German parliament is expected to allow Greek aid | Rise in Japan's factory output surprises economists | Experts discuss possible ways to overhaul Libor
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30 November 2012
CFA Institute: Financial NewsBrief
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"Fiscal cliff" talks are getting nowhere, lawmaker says
U.S. House Speaker John Boehner said no real progress has been made in talks between Republican leaders and the White House, and there is a real danger that the "fiscal cliff" will go into effect at year-end. "No substantive progress has been made in the talks between the White House and the House over the last two weeks," he said. "There's been no serious discussion of spending cuts so far, and unless there is, there's a real danger of going off the fiscal cliff." Reuters (29 Nov.), TheFiscalTimes.com (30 Nov.), Bloomberg (30 Nov.)
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German parliament is expected to allow Greek aid
The latest financial aid for Greece is expected to gain approval from German lawmakers. Chancellor Angela Merkel's governing coalition and opposition parties support the move. Reuters (29 Nov.), EUObserver (Brussels) (29 Nov.), Market News International (29 Nov.)
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Rise in Japan's factory output surprises economists
Economists were caught off guard by a 1.8% increase in Japan's industrial production in October from September, when it fell 4.1%. Surging demand for electronic parts and devices largely drove the increase, with production for those items up 14.7%. Sales to Apple played a big part in the expansion. Bloomberg (30 Nov.), RTT News (29 Nov.), MarketWatch (29 Nov.)
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Experts discuss possible ways to overhaul Libor
The American Enterprise Institute asked a group of experts to discuss proposals for resolving issues plaguing the London Interbank Offered Rate and other benchmarks. Alex Pollock of AEI offered a bit of history of how Libor came to be and how it has emerged as probably the world's most important index. The experts differed on many points but expect adjustments will be made to Libor's administration. However, deals might be drafted to rely on alternative benchmarks, they said. NewsMax.com/Moneynews (29 Nov.)
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Market Activity
Asian-Pacific markets up despite stall in "fiscal cliff" talks
Asian-Pacific markets closed out the month higher, and were up Friday despite a stall in "fiscal cliff" talks in the U.S. Japan's Nikkei 225 was up 0.5%. Australia's S&P/ASX 200 rose 0.6%. South Korea's Kospi edged up 0.1%. Hong Kong's Hang Seng added 0.5%. China's Shanghai Composite rose 0.9%. Taiwan's Taiex advanced 1%. India's Sensex was up 0.9% at mid-afternoon. MarketWatch (30 Nov.), The Economic Times (India) (26 Feb.)
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Chinese property insurer reportedly raises $3.1B in IPO
China's biggest property insurer, People's Insurance Company of China Group, raised $3.1 billion in its Hong Kong initial public offering, two people familiar with the matter said. The amount marks Hong Kong's biggest IPO in two years. Bloomberg (30 Nov.), Reuters (30 Nov.)
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"Fiscal cliff" triggers scramble to book deals in 2012
Fears that Congress won't strike a deal to avert the "fiscal cliff" and that capital gains taxes will rise Jan. 1 are driving a rush by U.S. companies and funds to close sales in 2012. Data provider Dealogic said follow-on offerings by venture capital and private equity firms total $35.3 billion, the most at this point in a year since Dealogic began tracking the data in 1995. The Wall Street Journal (tiered subscription model) (29 Nov.)
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Swedish exchange glitch is latest bourse tech issue
Nasdaq OMX Group halted trading in Swedish derivatives for four hours due to a computer error that resulted in an order seeking to buy futures contracts on the nation's stocks valued at 131 times its gross domestic product. "Our system misinterpreted a certain order category and communicated a value that was way too high into the book," said Nasdaq OMX spokesman Carl Norell. He noted that this wasn't a "fat finger" incident. The glitch was the latest in a series of technical problems experienced by exchanges in recent months. Bloomberg Businessweek (29 Nov.)
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Economics
U.S. economy grew faster in Q3 than first thought
The U.S. economy expanded 2.7% in the third quarter, not 2%, as initially estimated, according to the Commerce Department. Most of the growth came from government spending, mainly for military items, and companies stockpiling inventory, the department says. Consumer spending and business investment in equipment and software were less than originally thought. Los Angeles Times (tiered subscription model) (30 Nov.)
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Banks might need additional reserves, BoE's King says
Bank of England Governor Mervyn King suggested that banks might need larger capital reserves, citing potential losses, penalties from manipulation of the London Interbank Offered Rate and other factors. King also called for greater transparency, saying "we need to ensure that reported capital ratios do in fact provide an accurate picture of banks' health." The Telegraph (London) (tiered subscription model) (29 Nov.), Bloomberg (29 Nov.), The New York Times (tiered subscription model) (29 Nov.), Financial Times (tiered subscription model) (29 Nov.)
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Most Americans' taxes are lower than they were 30 years ago
The heated U.S. tax debate overlooks the fact that federal, state and local taxes have been declining for most Americans since 1980. The overall tax burden for a majority of families is less than it was 30 years ago, according to an analysis by The New York Times. The biggest declines were among households earning more than $200,000 annually, the newspaper found. The New York Times (tiered subscription model) (29 Nov.)
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Analysis: Competitors, not regulators, will challenge Web giants
Regulators are scrutinizing the Internet's Big Four -- Amazon, Apple, Facebook and Google -- but the companies' biggest challenge will be innovative competitors, according to The Economist. Microsoft is fading because it ignored changes in the marketplace, not because of regulatory action. "The four big fish nowadays also have a reputation for arrogance and plenty of enemies," the magazine notes. The Economist (free content) (01 Dec.)
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Geopolitical/Regulatory
PBOC official criticizes U.S. over FATCA
Liu Xiangmin, a senior official at the People's Bank of China, says the U.S. has erred in taking a unilateral approach to thwart tax evaders by way of the Foreign Account Tax Compliance Act. Liu says FATCA doesn't respect the sovereignty of other nations. "It creates unreasonable costs for foreign financial institutions and directly contravenes many countries' privacy and data-protection laws," he said. Risk.net (subscription required) (28 Nov.), Reuters (28 Nov.)
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2 U.S. lawmakers request Volcker rule delay
U.S. Reps. Spencer Bachus and Jeb Hensarling are asking regulators to postpone the Volcker rule, which prohibits proprietary trading at major banks. The leading Republicans asked to delay the effective date by two years after the final version is released. "Given the time that it will take for you to agree on one version of the Volcker Rule as well as the tremendous uncertainty that market participants face in trying to anticipate what the final rule will look like, we respectfully suggest that the Federal Reserve Board delay the Volcker Rule's effective date," Bachus and Hensarling wrote in a letter to regulators. Bloomberg Businessweek (29 Nov.), AmericanBanker.com (subscription required) (29 Nov.), The Wall Street Journal (tiered subscription model)/Deal Journal blog (29 Nov.)
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HKEx gains U.K. authorization to acquire LME
The U.K. Financial Services Authority approved Hong Kong Exchanges and Clearing's takeover of the London Metal Exchange. Shortly thereafter, HKEx raised as much as $1 billion from the equity market to help pay for the $2.2 billion purchase. The deal is expected to be completed late next week. Reuters (29 Nov.), Financial Times (tiered subscription model) (30 Nov.), Google/Agence France-Presse (29 Nov.)
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EU court blocks request for ECB files on how Greece hid debt
The EU General Court, rejecting a request by Bloomberg News, is allowing the European Central Bank to keep private documents that show how Greece used derivatives to conceal debt. "The courts are bending the rules to legalize the policies of the European institutions and help stabilize the region," said Georg Erber of the German Institute for Economic Research. "It reveals implicitly that the EU was well-informed about what was going on and didn't take steps to avert the crisis." Bloomberg (29 Nov.)
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House panel is expected to make SRO bill low priority
A U.S. bill to move supervision of financial advisers from the Securities and Exchange Commission to one or more self-regulatory organizations is unlikely to see a House vote this year, after Rep. Jeb Hensarling was elected chairman of the House Financial Services Committee, industry officials say. "I would expect him to hit the ground running with a strong agenda," said Dan Barry, managing director of government relations and public policy at the Financial Planning Association. "I wouldn't expect the investment-adviser issues to be high on his list." InvestmentNews (free registration) (28 Nov.), WealthManagement.com (U.S.)/Yield of Dreams blog (29 Nov.)
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Financial Products
ProShares plans high-yield-debt ETF with hedging
ProShares aims to launch an exchange-traded fund investing in high-yield corporate debt that would have built-in protection against rapidly rising interest rates. If approved by the Securities and Exchange Commission, the ProShares High Yield-Interest Rate Hedged ETF will take short positions on U.S. Treasurys to hedge against higher interest rates diminishing the value of its bonds. Zacks (28 Nov.), IndexUniverse.com (27 Nov.)
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