Boehner is re-elected U.S. House speaker by slender margin | LSE and NYSE win back market share from alternatives | Japanese exchange has difficult first day
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04 January 2013
CFA Institute: Financial NewsBrief
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Japan's debt is a financial time bomb, experts say
Largely unnoticed as Europe and the U.S. struggle with financial problems, Japan's debt has expanded to monumental proportions that might be impossible to sustain. Economists have started to warn that Japan could become the next Greece. Japanese debt amounts to 230% of gross domestic product, compared with 165% for Greece. Der Spiegel (Germany) (English online version) (03 Jan.)
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Boehner is re-elected U.S. House speaker by slender margin
Republican John Boehner held onto his position as U.S. House speaker in a 220-192 vote after about a dozen members of his party turned against him in a symbolic protest. Some were displeased with Boehner's agreement to allow a last-minute budget compromise raising the tax rate for wealthy Americans to come to the floor for a vote this week. "Public service was never meant to be an easy living; extraordinary challenges demand extraordinary leadership," Boehner said in an address to the House. Bloomberg (03 Jan.), The Hill (03 Jan.), Reuters (03 Jan.)
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LSE and NYSE win back market share from alternatives
NYSE Euronext and the London Stock Exchange regained in 2012 some of the ground they lost to other platforms in recent years. Their market-share gains mean BATS Chi-X Europe, Burgundy, Quote MTF and Turquoise endured losses. "[NYSE and LSE] looked at what new venues were doing in terms of pricing and technology, have taken it on and, in many cases, done it better, by virtue of their resources and economies of scale," said Herbie Skeete, managing director at exchange consultancy Mondo Visione. The Wall Street Journal (tiered subscription model)/Financial News (03 Jan.)
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Japanese exchange has difficult first day
Japan Exchange Group, formed by the merger of the Tokyo Stock Exchange and the Osaka Securities Exchange, lost value Friday despite a positive day for the Nikkei 225. Financial Times (tiered subscription model) (04 Jan.)
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ECB: Italian and Spanish banks purchased government debt
As crisis pressure lessened in the eurozone, Spanish and Italian banks began buying government bonds in November, according to the European Central Bank. The increase is one indication that liquidity released by the ECB is having its intended effect. Reuters (03 Jan.)
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Market Activity
Japan rises, while most other Asian-Pacific markets fall
Japan's Nikkei 225 rallied Friday, bucking the trend on most other Asian-Pacific markets amid worries that the Federal Reserve may shut down its U.S. stimulus program. The Nikkei 225 rose 2.8% to 10,688.11. China's Shanghai Composite gained 0.4%. Australia's S&P/ASX 200, South Korea's Kospi and Taiwan's Taiex each gave up 0.4%. Hong Kong's Hang Seng Index slid 0.3%. India's Sensex was up 0.1% at midafternoon. MarketWatch (04 Jan.), The Economic Times (India) (26 Feb.)
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Fed is divided on length of stimulus, minutes show
Federal Reserve officials offered conflicting views on how long to continue the U.S. central bank's bond-buying program, according to minutes from their December meeting. The division suggests the Fed could end bond purchases earlier than expected. Los Angeles Times (tiered subscription model)/Money & Co. blog (03 Jan.), Bloomberg (04 Jan.)
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Investors pour $7.17B into stock ETFs
While Congress approved a compromise to avert the U.S. "fiscal cliff," investors pulled money out of bond funds and put $7.17 billion into exchange-traded funds that buy stocks, according to Thomson Reuters' Lipper service. The flow of cash into stock ETFs in the week that ended Wednesday was the most in three weeks. Reuters (03 Jan.)
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Economics
Analysis: U.S. joins Europe in hiding from economic problems
The compromise averting the "fiscal cliff" means the U.S. has embraced Europe's dysfunctional approach to urgent economic problems, failing to deal with them and "kicking the can down the road," according to The Economist. "America, which has the biggest structural budget deficit in the rich world bar Japan, will become an outlier in its failure to deal with the fiscal consequences of an ageing population," the magazine notes. "Its ageing is slower than Europe's but, as its debt piles up and business and consumer confidence is dampened, the eventual crunch will be more painful." The Economist (free content) (05 Jan.)
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Initial unemployment claims edge up to 372,000
First-time jobless claims in the U.S. rose 10,000, to 372,000 last week, higher than the 360,000 most economists expected. The rolling four-week average, viewed by many economists as a more accurate indicator of labor-market conditions, increased only 250, to 360,000. The figures suggest moderate job growth. Los Angeles Times (tiered subscription model)/Money & Co. blog (03 Jan.), The Washington Post (tiered subscription model)/The Associated Press (03 Jan.)
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2012 sales in U.S. were best in 5 years, automakers say
The auto industry said 2012 was its best year in five years in the U.S., helped by a strong boost in sales in December. Sales totaled 14.5 million in 2012, 13% higher than in 2011. Sales at Chrysler, the smallest of automakers headquartered in Detroit, increased 21%. The Washington Post (tiered subscription model)/The Associated Press (03 Jan.), Detroit Free Press (04 Jan.)
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Advisers are unimpressed with "fiscal cliff" deal
Financial advisers don't share stock traders' enthusiasm about Congress' compromise to avert the U.S. "fiscal cliff," according to a survey by InvestmentNews. More than three-quarters of respondents said they don't think the deal will bring about long-term change in government spending, reduce the national debt or lead to tax reform. InvestmentNews (free registration) (03 Jan.)
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Geopolitical/Regulatory
Fate of Dodd-Frank might be decided this year, analysts say
Because rhetoric over the Dodd-Frank Act has softened and political alliances across the aisle have formed, 2013 could be the year that meaningful regulation comes out of Congress, analysts say. "There is no repealing Dodd-Frank, but there will be efforts to eliminate duplicative parts of the law to avoid unintended consequences," said Jaret Seiberg, senior policy analyst at Guggenheim Partners. The Washington Post (tiered subscription model) (02 Jan.)
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Schaeuble urges U.S. to implement Basel III
German Finance Minister Wolfgang Schaeuble says he is confident Europe will implement tougher capital rules for banks this year, and he put pressure on the U.S. to do the same. "I am confident that in the course of the year we will complete [details] in time to be able to start building up the additional capital required in the timeframe set by Basel III," Schaeuble wrote in an essay. "I also expect from our American partners that they too stick firmly to the political decision to introduce the new set of rules." Reuters (03 Jan.)
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Volatility curb might not start until April, BATS says
BATS Global Markets says a limit-up/limit-down rule, set to take effect in February, might not be implemented until April because of "substantial operational and interpretive issues." Market participants welcomed the possible delay. Bloomberg (03 Jan.)
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OCC signals banks will have more time to wall off swaps trading
U.S. companies that engage in swaps trading and receive federal deposit insurance are required under the Dodd-Frank Act to spin off some swaps trading into a separate branch. However, the Office of the Comptroller of the Currency says that if banks ask for a transition period, the request will be "considered favorably." Reuters (03 Jan.), Bloomberg (04 Jan.)
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U.S. regulator: Google search doesn't break antitrust law
The U.S. Federal Trade Commission says it couldn't find evidence that Google's Internet search business violates antitrust or anti-competition law. The decision, which concludes an investigation that lasted nearly two years, is expected to let Google expand its already-dominant position. The New York Times (tiered subscription model) (03 Jan.)
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Financial Products
Northern Trust readies 4 money funds
Northern Trust filed with the Securities and Exchange Commission to launch four money market mutual funds with a variable net asset value. Northern Trust Investments would serve as the adviser for the Investors Variable NAV Money Market Fund, the Investors Variable NAV AMT-Free Municipal Money Market Fund, the Investors Variable NAV U.S. Government Money Market Fund and the Investors Variable NAV Treasury Money Market Fund. MutualFundWire.com (02 Jan.), Crane Data (subscription required) (31 Dec.)
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