Eurozone industrial production declines again | Greece succeeds in bond buyback; Spain sees lower borrowing cost | EU closes in on wider authority for ECB
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December 13, 2012
CFA Institute: Financial NewsBrief - Aisa Pacific Edition
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U.S. Fed adds to bond buying, expects rates to stay low for years
Bernanke/Reuters
The U.S. Federal Reserve's Open Market Committee decided to add US$45 billion a month in Treasury purchases to its US$40 billion monthly mortgage bond purchases once Operation Twist ends this month. Later, Fed officials forecast that interest rates will remain low until at least 2015. Bloomberg (12/12)
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Eurozone industrial production declines again
Eurozone industrial output surprised on the downside in October, with a decline of 1.4% from September and 3.6% from a year before, as reported by the EU's statistics office. The stressed peripheral nations of Spain and Portugal saw production rise, but that was more than offset by declines in France and Germany. Bloomberg Businessweek (12/12)
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Greece succeeds in bond buyback; Spain sees lower borrowing cost
Greece fell narrowly short in its debt-reducing bond buyback program but came close enough for foreign lenders to pronounce it a success and clear the way for more aid. Meanwhile, Spain managed to exceed expectations in its sale of 12- and 18-month treasury bills, achieving a lower cost of borrowing. Reuters (12/12), Xinhuanet.com (China) (12/12)
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EU closes in on wider authority for ECB
Reuters
Adjusting to meet German concerns, European leaders edged closer to agreement on broad new supervisory authority for the European Central Bank. Germany had been looking to slow progress toward eventual banking union, but Finance Minister Wolfgang Schaeuble said Wednesday that his "intention is that we find a solution to the banking union on time before Christmas." Reuters (12/12)
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Japanese machinery orders turn positive
Japanese machinery orders reversed two months of decline, rising 2.6% in October, the Cabinet Office reported. The orders are considered a key indicator of near-term prospects for business investment. Exports, however, also remain a key factor for Japan, and "until foreign economies recover ... there won't be any strong pickup in domestic capital expenditure," said Hiroshi Watanabe, a senior economist at SMBC Nikko Securities. The Wall Street Journal (tiered subscription model) (12/11)
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Incoming Bank of England chief's remarks hint at policy turn
Inflation targeting should be set aside and low interest rates maintained until "precise numerical thresholds" for inflation and unemployment are reached, incoming Bank of England chief Mark Carney said. In remarks relating to the Canadian central bank, Carney said that "to achieve a better path for the economy over time, a central bank may need to commit credibly to maintaining highly accommodative policy even after the economy and, potentially, inflation picks up." The Telegraph (London) (tiered subscription model) (12/11)
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U.K. joblessness drops sharply
Reuters
Despite a stuttering economy, U.K. unemployment fell in the third quarter at the quickest pace in more than 10 years, with private-sector job growth outpacing losses in the public sector. However, wage increases were falling well short of the 2.7% annual inflation rate, according to the Office for National Statistics. The Guardian (London) (12/12)
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U.S. House speaker says big splits remain on budget
In the latest reading on U.S. budget negotiations, House Speaker John Boehner indicated the Republicans and the Obama administration are still far apart. "I remain the most optimistic person in this town, but we've got some serious differences," Boehner said. Meanwhile, the White House opened its doors to hedge fund managers to discuss the budget situation. Reuters (12/12), Bloomberg (12/12)
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Lower import prices to keep lid on U.S. inflation
U.S. inflationary pressures are expected to remain mild after import prices declined 0.9% last month, the largest drop in five months. For the 12 months through November, import prices were down 1.2%. Fox Business (12/12)
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Investment professionals are cautiously optimistic about the global economy in 2013, but ethical culture within financial firms needs to be addressed. Click here to view and download the full report.
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Market Activities
INTERNATIONAL MARKETS OVERVIEW
European shares budged little Wednesday ahead of the U.S. Federal Reserve's announcement of new bond buying. U.S. shares, however, responded only weakly when the word came out later in the day, with investors noting that past bond buying has had little effect. The Stoxx Europe 600 eked out a 0.05% gain to 280.64, and the S&P 500 edged up 0.04% to 1,428.48. Here is a continuously updated list of global stock indexes. The Wall Street Journal (tiered subscription model) (12/13), The Wall Street Journal (tiered subscription model) (12/12), CNNMoney (12/12)
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Asian shares advance
Shares were higher across Asia on Wednesday amid rising expectations of another dose of easing by the U.S. Federal Reserve. The Nikkei rose 0.59% to 9,581.46, the Hang Seng was up 0.80% to 22,503.35, the Kospi added 0.55% to 1,975.44 and the S&P/ASX edged up 0.17% to 4,583.80. Bloomberg (12/12)
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Economic Trends & Outlook
India's inflation rate, industrial output rise
Reuters
India's worrisome inflation rate picked up last month, with consumer prices rising 9.9%, well above the central bank's target range. On a brighter note, India's Index of Industrial Production jumped 8.2% in October. The Economic Times (India)/Reuters (12/12), The Hindu (India) (12/12), The Economic Times (India) (12/12)
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S. Korean exporters downbeat; S&P dismisses N. Korean rocket
South Korean exporters are not optimistic heading into the new year, expecting little improvement in the global economy while the won continues to appreciate against the U.S. dollar. Separately, Standard & Poor's said Wednesday's long-range rocket launch by North Korea would not affect the South's sovereign credit rating. The Korea Herald (Seoul)/Yonhap News Agency (12/12), Yonhap News Agency (South Korea) (subscription required) (12/12)
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Australian consumer survey reveals lower spirits even after rate cut
Australian consumer confidence has fallen a marked 4.1% to a reading of 100 this month, as measured by a Westpac and Melbourne Institute survey. The reading had climbed 5.2% in November. The consumer index comes after a rate cut by the central bank and a business survey that also revealed low spirits. RTT News (12/11), The Sydney Morning Herald (Australia) (12/12)
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Capital Markets & Financial Products
China grants $1 billion QFII award to Qatar Holding
At US$1 billion, China's new QFII award to Qatar Holding is the largest ever by the State Administration of Foreign Exchange. It's part of the latest issue of awards totaling US$2.5 billion and tops the US$700 million QFII awards to the Hong Kong Monetary Authority and Temasek Fullerton Alpha earlier this year. AsianInvestor.net (12/12)
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More IPOs are expected in 2013 after sharp drop this year
After a 30% falloff this year, worldwide activity in initial public offerings is likely to pick up in 2013, according to Ernst & Young. This year's global total came to US$118.5 billion spread over 768 offerings, down from 1,225 IPOs in 2011. The Business Times (Singapore) (12/12)
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Regulatory Update
Investment banks might face tougher Hong Kong IPO rules
Reuters
Under new proposed rules, investment banks sponsoring initial public offerings in Hong Kong could face criminal liability for any false information companies might present. Financial Times (tiered subscription model) (12/12)
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Martin Currie pulls plug on China Hedge Fund
Citing its currently small scale and unpromising outlook for growth, Martin Currie is shuttering its China Hedge Fund. The fund this year was fined a total of US$14 million by U.S. and U.K. regulators over conflict-of-interest allegations. AsianInvestor.net (12/12)
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Tiger Asia to pay US$60 million in insider trading case
Admitting that Tiger Asia Management used nonpublic information in selling short shares of Bank of China, the hedge fund pleaded guilty to insider trading and will now pay more than $60 million in settlement fees. The plea was entered by fund manager Bill Hwang in U.S. federal court in New Jersey. "Hwang today learned the painful lesson that illegal offshore trading is not off limits from U.S. law enforcement," said Robert Khuzami, enforcement director for the Securities and Exchange Commission. Bloomberg (12/13)
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