Agencies leave U.S. rating unchanged after budget deal | Analysts: Budget deal offers little hope for hiring, sales growth | U.K.'s Cameron calls for bold G-8 action on economy
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03 January 2013
CFA Institute: Financial NewsBrief
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Congress prepares for fight over U.S. debt limit
Hours after averting the "fiscal cliff," U.S. lawmakers are preparing for their next big fight: raising the national debt limit. President Barack Obama, however, says he won't participate in any debate regarding the debt ceiling. "I will not have another debate with this Congress over whether or not they should pay the bills that they've already racked up through the laws that they passed," Obama said. The New York Times (tiered subscription model) (02 Jan.), The Washington Post (tiered subscription model) (02 Jan.), The Christian Science Monitor (02 Jan.), Reuters (03 Jan.), The Wall Street Journal (tiered subscription model) (03 Jan.)
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Agencies leave U.S. rating unchanged after budget deal
Major credit rating agencies are leaving the U.S. rating unchanged as they await the outcome of debate regarding raising the debt limit and an effort to reduce borrowing. Standard & Poor's, Moody's Investors Service and Fitch Ratings have warned that the U.S. faces a possible downgrade. S&P stripped the U.S. of its AAA rating after the last debt-ceiling fight in August 2011. CNNMoney (02 Jan.)
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Analysts: Budget deal offers little hope for hiring, sales growth
Uncertainty created by lawmakers' temporary fix for the budget crisis leaves little hope that the U.S. economy will benefit from improved sales, hiring or an influx of investment, business analysts say. The next battle in Congress over raising the debt limit likely will depress consumer and business sentiment for months, they said. The Washington Post (tiered subscription model) (02 Jan.)
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U.K.'s Cameron calls for bold G-8 action on economy
British Prime Minister David Cameron, who has taken over presidency of the Group of Eight richest nations, called on fellow G-8 leaders to make choices aimed at building stronger and more open economies. "The ambitious standards we set and the bold steps we take can make a tangible difference," he said. Cameron singled out international tax evasion as an issue requiring action. BBC (02 Jan.), International Adviser online (U.K.) (02 Jan.), Xinhuanet.com (China) (03 Jan.)
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LSE starts off 2013 with technical glitch
Trading on the London Stock Exchange was disrupted Wednesday because of a technical glitch that delayed company announcements for 1½ hours. Financial Times (tiered subscription model) (02 Jan.)
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Standardised data, in-depth analysis & exclusive news
SNL provides hand-sourced financial data, industry news and expert analysis for three sectors critical to the European market: financial institutions, real estate and media & communications. Save time and monitor the trends affecting thousands of firms on our interactive platform. We perform all currency conversions and language translations. Read More
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Market Activity
"Fiscal cliff" deal boosts most Asian-Pacific markets
Most Asian-Pacific markets rose Thursday in response to a successful deal averting the U.S. "fiscal cliff." Australia's S&P/ASX 200 rose 0.7%. Hong Kong's Hang Seng Index gained 0.4%. South Korea's Kospi fell 0.6%. Markets in Japan and mainland China were closed for holidays. India's Sensex was up 0.3% at midafternoon. The Wall Street Journal (tiered subscription model) (03 Jan.), The Economic Times (India) (26 Feb.)
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CMBS risk rises as delinquency of underlying loans increases
Commercial mortgage-backed securities have been popular with investors for some time, largely because of their relatively high yields compared with other fixed-income investments, but questions are being raised about whether the pricing reflects the full risk of default. Trepp reported that 9.71% of commercial mortgages underlying CMBS issues were at least 30 days delinquent in November. In October 2008, the delinquency rate was below 1%. The Wall Street Journal (tiered subscription model) (02 Jan.)
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Emerging-market equities enter longest rally in 14 months
Emerging-market stocks marked their longest rally in 14 months. Reports of expansion in China's services sector and U.S. manufacturing fueled investor optimism that the global economic recovery is gathering momentum. Bloomberg (03 Jan.)
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Bonds might start losing appeal, experts say
Strategists don't expect large-scale change in asset allocation this year, but many expect investors to start shifting from fixed-income securities to equities as stocks outperform bonds. However, if U.S. debate about raising the debt limit turns ugly or becomes protracted, investors might return to the relative safety of bonds. CNBC/Market Insider blog (02 Jan.)
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Economics
Manufacturing expansion boosts U.S. economic outlook
U.S. manufacturing activity shifted from moderate contraction in November to modest expansion in December, brightening the outlook for economic growth in 2013. An Institute for Supply Management index rose from a three-year low of 49.5 in November to 50.7 in December, on a scale in which anything higher than 50 indicates growth. Bloomberg (02 Jan.)
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China's young adults embrace Western love of credit cards
Though against tradition, use of consumer credit in China is rapidly increasing, particularly among younger workers, according to an analysis by The Wharton School at the University of Pennsylvania. During the next decade, China is expected to overtake the U.S. and become the biggest credit card market in the world, measured by the number of cards issued. Knowledge@Wharton (02 Jan.)
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French vehicle registration hits 15-year low
New car registration in France totaled 1.9 million last year, a 13.9% decline compared with 2011 and the fewest in 15 years. Some French automakers are starting 2013 with reduced hours on assembly lines. Market News International (02 Jan.), Google/Agence France-Presse (02 Jan.)
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Advisers applaud survival of $5M gift-tax exemption
Financial advisers say they are relieved that a $5 million gift- and estate-tax exemption was made permanent in the deal to avert the U.S. "fiscal cliff." In the final months of 2012, clients sought guidance on what to do amid possible loss of the exemption. Financial-Planning.com (03 Jan.)
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Poll: Investors are more confident eurozone will hold up
Only 1 in 4 investors thinks a eurozone member will be compelled to pull out of the single currency during the next year, according to a Sentix poll. In June, nearly 3 in 4 thought so. Reuters (02 Jan.)
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Geopolitical/Regulatory
Analysis: Basel III represents regulatory difficulties
As governments propped up ailing banks during the past five years, regulating the industry became increasingly more complex. The EU and the U.S. each drafted a 700-page proposal for Basel III rules. In addition, the U.S. created the Dodd-Frank Act, which an industry group says will end up being 2,900 pages of regulations. Bloomberg (02 Jan.)
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Investors adjust portfolios to avoid French transaction tax
France's 0.2% financial-transaction tax is already reshaping investor behavior. Investors are selling shares and buying derivatives that take positions in those securities, such as contracts for difference, structured products and exchange-traded funds. The tactic works because derivatives are exempt from the tax. Risk.net (subscription required) (02 Jan.)
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Sweden wants traders to obey bond-reporting rules
The Swedish Financial Supervisory Authority says it will start enforcing a requirement that traders report corporate-bond prices. The move is part of an effort to increase transparency in the growing market. Traders must report volume and prices -- highest, lowest and closing -- by 9 a.m. the day after trades are made. Bloomberg (02 Jan.)
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Financial Products
Cognios launches market-neutral mutual fund
Cognios Capital entered the mutual fund business with an actively managed market-neutral fund that goes long and short on major U.S. equities. The Cognios Market Neutral Large Cap Fund aims to consistently outperform the Standard & Poor's 500 index. Money Management Executive (free content) (02 Jan.)
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