EU fines Microsoft €561M for antitrust violation | Spanish party sues newspaper over corruption accusation | Yen devaluation would be dangerous, Chinese SWF chief warns
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07 March 2013
CFA Institute: Financial NewsBrief
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House passes interim measure to avert U.S. government shutdown
The House of Representatives passed a bill in a 267-151 vote that would fund U.S. government programs through Sept. 30, to avoid a shutdown March 27. Some attendees of a dinner meeting between President Barack Obama and Senate Republican leaders are more optimistic that Democrats and Republicans can reach an agreement on the budget and debt. Reuters (07 Mar.), USA Today (06 Mar.), The Hill (06 Mar.)
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EU fines Microsoft €561M for antitrust violation
The EU imposed a €561 million fine on Microsoft, saying it failed to comply with a 2009 antitrust agreement in which it promised to give customers a choice of Internet browsers, rather than automatically installing Internet Explorer in Windows systems. Microsoft violated the agreement from May 2011 to July 2012, the EU said. Spiegel Online (Germany) (06 Mar.)
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Spanish party sues newspaper over corruption accusation
The party that controls Spain's government sued the newspaper El Pais for publishing a story that accused party leaders, including Prime Minister Mariano Rajoy, of accepting tens of thousands of euros of undeclared payments from contributors. El Pais published account ledgers that it said showed that Rajoy and other party officials took the money. The Telegraph (London) (tiered subscription model)/Agence France-Presse (06 Mar.), Bloomberg (06 Mar.)
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Yen devaluation would be dangerous, Chinese SWF chief warns
Gao Xiqing, president of sovereign-wealth fund China Investment, said devaluation of the yen would be bad for Japan as well as its Asian neighbors. "Treating the neighbors as your garbage bin and starting a currency war would not only be dangerous for others but eventually be bad for yourself," he said. "I would hope that [Japan] doesn't do that as a responsible government." The Wall Street Journal (tiered subscription model) (06 Mar.)
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NYSE Euronext aims to cut LCH.Clearnet stake, sell MCX holding
NYSE Euronext is selling noncore assets, including a 4.79% holding of Multi Commodity Exchange of India and part of a 9% stake in LCH.Clearnet Group. Chief Financial Officer Michael Geltzeiler says NYSE Euronext is taking steps to increase savings and lower investment costs. The Wall Street Journal (tiered subscription model) (06 Mar.)
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Reader Survey
What will be the next major financial-market mover (i.e. effects lasting for 1 year+)?
A macroeconomic event, such as a sovereign-debt crisis or inflation  27.56%
A random, unforeseeable event  24.37%
A political event, such as a U.S. government shutdown or a shift in the EU's makeup  16.44%
A central bank action, such as more QE or no more QE  12.28%
A geopolitical event, such as an incident in the South China Sea or in the Middle East  11.03%
A change in corporate profits (up or down)  6.19%
An announced technological revolution, such as a new computing technology or biotechnology  2.13%
Poll analysis:
We asked readers earlier this week about what will be the next major financial market mover whose effects will last for longer than one year. Most interestingly, for a group made up mostly of professional finance folks, only about one in 16 of 1,034 respondents chose "a change in corporate profits (up or down)." That is, investors can choose to directly invest in corporations, while all of the other answer options investors do not have control over. So it must be an anxious time for the professional finance crowd. Most popular among the answers was the belief that a macroeconomic event is most likely to change the direction of the financial markets. This may be evidence of discounting the status quo or it may be an example of priming, in the behavioral finance sense of the word. In other words, our preceding long period of market activity (2008 to now) was driven by macroeconomic events and therefore investors are primed to expect more of the same. A close number two choice was "A random, unforeseeable event" which, given the wide swath of choices, suggests again that readers of Newsbrief are finding the current period a very stressful one despite global stock markets approaching, or hitting, new highs. Last, folks seem to no longer see technology in the golden light of half a generation ago, when all things electronic and biotech lifted investor spirits. -- Jason A. Voss, CFA, Content Director, CFA Institute
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Japanese market rises, while most of Asia-Pacific stumbles
Japan's Nikkei 225 moved up 0.3%, to 11,968.09, its best showing since September 2008, but markets fell elsewhere in the Asian-Pacific region Thursday. China's Shanghai Composite fell 1%. South Korea's Kospi lost 0.8%. Australia's S&P/ASX 200 slid 0.2%. Hong Kong's Hang Seng Index finished the session marginally lower. India's Sensex was up 0.8%. MarketWatch (07 Mar.), The Economic Times (India) (19 Dec.)
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Mapletree REIT shares rise after Asia's biggest IPO this year
Mapletree Greater China Commercial Trust shares advanced after raising $1.3 billion in Asia's biggest initial public offering this year. Share prices rose 10% shortly after trading began in Singapore. The real estate investment trust is a unit of Temasek Holdings, an investment company owned by Singapore. Bloomberg (07 Mar.)
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EU officials plan to maintain budget-reduction effort
EU leaders plan to stay the course on cutting and balancing budgets, according to draft conclusions for a summit next week. In addition to endorsing stricter budget rules set to take effect this year, they will call for a conclusion to debate on policy that forces shareholders and bondholders to take a greater share of a collapsed bank's losses. They also will support the creation of a single agency responsible for troubled financial institutions, the draft says. Bloomberg (06 Mar.)
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Abe challenges Japanese establishment to rev up economy
Japanese Prime Minister Shinzo Abe is proving that he is ready to challenge the establishment to energize the struggling economy. Only two months into office, he has forced a cautious head of the Bank of Japan to step down and has named a replacement who promises to do "whatever it takes" to reverse persistent deflation. The New York Times (tiered subscription model) (06 Mar.)
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U.S. wasted $8B in Iraqi reconstruction, report says
At least $8 billion in U.S. spending to reconstruct Iraq was wasted, according to a report from the Special Investigator General for Iraq Reconstruction. "There exists limited tangible evidence of any positive effects from the rebuilding program," the report says in summary of an interview with Iraqi Finance Minister Rafi al-Eissawi. The Christian Science Monitor (06 Mar.), Council on Foreign Relations online/Democracy in Development blog (06 Mar.)
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Analysis: Fed policy benefits banks more than homeowners
The Federal Reserve is troubled that its reduction of interest rates is sending mortgage lenders' profit sky high, according to The Economist. "The Federal Reserve's campaign to push down interest rates has fuelled a wave of home-buying and loan refinancing," the magazine notes. "And to the frustration of the Fed, those lower rates are not being fully passed on to customers by the banks." The Economist (tiered subscription model) (02 Mar.)
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Geopolitical/Regulatory
Officials warn about effects of Europe's transaction tax
Officials tasked with managing the public debt of France and Italy have warned about Europe's proposed tax on financial transactions, saying it could damage the sovereign-bond market. Maria Cannata, who heads Italy's debt agency, says policymakers must consider the "importance of not damaging the government-bond markets." The Telegraph (London) (tiered subscription model) (06 Mar.)
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Chinese regulator expands RQFII program
The China Securities Regulatory Commission is letting more financial institutions participate in the Renminbi Qualified Foreign Institutional Investor program. Under amended rules, Hong Kong divisions of Chinese insurers and banks, as well as Hong Kong-based financial institutions, are allowed to participate. Also, participants can invest in stock-index futures, in addition to bonds and equities. Bloomberg (07 Mar.), The Wall Street Journal (tiered subscription model)/Dow Jones Newswires (06 Mar.)
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Council of the EU moves toward deal on OTFs in MiFID II
Organized trading facilities, part of the revised Markets in Financial Instruments Directive, continue to be a sticking point for policymakers, but the Council of the EU appears to be making progress. The council has reached an agreement on the venue category, saying it should be used for all asset classes, sources say. The Trade News (U.K.) (tiered subscription model) (06 Mar.)
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Possible bids on SEC computer project raise questions
Four prospective bidders to create a computer system to help the Securities and Exchange Commission track trading activity are members of the consortium that will select the winning bid. NYSE Euronext, Nasdaq OMX Group, BATS Global Markets and the Financial Industry Regulatory Authority have expressed interest in the project. The Washington Post (tiered subscription model) (06 Mar.)
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Group calls for fees to fund SEC adviser examination
The North American Securities Administrators Association, which represents U.S. state securities regulators, plans to lobby Congress to approve user fees to fund examination of financial advisers by the Securities and Exchange Commission. NASAA President Heath Abshure says the association will "stay on guard" regarding an effort by the Financial Industry Regulatory Authority to become a self-regulatory organization for advisers. AdvisorOne (05 Mar.)
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SEC considers making voluntary tech standard mandatory
The Securities and Exchange Commission is set to vote on making the voluntary Automation Review Policy mandatory. The change would require covered entities to regularly audit and stress-test their systems. The SEC might also expand the rule to cover not only exchanges and clearinghouses but also large brokerages and dark pools. Bloomberg (07 Mar.)
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Financial Products
PowerShares aims to launch ETF investing in 3-year bonds
Invesco PowerShares has filed with the Securities and Exchange Commission to introduce an exchange-traded fund that would buy investment-grade public and private bonds maturing in three years. The PowerShares Global Select Short Term Bond Portfolio would attempt to replicate the performance of the DB Global Dynamic Short Maturity Bond Index. Barron's (free content)/Focus on Funds blog (06 Mar.), IndexUniverse.com (06 Mar.)
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Venture Exchanges and Investor Risk and Returns
CFA Institute report looks at reporting issues, fraud, and other problems by exchange
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