China sticks with 7.5% GDP growth target for 2013 | EU ministers give in to demands for relaxed budget controls | Fannie-Freddie securitization company in the works, FHFA says
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05 March 2013
CFA Institute: Financial NewsBrief
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Obama moves to take climate-change, energy policy from Congress
President Barack Obama has nominated two people to his Cabinet, following through on his warning that he will use executive power to set climate-change and energy policy if Congress doesn't act. He nominated Gina McCarthy, a former regulator and expert on air-quality law, to head the Environmental Protection Agency, and physicist Ernest Moniz, who advocates phasing out coal, to run the Department of Energy. The New York Times (tiered subscription model) (04 Mar.), NBC News/NBC Politics blog (04 Mar.), Politico (04 Mar.), Oil & Gas Journal (04 Mar.)
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China sticks with 7.5% GDP growth target for 2013
For the second year in a row, China is aiming for 7.5% gross domestic product growth, after scaling back a long-standing 8% growth target in 2012. Premier Wen Jiabao said in a report to the annual legislative session that the global economy is "full of uncertainty and not yet on a stable footing" and that China "will have to work hard to attain" 7.5% growth. Xinhuanet.com (China) (05 Mar.), Channel NewsAsia/Agence France-Presse (05 Mar.)
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EU ministers give in to demands for relaxed budget controls
After running into backlash in Italy and France over their austerity policies, EU finance ministers have opened the door to looser national spending and borrowing policies. EU Economic and Monetary Commissioner Olli Rehn said after a meeting of eurozone finance ministers that difficult economic conditions "may also justify in a certain number of cases reviewing deadlines for the correction of excessive deficits." Bloomberg (04 Mar.)
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Fannie-Freddie securitization company in the works, FHFA says
Fannie Mae and Freddie Mac will launch a joint company responsible for home-loan securitization, said Edward DeMarco, acting director of the U.S. Federal Housing Finance Agency. "The overarching goal is to create something of value that could either be sold or used by policymakers as a foundational element of the mortgage market of the future," DeMarco said. Reuters (04 Mar.)
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Germany's Daimler wants to hire more foreign execs
German carmaker Daimler has launched a campaign to recruit more executives from other countries for international operations. Wilfried Porth, head of human resources, said that if the company wants to be more successful internationally, it needs more management-level employees from abroad. "So far, the company's management has been rather German-oriented," he said. Deutsche Welle (Germany)/Agence France-Presse/Deutsche Presse-Agentur (04 Mar.), The Guardian (London) (04 Mar.)
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Market Activity
China rebounds as Asian-Pacific markets gain
Asian-Pacific markets made a comeback Tuesday with China posting the biggest gain. China's Shanghai Composite closed up 2.3% after dropping 3.7% Monday. Hong Kong's Hang Seng Index edged up 0.1%. Japan's Nikkei 225 gained 0.3%. South Korea's Kospi rose 0.2%. Australia's S&P/ASX 200 moved up 1.3%. India's Sensex was up 1.4%. MarketWatch (05 Mar.), The Economic Times (India) (01 Oct.)
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Corporate-bond boom shows signs of slowing
Decreased demand for bonds issued by Philip Morris International and UnitedHealth Group is raising concern among traders that strength in the corporate-bond market might be waning. Financial Times (tiered subscription model) (04 Mar.)
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Economics
Shell plants will double U.S. supply of LNG fuel for transportation
Royal Dutch Shell will build facilities in Louisiana and Ontario that will double the U.S. supply of liquefied natural gas fuel for trucks, railroads and ships. James Burns, who heads LNG supply operations for businesses, said Shell's fuel will offer a 30% cost saving for long-haul truckers and other large diesel users. Houston Chronicle (tiered subscription model) (05 Mar.)
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Leftist politicians across Europe celebrate pay caps
EU and Swiss efforts to cap corporate compensation have emboldened leftist politicians to press for further measures against what they call corporate greed "gone wild." Political parties once opposed to state interference in corporate pay are starting to see the matter differently, according to German magazine Der Spiegel. Spiegel Online (Germany) (04 Mar.), SwissInfo (04 Mar.)
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IKEA affiliate and Marriott plan low-cost hotel chain
A unit of IKEA parent Inter IKEA Group plans to launch a budget hotel brand and develop 50 properties across Europe in partnership with Marriott International. Inter IKEA Group expects to invest about $500 million in Moxy, which will have hotels ranging from 150 to 300 rooms. The Wall Street Journal (tiered subscription model) (05 Mar.)
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Tax-exempt bonds used by companies prompt questions
Bonds that pay tax-exempt dividends that are being used to finance private projects are getting a closer look, as the U.S. searches for revenue to narrow the budget deficit. Since 2003, more than $65 billion in such bonds have been sold by state and local governments on behalf of companies, according to an analysis by The New York Times. Ending this tax-exempt borrowing could produce $50 billion in revenue for the U.S. government over 10 years, according to the Bipartisan Policy Center. The New York Times (tiered subscription model) (04 Mar.)
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Analysis: U.K. needs smarter -- not more -- austerity
The U.K. is cutting spending as much as it can without seriously harming the economy, but the government could do a better job of managing resources to encourage growth, according to The Economist. "Improved railways, roads and broadband give the economy a short-term boost as they are built, and increase future productivity too. ... It is hardly impossible to find more money for infrastructure," the magazine notes. The Economist (tiered subscription model) (02 Mar.)
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Venture Exchanges and Investor Risk and Returns
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Geopolitical/Regulatory
U.S. Treasury wants one version of Volcker rule, official says
Mary John Miller, U.S. Treasury undersecretary for domestic finance, said at an industry conference that the five regulators working on the Volcker rule should produce a single version. "We think a joint rule is optimal," she said. "To have a different rule developed by a banking regulator and a securities regulator would not be helpful to the market ... That requires a significant amount of coordination and discussion to think about how they can all work together. And that process takes time -- it has taken time." Meanwhile, former Federal Reserve Chairman Paul Volcker says progress on the rule has been hindered by a fragmented regulatory landscape and other obstacles. Risk.net (subscription required) (04 Mar.), Reuters (04 Mar.)
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SEC finds erroneous compliance with custody rule among advisers
The Securities and Exchange Commission has discovered compliance deficiency in one-third of investment advisers reviewed regarding a rule governing the custody of clients' funds. "We take deficiencies in this area very seriously and want to put advisers on alert about the importance of complying with the custody rule," said Carlo di Florio, director of the SEC Office of Compliance, Inspections and Examinations. Reuters (04 Mar.), InvestmentNews (free registration) (04 Mar.), AdvisorOne (04 Mar.)
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FSA is set to issue report about benchmark-rate warnings
The U.K. Financial Services Authority is under fire from lawmakers for missing warning signs about manipulation of benchmark interest rates, including the London Interbank Offered Rate. After an internal audit, the regulator is poised to issue a report in which it is expected to defend its position. "There are some issues for which you just cannot have a police force big enough ever to spot all these problems," Chairman Adair Turner recently told lawmakers. "We could not have got at it by intensive supervision." Bloomberg (04 Mar.)
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FSA targets asset managers' use of investor money
The U.K. Financial Services Authority is questioning the use of investor cash by asset managers, including hedge funds, to pay for access to CEOs. The regulator's Ed Harley has signaled multimillion-pound fines for firms in violation. Reuters (05 Mar.), Financial Times (tiered subscription model) (04 Mar.)
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U.S. regulators prosecute financial crime worldwide
In recent months, HSBC Holdings, Standard Chartered and Royal Bank of Scotland have admitted criminal wrongdoing in agreements with U.S. regulators, despite being European entities. Legal experts cite better resources and a system more conducive to prosecuting corporate criminal liability for the far reach of the U.S. justice system. "The U.S. will assert jurisdiction aggressively, even if there's only a minimal link," said Judith Seddon of law firm Clifford Chance. Financial News Online (U.K.) (subscription required) (05 Mar.)
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Financial Products
SSgA aims to launch index-tracking, dividend-focused ETF
State Street Global Advisors is seeking Securities and Exchange Commission approval of an exchange-traded fund that would buy stocks of companies worldwide that pay high dividends. The SPDR S&P Global Dividend ETF would select investments from the S&P Global Dividend Aristocrats Index, using representative sampling. ETF Trends (02 Mar.), IndexUniverse.com (01 Mar.)
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