toward equities, and a survey revealed that half of respondents expect global equities' performance to outpace that of other asset classes in 2013. Financial News Online (U.K.) (subscription required) (13 Dec.)

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Economics

Initial jobless claims in U.S. drop fourth week in a row
First-time unemployment claims in the U.S. posted their fourth consecutive major decline last week, reaching their lowest level since the beginning of October, the Labor Department said. New applications totaled 343,000, down 29,000 from the week before. The four-week rolling average, which economists consider a more accurate indicator of labor market trends, declined to 381,500, compared with 408,500 the previous week. Los Angeles Times (tiered subscription model)/Money & Co. blog (13 Dec.), MSNBC/The Maddow Blog (13 Dec.), The Hill/On The Money blog (13 Dec.)

Cars and electronics lead U.S. retail-spending rebound
Retail sales in the U.S. increased 0.3% in November compared with October, the Commerce Department said. Vehicle sales rose 1.4%, and electronics sales climbed 2.5%. Internet and mail-order sales gained 3%. Reuters (13 Dec.), USA Today (14 Dec.), The Washington Post/The Associated Press (13 Dec.)

Report: Rising health care costs outstrip states' revenue
State governments face cuts in U.S. assistance and skyrocketing health care costs this year, according to the Fiscal Survey of States, a report by the National Association of State Budget Officers and the National Governors Association. Because states can't fill the gap left by reduced federal funding, service cuts begun during the recession will have to become deeper, the report said. The Washington Post (14 Dec.)

Chinese factory output is at highest level in 14 months
Despite weakness in the global economy, China's manufacturing activity reached a 14-month high this month, according to a preliminary purchasing managers index by HSBC Holdings. The index hit 50.9, increasing from 50.5 in November, on a scale in which anything higher than 50 indicates expansion. Channel NewsAsia/Agence France-Presse (14 Dec.)

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Geopolitical/Regulatory

Italy postpones financial-transaction tax
Italy has tweaked its financial-transaction tax, delaying implementation to March. Stock transactions will be taxed at 0.12%, then 0.1% starting in 2014. Derivatives taxation has been postponed to July, with the rate still unset. Reuters (13 Dec.)

UBS reportedly faces $1B fine in Libor case
UBS might have to pay $1 billion for possible manipulation of the London Interbank Offered Rate, more than double a fine paid by Barclays, a source says. The penalty, which could be handed down next week, would come after the first individual arrests in the U.K. and as transcripts reveal the extent and gravity of manipulation by banks. Reuters (13 Dec.), Bloomberg (13 Dec.), The New York Times (tiered subscription model)/DealBook blog (13 Dec.), Financial Times (tiered subscription model) (13 Dec.)

China aims to establish bank-deposit insurance
Chinese leaders are preparing a series of financial reform, including introducing deposit insurance, a government official says. The government sees such insurance as a way to steer credit toward small and midsize businesses, which are thought to receive as little as 3% of bank lending. The New York Times (tiered subscription model) (13 Dec.)

Easy victory is expected for Japanese opposition party
Japan's opposition Liberal Democrat Party, led by former Prime Minister Shinzo Abe, is headed for an overwhelming victory in Sunday's parliamentary election, according to a survey by Japanese newspaper Asahi Shimbun. With 241 seats needed for an outright majority, the party is expected to get 280. Abe would have seven months to turn around a struggling economy before the next election in July. The Asahi Shimbun (Japan) (14 Dec.), Bloomberg (14 Dec.)

Fed supervision of money funds is considered by panel
The Financial Stability Oversight Council, chaired by U.S. Treasury Secretary Timothy Geithner, discussed the possibility of placing money market mutual funds under Federal Reserve regulation. Treasury Department spokeswoman Suzanne Elio says the council discussed a provision of the Dodd-Frank Act that would let it designate money funds "or their sponsors or advisers for Federal Reserve supervision and enhanced prudential standards." Bloomberg (13 Dec.), Reuters (13 Dec.)

Regulators press advisers to plan for death
Financial advisers who fail to adopt a continuity plan to deal with clients' accounts in case the adviser dies or becomes disabled could be fined by regulators, compliance professionals say. Regulators often raise the issue in routine examination, they say. Reuters (12 Dec.)

Financial Products

JPMorgan plans firewall between copper ETF and traders
JPMorgan Chase told NYSE Arca that it would establish a firewall between a proposed exchange-traded fund investing in copper and the bank's metal traders, to prevent the release of nonpublic information, according to a filing with the Securities and Exchange Commission. The SEC is considering whether to allow the JPM XF Physical Copper Trust. Bloomberg (12 Dec.)

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