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15 November 2012

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China introduces next leadership team
China's Communist Party named its leadership line-up with Vice President Xi Jinping taking over command of the third-largest economy from departing President Hu Jintao. Xi was also named head of the Central Military Commission. He is scheduled to step into his new role when parliament meets in March. Reuters (15 Nov.), Xinhuanet.com (China) (15 Nov.), Council on Foreign Relations online/The National (14 Nov.)

Obama presents populist vision for second term
President Barack Obama took a populist tone at his first news conference after his re-election, saying he has a mandate to help poor and middle-class Americans. He said he believes that his opposition to extending Bush-era tax cuts for the wealthiest Americans played a role in his victory. "I think every voter out there understood that was an important debate, and the majority of voters agreed with me," he said. The Washington Post (14 Nov.), The New York Times (tiered subscription model) (14 Nov.), Los Angeles Times (tiered subscription model) (14 Nov.)

Most Americans are optimistic about future, poll finds
About 54% of Americans expect the nation to be better off in four years than it is today, according to the USA Today/Gallup Poll. About 41% of respondents said things will get worse in that period. And 74% of those surveyed said President Barack Obama should strongly back programs with bipartisan support. USA Today (15 Nov.)

House report rebukes MF Global CEO for firm's collapse
The U.S. House Financial Services Subcommittee on Oversight and Investigations released a summary of a report -- expected to be released in full Thursday -- on the collapse of MF Global Holdings. In it, Republicans say CEO Jon Corzine's decisions led to the firm's demise. "Choices made by Jon Corzine during his tenure as chairman and CEO sealed MF Global's fate," said Rep. Randy Neugebauer, chairman of the panel. Bloomberg Businessweek (15 Nov.), Financial Times (tiered subscription model) (14 Nov.), The Hill/On the Money blog (14 Nov.), The Wall Street Journal (14 Nov.)

ECB demands revamp of system for setting Euribor
In the wake of issues concerning the London Interbank Offered Rate, the European Central Bank and national central banks in the eurozone called for an overhaul of the system that determines the Euro Interbank Offered Rate. "In the short term, the focus should be on improving the governance process, as well as on providing a clear road map for both the regulation and supervision of Euribor," according to an ECB paper. Reuters (14 Nov.)

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Market Activity

Asian-Pacific markets falter amid worries of "fiscal cliff"
Most Asian-Pacific markets fell Thursday amid concern about the U.S. "fiscal cliff." Australia's S&P/ASX 200 slid 0.9%. Hong Kong's Hang Seng Index gave up 1.6%. China's Shanghai Composite fell 1.1%. South Korea's Kospi lost 1.2%. India's Sensex was down 0.8% at mid-afternoon. Bucking the trend, Japan's Nikkei 225 advanced 1.9%. The Economic Times (India) (21 Nov.), The Wall Street Journal (15 Nov.)

NYSE trade interruption might bring scrutiny
A New York Stock Exchange server problem temporarily halted trading in more than 200 companies Monday morning, a hiccup expected to heighten scrutiny over self-regulation. It was the latest of many such glitches during the past few months. "Reliance on technology has enabled the markets to achieve extraordinary levels of speed and efficiency," Securities and Exchange Commission Chairman Mary Schapiro said. "But with technology comes a responsibility for getting it right, minimizing errors and protecting the interests of investors." The Trade News (U.K.) (14 Nov.)

Mutual fund investors shift money from stocks to bonds
Investors in mutual funds pulled a net $15.2 billion from stock funds in October, the eighth straight month of net outflows, consulting firm Strategic Insight said. Bond funds brought in $29.7 billion of new investment last month, most going into taxable bond funds. Bond funds have attracted net inflows every month since September 2011. The Washington Post/The Associated Press (14 Nov.)

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Economics

Fed is receptive to more bond buying, minutes show
The minutes of the Federal Reserve's last policy meeting suggest that the central bank will announce a bond-buying program next month to stimulate employment. Several members supported focusing on purchases of long-term bonds when the current program ends, the minutes said. The New York Times (tiered subscription model)/The Associated Press (14 Nov.)

Sandy drove down October retail sales
U.S. retail sales declined 0.3% last month compared with September, the first decrease since June, the Commerce Department said. Activity at East Coast auto dealerships fell sharply as superstorm Sandy approached. If auto sales are excluded, October retail sales were flat. Reuters (14 Nov.), Medill Reports (Northwestern University) (14 Nov.)

Industrial production slides in eurozone
Eurozone factory output in September decreased 2.5% compared with August, according to Eurostat. Economists had expected a more modest decline. Durable consumer goods were hit worst, dropping 4.3%. Deutsche Welle (Germany)/Deutsche Presse-Agentur/Reuters (14 Nov.), Market News International (14 Nov.)

FHA reportedly is close to needing taxpayer money
The U.S. Federal Housing Administration, for the first time in its 78-year history, might need an infusion of taxpayer funding to stay in business. The agency, which insures mortgages by private lenders, is expected to report that it is in danger of exhausting reserves, people familiar with the matter said. The New York Times (tiered subscription model) (14 Nov.), The Wall Street Journal (14 Nov.)

Analysis: Domestic demand bolsters developing Asia
Developing nations in Asia have attained high growth and greater stability by encouraging domestic consumption, rather than relying on exports, according to The Economist. "Fortunately, Asia's policymakers never shared the West's faith in self-correcting financial systems," the magazine notes. "The region has pioneered 'macroprudential' regulations, designed to curb excessive credit and capital flows even without raising interest rates." The Economist (10 Nov.)

Roubini sees eurozone core succumbing to crisis
Economist Nouriel Roubini says the eurozone periphery's debt crisis is affecting core countries, citing Germany's slowing economy. Roubini also mentioned France, which "is entering a recession," and noted that German exports are down because of weakness in the eurozone and China. Bloomberg (14 Nov.)

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Geopolitical/Regulatory

U.K. court seeks Barclays documents in Libor case
A U.K. judge ordered Barclays to turn over documents about 42 people possibly involved in manipulation of the London Interbank Offered Rate. The judge also said board meetings, taped conversations among traders, compliance materials and other information must be disclosed. Reuters (14 Nov.), Financial Times (tiered subscription model) (14 Nov.), Bloomberg Businessweek (14 Nov.)

Firms criticize Europe's short-selling rules
Europe's restrictions on short selling have caused frustration among buy-side firms, some to the point that they've stopped trading credit default swaps and certain equities. Market participants said at an industry conference that some instruments have become untradeable because regulators have changed their minds capriciously. Risk.net (subscription required) (14 Nov.)

U.S. senators voice concerns about Basel III plan
Republican and Democratic senators in the U.S. are questioning Basel III capital rules for banks, saying a proposal for implementation is overly complex. "I'm concerned Basel III allows the largest banks to use complex internal models to determine capital requirements for transactions that were some of the most troublesome during the crisis," said Sen. Sherrod Brown. He also expressed concerns about over-the-counter derivatives used by major financial institutions. MarketWatch (14 Nov.), The Wall Street Journal/Deal Journal blog (14 Nov.)

SEC sets record for enforcement actions
The Securities and Exchange Commission initiated the most enforcement actions in its history against financial advisers and investment firms during fiscal 2012, which ended Sept. 30. The regulator filed 147 actions, one more than in fiscal 2011, the previous record. InvestmentNews (free registration) (14 Nov.)

Financial Products

Blackstone plans ETF focused on corporate loans
Blackstone Group aims to launch an actively managed exchange-traded fund that would invest principally in corporate loans. Blackstone and State Street are developing the Blackstone/GSO Senior Loan Portfolio, which would allocate at least 80% of funds to leveraged loans, according to a filing with the Securities and Exchange Commission. Bloomberg (13 Nov.)

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