Gridlock remains concern with U.S. Congress divided | Consumer crusader Warren is elected to U.S. Senate | Greek workers stage nationwide strike
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07 November 2012
CFA Institute: Financial NewsBrief
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Wall Street will change strategy after Obama re-election
The financial industry largely bet on Mitt Romney to win the U.S. presidential election, but President Barack Obama's re-election is expected to force the sector to rebuild its relationship with the administration and its appointed regulators. "I think the Obama win ... will lead to more accountability and tighter regulation on Wall Street," said Chris Tobe, a principal at Stable Value Consultants. "Especially after a big shift to Romney from Wall Street, Obama, I believe, will be less likely to hold back on regulation this term." Reuters (07 Nov.), The New York Times (tiered subscription model) (06 Nov.), Los Angeles Times (tiered subscription model)/Politics Now blog (06 Nov.), The Washington Post (tiered subscription model) (06 Nov.), The Telegraph (London) (tiered subscription model) (07 Nov.), Financial Times (tiered subscription model) (07 Nov.), The Wall Street Journal (tiered subscription model) (07 Nov.)
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Gridlock remains concern with U.S. Congress divided
Tuesday's elections left the balance of power in the U.S. Congress largely unchanged, raising the prospect of further partisan gridlock. Democrats held onto their majority in the Senate, and Republicans retained control of the House of Representatives. Reuters (07 Nov.), Politico (Washington, D.C.) (07 Nov.), The Hill (06 Nov.)
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Consumer crusader Warren is elected to U.S. Senate
Democratic candidate Elizabeth Warren, a Harvard University professor who campaigned as a defender of middle-class families, was elected in Massachusetts to the U.S. Senate, defeating incumbent Scott Brown. "For every family that has been chipped and squeezed and hammered, we're going to fight for a level playing field and we're going to put people back to work," she said at a victory celebration. The Boston Globe (tiered subscription model)/Metro Desk blog (07 Nov.), Forbes (06 Nov.), Bloomberg (07 Nov.)
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Greek workers stage nationwide strike
Greeks held a nationwide strike Tuesday, shutting down airports, ports, subways, local government offices, banks and schools ahead of a vote in parliament on further government-backed austerity measures. An anti-austerity protest outside parliament drew 16,000 demonstrators. Beyond tax increases and spending cuts, the government wants to raise the retirement age from 65 to 67 and simplify the dismissal of civil servants. Spiegel Online (Germany) (06 Nov.), Kathimerini (Greece) (06 Nov.)
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France proposes incentives to boost industry
French Prime Minister Jean-Marc Ayrault said the government plans to enact a long list of incentives to encourage growth and increase hiring in the industrial sector. The measures include tax breaks for businesses that keep jobs in France and incentives for small businesses, training programs and innovation. EuroNews.com (France)/Agence France-Presse/Reuters (06 Nov.)
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Market ActivityAdvertisement
Obama's re-election bolsters Asian-Pacific markets
Asian-Pacific markets edged up Wednesday, after U.S. President Barack Obama was re-elected. Australia's S&P/ASX 200 and Hong Kong's Hang Seng Index each advanced 0.7%. Japan's Nikkei 225 and China's Shanghai Composite were flat. South Korea's Kospi added 0.5%. India's Sensex was up 0.5% at midafternoon. MarketWatch (07 Nov.), The Economic Times (India) (26 Feb.)
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Economics
Investors hope Obama will address "fiscal cliff" immediately
Investors and traders hope U.S. President Barack Obama will quickly go to work to avert the $600 billion "fiscal cliff" of tax hikes and spending cuts. Some investors worry that with Republicans retaining their majority in the House of Representatives, it could be difficult to reach a compromise on budget reform. Financial-Planning.com (07 Nov.), Reuters (07 Nov.), The Washington Post (tiered subscription model) (07 Nov.), USA Today (06 Nov.)
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ECB is expected to keep rates steady
The European Central Bank is expected to hold interest rates Thursday, keeping Germany's strong stance in mind. The ECB doesn't want to undermine its bond-buying pledge, which has worked well to reduce borrowing costs in troubled nations. "If German political opinion swings back against the ECB, it may well be that the signal effect of the [bond-buying pledge] is weakened because markets panic about Germany's support," said Berenberg Bank's Christian Schulz, a former ECB economist. Reuters (06 Nov.)
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Studies: London finance sector will cut 13,000 positions
Employment in London's financial sector is set to hit a 20-year low in 2014, after companies lay off 13,000 workers next year, studies show. The Center for Economics and Business Research expects employment to experience a "gentle rise" after 2014. Reuters (06 Nov.), The Independent (London) (tiered subscription model) (07 Nov.)
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Analysis: Economic challenges await Indian government
Indian Prime Minister Manmohan Singh's reshuffling of ministers has given the government a new look, but it has done little to deal with slumping growth and a widening budget deficit, according to The Economist. "The prospect may be for yet slower economic growth, just as India's ruling politicians raise their eyes towards a looming general election," the magazine notes. The Economist (free content) (03 Nov.)
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Financial advisers worry about clients' equity fear
Many investors are missing out on the soaring stock market because they are afraid of equities, leaving financial advisers wondering whether they have an obligation to persuade clients to give equities another look. Investors are still pulling money out of equity mutual funds, even with the Standard & Poor's 500 index and the Dow Jones industrial average close to where they stood at the end of 2007. Reuters (06 Nov.)
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Geopolitical/Regulatory
Committee official warns Basel III isn't enough
The Basel Committee on Banking Supervision plans to overhaul capital rules for assets on banks' trading books and review capital rules for securitized debt, aiming to de-emphasize banks' reliance on assessments from credit rating agencies. However, Secretary General Wayne Byres warned that Basel III rules are not enough to ensure security of the financial system. "Basel III is necessary, and banks are reasonably well positioned to meet the new capital requirements -- but it is not sufficient," Byres said. Bloomberg (06 Nov.), City A.M. (London) (07 Nov.)
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Market watches how regulators treat Barclays' CoCo bond
The market is keeping an eye on Barclays' contingent-capital bond to see how regulators will treat it. The bank is expected to file with the Securities and Exchange Commission, a step considered the first real test for CoCos outside the U.K. "There has been a lot of debate around contingent capital," a hybrid-capital banker said. "And while it wasn't endorsed by global regulators as an asset class under Pillar 1, the fact that the U.K. regulator is endorsing it under Pillar 2 means that other regulators might take a second look, and we do see a real market spring up." International Financing Review (free content) (07 Nov.), Financial Times (tiered subscription model) (06 Nov.)
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Groups worry transaction tax will come to U.S.
Investment and business groups expressed concern in a letter to Treasury Secretary Timothy Geithner that a European effort to set up a financial-transaction tax will catch on in the U.S. "Now is not the time to experiment with policies that experience tells us will impede growth, fragment markets, increase market volatility, destroy savings and encourage uneconomic tax-motivated decisionmaking," the groups wrote. The Hill/On The Money blog (06 Nov.)
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CFTC faces obstacles in fight for position limits
The Commodity Futures Trading Commission is expected to appeal a September court ruling that struck down its position-limit rule. "The obvious option is to appeal, and [Chairman] Gary Gensler is reportedly contemplating a challenge to the judge's ruling," said Holland West, a partner at Dechert. "The CFTC will have additional options, such as challenging the ruling on remand or going through the regulatory process of creating a record to determine that specific position limits are necessary." However, the CFTC faces significant challenges, experts say. Risk.net (subscription required) (07 Nov.)
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EU's OTC clearing mandates will take time, U.K. official says
A Bank of England official says it is unlikely that the first clearing mandates for over-the-counter derivatives will be in effect in Europe before August, given necessary regulatory and legislative steps. "At that point, it is possible there will be [central counterparties] that have been authorized and that [the European Securities and Markets Authority] will pretty quickly, or around the same time, confirm that the central-clearing mandate applies for some or all of the products those CCPs clear," said Edwin Schooling Latter, head of payments and infrastructure at the U.K. central bank. Risk.net (subscription required) (06 Nov.)
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Citi faces rate-manipulation inquiry in Singapore
The Monetary Authority of Singapore is investigating Citigroup for possible manipulation of interest rates, the company disclosed. Citi says in a financial filing that it is cooperating after receiving "additional requests for information and documents from various domestic and overseas regulators and enforcement agencies, including the Monetary Authority of Singapore and a consortium of state Attorneys General." The Wall Street Journal (tiered subscription model) (06 Nov.)
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Financial Products
Global X aims to launch high-dividend ETF
Global X Funds filed with the Securities and Exchange Commission to introduce an exchange-traded fund that aims to deliver a high dividend with low volatility. The Global X SuperDividend U.S. ETF would be linked to the INDXX SuperDividend U.S. Low Volatility Index. Zacks (06 Nov.), IndexUniverse.com (05 Nov.)
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