Sharp words are exchanged over U.S. budget talks | Low-growth U.S. economic picture becomes clearer | Rescue funds are downgraded; eurozone outlook remains gloomy
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December 3, 2012
CFA Institute: Financial NewsBrief - Aisa Pacific Edition
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China manufacturing indicator reaches 7-month high
Reuters
China's purchasing managers' index touched a seven-month high at 50.6 in November, reinforcing indications that the Chinese economy -- particularly the manufacturing sector -- is pulling out of a slump. "Though the November PMI is a bit lower than the market expectation of 50.8, it remained above 50 and has risen for three months in a row, demonstrating that the country's real economy and financial market is improving," said Zhou Hao, an economist at ANZ Banking Group. TheStreet.com/The Associated Press (12/2), China Daily (Beijing) (12/2), The Wall Street Journal (tiered subscription model) (12/1)
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Sharp words are exchanged over U.S. budget talks
New signs that crucial budget negotiations in Washington might be stalling emerged over the weekend, with House Speaker John Boehner dismissing White House proposals as "nonsense" and Treasury Secretary Timothy Geithner ruling out any plan that doesn't include tax increases. "I would say we're nowhere, period," Boehner said of the ongoing talks. The Hill (12/2), Bloomberg (12/2)
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Low-growth U.S. economic picture becomes clearer
Although the effects of Hurricane Sandy are still being felt in U.S. economic indicators, enough valid evidence is emerging to suggest that the U.S. rate of growth is slowing. New data due this week -- on consumer sentiment, auto sales and manufacturing -- should give a clearer picture, but economists expect nothing very encouraging. MarketWatch (12/2)
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Rescue funds are downgraded; eurozone outlook remains gloomy
Reuters
The eurozone's two bailout funds lost a notch in their ratings standings as estimated by Moody's, which also characterized the outlook for each as negative. Separately, economists now forecast the eurozone might be in recession through 2013, with only an uncertain longer-term outlook for the most troubled member nations. The Hindu (India)/Deutsche Presse-Agentur (12/1), Reuters (12/2)
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Spain's Rajoy suggests budget target might be missed
Spain's outlook for meeting this year's goal of reducing its budget deficit to no more than 6.3% of GDP is "very complicated," said Prime Minister Mariano Rajoy, who had vowed earlier to meet the target. "Spain was asked to make a very difficult effort, to go from 8.9% to 6.3% in only one year," Rajoy said in a newspaper interview. Channel NewsAsia/Agence France-Presse (12/2)
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More stimulus is on the way in Japan; factory output grows
Japan's Cabinet has cleared a second round of stimulus, with the ¥1.2 trillion package expected to raise GDP by 0.2 percentage points a year. Spending will be channeled both to growth-related and tsunami-recovery projects. Separately, Japan's industrial output rose an unexpected 1.8% in October, reversing a 4.1% decline in September. The Yomiuri Shimbun (Japan) (12/1), The Business Times (Singapore) (12/1)
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Bank of England lending program might be a bust
Reuters
The hoped-for £80 billion boost from the Bank of England's plan to raise lending -- launched in August -- probably has produced only a small fraction of that to date, analysts say. As the bank prepares to report on early results, hopes are not high. "Given that we are just two or three months into the scheme, it is likely to be something more in the order of £10 billion," said Jens Larsen, the chief European economist at RBC Capital Markets. The Independent (London) (tiered subscription model) (12/2)
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U.S. banks receive warning on regulation
Global regulators are insisting that the 19 biggest U.S. banks show they are well on the way to meeting Basel III standards next year. Financial Times (tiered subscription model) (11/30)
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CFA Institute report examines impact of internalization and dark pool trading on market quality.
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Market Activities
INTERNATIONAL MARKETS OVERVIEW
European stocks eased back from 17-month highs and U.S. stocks struggled to find direction Friday as investors on both sides of the Atlantic waited for clear indications to emerge from contentious U.S. budget negotiations. The Stoxx Europe 600 ended 0.19% lower at 275.78, and the S&P 500 was basically unchanged at 1,416.18. Here is a continuously updated list of global stock indexes. The Wall Street Journal (tiered subscription model) (12/3), Bloomberg (11/30), CNNMoney (11/30)
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Asian shares advance on news from Japan, U.S.
Rising expectations of stimulus in Japan and a brighter outlook for a resolution in the budget showdown in the U.S. helped lift stocks across Asia last week. On Friday, the Nikkei was up 0.48% to 9,446.01, the Hang Seng rose 0.49% to 22,030.39, the Kospi edged down 0.10% to 1,932.90 and the S&P/ASX added 0.63% to close at 4,506.00. Bloomberg Businessweek (11/30)
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The Gold Standard: A Fifty-Year History of the CFA Charter
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Economic Trends & Outlook
Indian business outlook dims
Reuters
A clouded outlook both for India and the global market is cited as Indian businesses indicate lower levels of confidence in the latest quarter. "Moderation in economic growth along with high and stubborn inflation appears to be the main concern in business operation," the NCAER-MasterCard Worldwide Index of Business Confidence report notes. The Economic Times (India) (12/2)
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S. Korea posts 2nd month of export gains; forecast isn't promising
With a year-on-year gain in November, South Korea's trade surplus marked two months of growth, suggesting a sustained pace of recovery. However, the prospects for double-digit export growth anytime soon are slim in the midst of global sluggishness and the shadow cast by the eurozone situation, said Han Duck-soo, chairman of the Korea International Trade Association. The Wall Street Journal (tiered subscription model) (12/1), The Korea Herald (Seoul) (12/2), Yonhap News Agency (South Korea) (subscription required) (12/2)
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South Korean at-risk mortgages account for 4.8% of total
South Korean mortgages deemed to be at risk of default totaled US$236 million in September, or 4.8% of the total home-backed loans from local financial institutions, the Financial Supervisory Service reports. "The percentage itself may yet seem small, but it's a significant figure considering most of these mortgages were borrowed by the low-credit group," said Yang Hyun-geun, an FSS director. Yonhap News Agency (South Korea) (subscription required) (12/2)
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Australians expecting a rate cut this week
Reuters
Expectations are growing that the Reserve Bank of Australia will cut its official cash rate to 3% this week, equal to the rate last achieved during the global financial meltdown. "With a two-month hiatus before the next RBA meeting, inflation on target, weakening investment intentions and only modest signs that monetary policy is driving [a] rebalancing of growth as yet, we expect another 25 basis-point cash rate cut next week, ahead of Christmas," said Paul Bloxham, chief economist of HSBC Australia. The Sydney Morning Herald (Australia) (12/2)
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Capital Markets & Financial Products
PICC's Hong Kong IPO is said to raise US$3.1 billion
With a lift from 17 cornerstone investors, People's Insurance Company (Group) of China is reported to have raised US$3.1 billion in the largest initial public offering in Hong Kong in two years. "Liquidity is helping, and good companies with reasonable valuations can attract investors," said Binay Chandgothia, a Hong Kong-based portfolio manager at Principal Global Investors. Bloomberg (11/30)
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Rate cuts have potential to rein in China bank profits
Recent rate cuts by China's central bank are expected to cut into profits across the country's banking sector in the coming year. Bank profits, however, have been huge in recent years, with the combined net of the 16 banks listed on mainland exchanges accounting for more than half the profits of the total of 2,493 listed companies. Xinhuanet.com (China) (12/2)
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Chinese futures trading soars as stocks lag
China's lagging stock markets have led investors to other venues, accelerating growth in the country's futures markets. This year, reports the China Futures Association, combined trading turnover is up nearly 20% in the first 11 months from the year-earlier period. Xinhuanet.com (China) (12/2)
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India Ratings plans new products
Infrastructure and structured finance are the focus as Fitch unit India Ratings lays plans to introduce new products. "We believe that within structured finance space, there are a lot of instruments, which should emerge with the development of market," India Ratings chief Atul Joshi said, while noting plans to bring to India infrastructure products currently available overseas, such as airport or port receivables or trade receivables. The Economic Times (India)/Press Trust of India (12/2)
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Regulatory Update
Muddy Water dares Olam to undergo debt rating
Reuters
Muddy Waters is offering to pay if Singapore-based Olam will agree to have its debt rated by Standard & Poor's. Olam has accused Muddy Waters of being a front for other hedge funds, but Muddy Waters denies this and is threatening a lawsuit if a retraction is not forthcoming. The Business Times (Singapore) (12/1)
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ING Group puts South Korean asset-management unit up for sale
ING Group's asset-management business in South Korea is now on the block, added to the Asian operations ING hopes to sell. ING says it hopes to complete the sale in the first quarter of the new year. MK.co.kr (South Korea) (11/30)
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