CEOs press Congress to deal with deficit | Greek Parliament adopts austerity budget | U.S. regulators postpone Basel III implementation
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12 November 2012
CFA Institute: Financial NewsBrief
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Obama aims to build public support for deficit plan
Reuters
President Barack Obama is launching a public campaign to make his case to reduce the U.S. deficit through tax increases and spending cuts. The approach marks a significant departure from his unsuccessful private talks with Republicans last year. Obama will meet with corporate executives and labor leaders this week to build national support for his proposals, before beginning talks with congressional leaders. The New York Times (tiered subscription model) (11 Nov.), The White House Blog (10 Nov.), The Wall Street Journal (tiered subscription model) (12 Nov.)
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CEOs press Congress to deal with deficit
As Republican and Democratic lawmakers prepare for upcoming discussions over the U.S. "fiscal cliff," corporate executives are launching their own media-based campaigns. The Campaign to Fix the Debt expects to spend more than $1 million on advertisements with slogans such as "Just Fix It." The Business Roundtable is ready to spend about $500,000 on similar messages focused on media in the Washington, D.C., area. The New York Times (tiered subscription model) (11 Nov.)
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Greek Parliament adopts austerity budget
Greek lawmakers approved a 2013 budget that includes spending cuts and reform demanded by creditors. The budget aims to generate a primary surplus of 0.4% of gross domestic product. Prime Minister Antonis Samaras said the government is taking action to keep Greece in the eurozone. Kathimerini (Greece) (12 Nov.), Deutsche Welle (Germany)/Agence France-Presse/The Associated Press/Deutsche Presse-Agentur/Reuters (12 Nov.)
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U.S. regulators postpone Basel III implementation
The Federal Reserve and other regulators decided to postpone implementation of Basel III capital rules for U.S. banks. The rules were supposed to go in effect Jan. 1. Regulatory agencies seek to align U.S. rules with standards determined by the Basel Committee on Banking Supervision. Bloomberg (09 Nov.), MarketWatch (09 Nov.), CNBC/The Associated Press (09 Nov.)
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SEC opens formal investigation of Knight's trading glitch
The Securities and Exchange Commission started its formal investigation into the $457.6 million trading glitch that affected Knight Capital Group in August. Knight says faulty software was to blame. The U.S. inquiry will focus on whether the company adhered to rules governing risk-control procedures. Bloomberg (09 Nov.)
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Market Activity
Asian-Pacific markets mixed with news from China up, Japan down
Asian-Pacific markets were mixed Monday as investors reacted to favorable trade data from China and disappointing news that Japan's economy is contracting. Hong Kong's Hang Seng Index closed up 0.2%. China's Shanghai Composite added 0.5%. Japan's Nikkei 225 fell 0.9%. Australia's S&P/ASX 200 gave up 0.3%. South Korea's Kospi slid 0.2%. India's Sensex was down 0.1% at mid-afternoon. The Wall Street Journal (tiered subscription model) (12 Nov.), The Economic Times (India) (26 Feb.)
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Abu Dhabi bank raises $1B with Basel III-compliant sukuk
Abu Dhabi Islamic Bank raised $1 billion at 6.375% in a hybrid Tier 1 noncall six perpetual note offering that was the first sukuk deal deemed Basel III compliant. The issue saw 330 orders totaling $15 billion. Private banks took 60% of the allocation, while fund managers got 26%. International Financing Review (free content) (10 Nov.)
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Economics
Japan appears headed toward recession
Japanese gross domestic product contracted 0.9% in the third quarter compared with Q2 and 3.5% compared with Q3 of 2011. Growing tension with China and slowing growth worldwide hurt exporters. Economists expect another contraction this quarter, putting Japan in a technical recession. BBC (12 Nov.), Reuters (12 Nov.)
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Indian factory production unexpectedly slides
Indian industrial output decreased 0.4% in September compared with September 2011, the Central Statistical Office said. Economists surveyed by Bloomberg News had expected a 2.8% increase. August's production was revised to a 2.3% gain. Bloomberg (12 Nov.), The Financial Express (India) (12 Nov.)
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Chinese exports reach 5-month high
Chinese exports increased 11.6% last month compared with October 2011, hitting a five-month high. Experts say the gain might not be sustainable because it represents seasonal, pre-Christmas activity. CNBC (11 Nov.)
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Analysis: Presidential campaign ignored poor Americans
Reuters
Little was said about the working poor as President Barack Obama and Republican challenger Mitt Romney ran for the White House, according to The Economist. "Obama's re-election and Democratic control of the Senate give federal anti-poverty programmes a level of security they would have lacked under a Romney administration," the magazine notes. "But America's poor face systemic challenges beyond the aid of any single administration or programme." The Economist (free content) (10 Nov.)
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Advisers tell the rich there's no need to panic
Financial advisers are telling wealthy clients who are displeased with U.S. President Barack Obama's re-election that they should avoid making rash decisions with their money. Advisers say there could be market volatility as politicians debate taxes and spending, but they aren't predicting doom and gloom. Reuters (10 Nov.), InvestmentNews (free registration) (11 Nov.)
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Geopolitical/Regulatory
EU short-selling rules prompt confusion
The European Securities and Markets Authority turned pan-European rules on short selling into practical guidelines. The rules went into effect Nov. 1, prompting confusion among market participants. One point of frustration is an exemption for market-making firms and how that affects trading of newly issued securities. Financial News Online (U.K.) (subscription required) (12 Nov.)
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EU might regulate money market funds
Money market mutual funds and securities-lending agreements are expected to be part of the European Commission's call for legislation to regulate shadow banking. "The overall objective is to make sure that our new regulations do not result in pushing activities to the world of shadow banking," said Stefaan De Rynck, spokesman for EU Internal Market Commissioner Michel Barnier. "To reach this goal, we will no doubt come forward with new legal initiatives in the next year on issues such as money market funds and securities lending." Bloomberg (09 Nov.)
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French banks worry about conflicts in swaps rules
French banks warned that they will face conflicting requirements next year on either side of the Atlantic Ocean as the Dodd-Frank Act takes effect. Specifically, banks that sign up to be swaps dealers in the U.S. will be forced to make disclosures that violate French statutes. Reuters/International Financing Review (09 Nov.)
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Japan reportedly nears support of free-trade agreement
Japanese Prime Minister Yoshihiko Noda is expected to push for the nation to join the Trans-Pacific Partnership, a U.S.-led free-trade agreement, major Japanese newspapers reported. Support is building within the Noda administration for participation, the newspapers reported. The New York Times (tiered subscription model) (09 Nov.)
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China's RQFII quota moves closer to increase
The China Securities Regulatory Commission, the People's Bank of China and the State Administration of Foreign Exchange have reached preliminary agreement to raise the quota for the Renminbi Qualified Foreign Institutional Investor program by 200 billion yuan, CSRC Chairman Guo Shuqing said. The program allows investors to raise renminbi overseas that can be used to buy stocks and bonds in China. Bloomberg (11 Nov.), Reuters (11 Nov.)
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Financial Products
Whitebox debuts long-short equity mutual fund
Whitebox Advisors is launching on the retail market a mutual fund that uses the strategy of its long-short stock hedge fund. The Whitebox Long Short Equity Fund is designed to deliver positive returns regardless of trends and fluctuations influencing U.S. equity markets. Bloomberg (09 Nov.), FINalternatives (09 Nov.), Bloomberg (09 Nov.)
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