Obama reportedly will name Hagel to defense secretary's post | Alitalia reportedly close to a takeover by Air France-KLM | Researchers: Trade deal with China cut U.S. factory jobs 29.6%
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07 January 2013
CFA Institute: Financial NewsBrief
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Japan reportedly is close to launching $136B of stimulus
The Japanese government, headed by Prime Minister Shinzo Abe, is expected to announce Monday $136 billion of fiscal stimulus measures aimed at restoring the contracting economy to growth, according to reports by Japanese news media. Finance Minister Taro Aso has said that the government isn't required to follow a previously adopted 44 trillion-yen cap on the issuance of new bonds. Bloomberg (07 Jan.), Kyodo News (Japan) (subscription required) (07 Jan.), Reuters (07 Jan.)
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Obama reportedly will name Hagel to defense secretary's post
Vietnam War veteran and former Nebraska senator Chuck Hagel, a Republican, is President Barack Obama's nominee to be the next U.S. secretary of Defense, people familiar with the matter said. He was an independent voice while on the Senate Foreign Relations Committee, often breaking with fellow Republicans on foreign policy issues. The Washington Post (tiered subscription model) (06 Jan.), The New York Times (tiered subscription model) (06 Jan.)
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Alitalia reportedly close to a takeover by Air France-KLM
Negotiations are under way that likely will lead to Air France-KLM assuming control of Italy's flagship air carrier Alitalia by summer, the Italian newspaper Messaggero reported. Air France-KLM offered Alitalia's owners a 20% premium above what they paid for the airline in 2008, the newspaper said. Reuters (06 Jan.)
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Researchers: Trade deal with China cut U.S. factory jobs 29.6%
Giving China "permanent normal trade relations" status in 2000 has reduced U.S. manufacturing employment by 29.6%, according to a paper by Federal Reserve researcher Justin Pierce and Yale University's Peter Schott. Without the deal, U.S. manufacturing jobs would have increased nearly 10% rather than contracting, they concluded. The Washington Post (tiered subscription model)/Wonkblog (06 Jan.)
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JPMorgan alters trading platform to offset regulatory costs
In a radical change, JPMorgan Chase is adopting new trading technology and moving to a single platform in a bid to rein in costs as regulations come into effect. Financial Times (tiered subscription model) (06 Jan.)
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Subdued debt issuance is expected from EU financial firms
Europe's largest banks are expected to continue deleveraging balance sheets in 2013. Consequently, investment bankers do not anticipate much debt issuance from the financial-services sector. Debt securities issued by banks in 2012 declined 7% compared with 2011, according to Dealogic. Sebastien Domanico of Societe Generale says banks have reduced balance sheets on average about 30% during the past three years. Financial News Online (U.K.) (subscription required) (04 Jan.)
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Most Asian-Pacific markets fall after opening 2013 with gains
Most Asian-Pacific markets declined Monday after opening the year with strong start. Japan's Nikkei 225 gave up 0.8%. Australia's S&P/ASX 200 slid 0.1%. Taiwan's Taiex lost 0.7%. South Korea's Kospi and Hong Kong's Hang Seng Index closed the session fractionally lower. Bucking the trend, China's Shanghai Composite rose 0.4%. India's Sensex was down 0.6% at midafternoon. MarketWatch (07 Jan.), The Economic Times (India) (26 Feb.)
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FTSE 100 posts highest closing in nearly 2 years
Responding to mixed U.S. labor market data, the U.K.'S FTSE 100 on Friday closed at its highest level since Feb. 8, 2011, and just two points below its strongest close since May 2008. Some analysts said data showing that the U.S. unemployment was holding at 7.8% eased investors' concerns that the Federal Reserve might tighten monetary policy. Reuters (04 Jan.), The Guardian (London)/Market Forces Live Blog (04 Jan.)
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Fund managers expect high-yield bond rally to lose momentum
In the first three trading days of 2013 alone, high-yield bonds gave a return of three-quarters of a percent, but fund managers believe the rally is nearing an end. Many investors say that with the average price of high-yield corporate debt at 105 cents on the dollar, there is little room for further gains. The Wall Street Journal (tiered subscription model) (06 Jan.)
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Hedge funds' commodities holdings begin '13 at '12 start level
While commodity markets were rather volatile in 2012, particularly crude oil, they ended up pretty close to where they were at the beginning of 2012. All long contracts in U.S. commodity futures classified as "managed money" stood at $70.4 billion on Jan. 1. Whereas on Jan. 3, 2012, they were at $66.8 billion, according to Commodity Futures Trading Commission figures that Reuters compiled and calculated. Reuters (04 Jan.)
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Euro wins respect in futures markets
The euro is winning a vote of confidence from futures traders, with many reversing positions anticipating a decline by the common currency against the U.S. dollar, according to data from the Commodity Futures Trading Commission. The switch comes after the euro's long slide against the dollar ended last year with a pledge by the European Central Bank to back and preserve the currency. Bloomberg (04 Jan.)
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Economics
U.S. unemployment holds at 7.8%
Employers in the U.S. hired 155,000 workers in December, but the national unemployment rate remained at 7.8%, the Labor Department said. Workers who previously dropped out of the workforce returning to the job hunt kept the unemployment rate steady. Workers with jobs worked more hours and benefited from faster wage growth. The New York Times (tiered subscription model) (04 Jan.), Brookings Institution (Washington, D.C.)/Up Front blog (04 Jan.), Chicago Tribune (tiered subscription model) (04 Jan.)
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Outlook brightens for Europe's economy, data show
Europe's economy is showing signs of recovery and could return to growth before the year ends. In December, the Markit purchasing managers' index for the eurozone reached a nine-month high. CNNMoney (04 Jan.)
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Analysis: EU should help Ireland exit rescue program
With assistance, Ireland could leave its rescue program this year, and the EU should provide a helping hand, according to The Economist. "The terms on the promissory notes -- IOUs -- which the Irish government used in 2010 to prop up its banks could be eased," the magazine notes. "A more effective measure would be to allow the European Stability Mechanism (ESM), the euro area's permanent rescue fund, to take stakes in the Irish banks that remain operational." The Economist (free content) (05 Jan.)
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Financial advisers expect wealthy to cut back spending
Since Congress averted the U.S. "fiscal cliff," wealthy taxpayers likely will scale back their spending and look for opportunities to defer income, financial advisers said. People with taxable income of more than $400,000 a year and households with more than $450,000 face the biggest tax increase because of the budget deal. Reuters (06 Jan.)
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Geopolitical/Regulatory
Banks win delay and phase-in for Basel LCR
The Basel Committee on Banking Supervision has granted a four-year reprieve and phase-in period for its liquidity-coverage ratio, a step that banks had argued was necessary to sustain lending. Originally, banks were required to have in 2015 sufficient liquid assets to cover expected outflow over 30 days. The date for that has been changed to Jan. 1, 2019, with banks needing to show a 60% ratio in 2015. Financial Times (tiered subscription model) (06 Jan.), Reuters (06 Jan.), The Wall Street Journal (tiered subscription model)/Dow Jones Newswires (06 Jan.)
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Cross-border regulation creates challenges
During the past year, regulators have clashed publicly and privately over harmonizing rules from different countries. In 2013, it will be crucial for negotiators to establish a framework to resolve extraterritoriality issues concerning areas including derivatives trading and capital requirements, Michelle Price writes. Financial News Online (U.K.) (subscription required) (07 Jan.)
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Financial Products
Trading begins for iPath ETN tracking master-limited partnerships
Barclays iPath brought to the NYSE Arca market an exchange-traded note that gives investors exposure to master-limited partnerships. The iPath S&P MLP ETN tracks the Standard & Poor's MLP Index, which includes publicly traded energy master-limited partnerships and limited liability companies. Bloomberg (04 Jan.), IndexUniverse.com (04 Jan.), 24/7 Wall St. (04 Jan.)
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