Analysis: Election won't end uncertainty | Report: EU rescue of Cyprus would benefit Russian mafia | Surge of private-sector credit in Asia raises concerns
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06 November 2012
CFA Institute: Financial NewsBrief
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Polls give Obama a slim edge
National and battleground state polls gave President Barack Obama a narrow lead in the U.S. presidential campaign on the eve of Election Day. Obama had the support of 50% of voters, compared with Republican challenger Mitt Romney's 47%, according to the Washington Post-ABC News tracking poll, Obama's strongest showing since July. The Washington Post (tiered subscription model) (05 Nov.), ABC News/Polls blog (05 Nov.), Reuters (05 Nov.)
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Analysis: Election won't end uncertainty
Uncertainty is widely given as the reason the U.S. can't produce a robust economic recovery, but the result of the presidential election won't do away with that uncertainty, Andrew Ross Sorkin writes. The growing consensus in Washington, D.C., is that Congress will head off the "fiscal cliff" by delaying all the tough decisions on taxes and spending, possibly until the fall of 2013, giving the nation another year of uncertainty, he wrote. The New York Times (tiered subscription model)/DealBook blog (05 Nov.)
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Report: EU rescue of Cyprus would benefit Russian mafia
The EU is widely expected to go ahead with a €10 billion financial rescue for Cyprus, but the deal creates a political dilemma for German Chancellor Angela Merkel. A secret German intelligence service report, according to Der Spiegel, concludes that the bailout would principally benefit Russian mafia figures, oligarchs and businessmen who have invested the profit from their illegal enterprises in Cyprus. The Cypriot government has dismissed such claims. Der Spiegel (Germany) (English online version) (05 Nov.), Google/The Associated Press (05 Nov.)
Surge of private-sector credit in Asia raises concerns
Growth in private-sector credit across much of Asia might presage another financial crisis, according to a study by Capital Economics. The firm likens worrisome credit growth in Hong Kong to the situation in Ireland and the Baltics before the last meltdown. The study also singles out China and Vietnam, where private credit has ballooned at a less alarming but still rapid rate. CNBC (05 Nov.)
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Morningstar Direct White Paper in CFA Institute Selections Newsletter
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Asian-Pacific markets are mixed as U.S. Election Day begins
Asian-Pacific markets were mixed Tuesday at the beginning of Election Day in the U.S. China's Shanghai Composite fell 0.4%. Hong Kong's Hang Seng Index slid 0.3%. Japan's Nikkei 225 gave up 0.4%. South Korea's Kospi gained 1.1%. Australia's S&P/ASX 200 rose 0.2%. India's Sensex rose 0.3% at midafternoon. MarketWatch (06 Nov.), The Economic Times (India) (26 Feb.)
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Sales of investment-grade bonds top one-day record
Issuers of investment-grade debt sold $22.1 billion worth of fixed-income securities Monday, setting a one-day record for dollar volume on the U.S. market of high-grade debt. AbbVie, Abbott Laboratory's new pharmaceutical business, sold $14.7 billion of debt, the biggest sale of investment-grade corporate debt in history. International Financing Review (free content) (05 Nov.)
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Government-bond markets land on positive ground
All 26 government-bond markets monitored by Bloomberg and the European Federation of Financial Analysts Societies are producing positive annual returns for the first time since 2008. The development comes amid strong demand for government debt. "The longer-term bull market in government bonds is still intact all over the world," said Howard Simons, a strategist at Bianco Research. Bloomberg (05 Nov.)
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BoE might turn to QE alternatives to boost economy
With the Bank of England's quantitative easing falling short in terms of results, the central bank might rely more on the Funding for Lending Scheme, which encourages banks to provide direct, low-cost credit to companies and households. "We are in uncharted territory," said Steven Bell, chief economist at hedge fund GLC. "The search for alternatives to QE is gathering pace." Bloomberg (05 Nov.)
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Young workers' prospects for retirement darken
Public and private employers increasingly are reducing pension benefits, a trend that is hitting young workers harder than their older colleagues. The situation leaves the next generation's retirees with a bleak future. Many companies are making severe cuts for new hires to preserve benefits for existing employees. The Washington Post (tiered subscription model) (05 Nov.)
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Expansion slows but hiring accelerates in services sector
The U.S. services sector continued growing in October but at a slightly slower place than in September, according to the Institute for Supply Management. Meanwhile, the institute's employment index for the sector reached its highest level since March. Reuters (05 Nov.), The Christian Science Monitor/Paper Economy blog (05 Nov.)
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G-20 backs away from earlier deficit goals
Group of 20 leaders relaxed deficit-cutting targets amid fears that austerity policies adopted in 2010 in Toronto will send the world into recession. The group pledged in a communique that G-20 countries will enact "credible and ambitious" debt targets for after 2016. The targets will be discussed next year. Reuters (05 Nov.), The Washington Post (tiered subscription model)/The Associated Press (05 Nov.)
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Analysis: China faces challenges amid power transition
Media reports that the family of Chinese Premier Wen Jiabao accumulated a fortune during his 10 years in office were particularly inconvenient for the Communist Party, which is trying to arrange a smooth transition of power, as it does every decade, according to The Economist. "Since the late 1980s the party has never faced so many scandals and crises this close to a leadership transition," the magazine notes. The Economist (free content) (03 Nov.)
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Study: Prospecting drives financial advisers' sales
Diligent prospecting for clients is much more important to sales by financial advisers than being a natural salesperson, according to a study by Behavioral Sciences Research Press. The researcher found that the best prospectors also have the greatest sales productivity. AdvisorOne (05 Nov.)
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Geopolitical/Regulatory
FSB sees steady but uneven progress in financial revamp
The Financial Stability Board informed Group of 20 leaders that a regulatory overhaul has been moving forward but that much work remains. The FSB also said progress has been uneven, with eight of 27 jurisdictions having finalized rules. The FSB touted changes in over-the-counter derivatives but noted concerns about harmonizing accounting standards and strengthening the banking system. Financial Times (tiered subscription model) (05 Nov.), Reuters (05 Nov.), The Wall Street Journal (tiered subscription model)/Dow Jones Newswires (05 Nov.)
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FSB aims to revamp shadow banking by September
The Financial Stability Board is looking to overhaul rules for shadow banking, including money market mutual funds, by September. The global regulator also plans to propose rules aimed at systemically important nonbank institutions. "Vigilant oversight of shadow banking activities will be required to respond to inevitable market mutations," according to the FSB. "The approach is designed to be proportionate to financial stability risks." Bloomberg (05 Nov.)
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Regulators begin to ease up on rule changes
With clarity increasing among regulators regarding possible consequences of wholesale rule changes in Europe, authorities are beginning to soften their positions, industry observers say. "We have seen a degree of relaxation in liquidity standards imposed on banks," said Bob Penn, a regulatory partner at Allen & Overy. "There will be greater political intervention to meet political goals around economic growth, and that will involve laying off capital and liquidity regulations." Financial News Online (U.K.) (subscription required) (05 Nov.)
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Banks find Basel proposal for forex unnecessary
Banks have branded as unnecessary a measure by the Basel Committee on Banking Supervision to increase capital holdings to provide a safety net for foreign exchange settlements. Experts say such a setup would run counter to recent efforts to reduce outstanding principal exposure. Risk.net (subscription required) (05 Nov.)
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Financial Products
Pyxis prepares to debut leveraged-loan ETF
Pyxis Funds, formerly Highland Funds Asset Management, is set to launch on NYSE Arca an exchange-traded fund that invests primarily in below-investment-grade leveraged loans. The Pyxis/iBoxx Senior Loan ETF will be linked to the Markit iBoxx USD Liquid Leveraged Loan Index. Superstorm Sandy delayed the ETF's debut. IndexUniverse.com (05 Nov.), InvestmentNews (free registration) (04 Nov.)
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