Greece adopts privatization law, but other reform stalls | Eurozone unemployment broke record in September | Obama leads Romney in 3 battleground states, polls find
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01 November 2012
CFA Institute: Financial NewsBrief
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Wall Street returns to business after smooth reopening
Trading resumed on major U.S. exchanges, and markets' reopening went so smoothly that there was no need to use a computerized backup system set up to take over if necessary. The trading frenzy that some market strategists worried might develop because of pent-up demand and the end of accounting periods failed to materialize. The New York Times (tiered subscription model)/DealBook blog (31 Oct.), CNNMoney (31 Oct.), Bloomberg (31 Oct.)
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Greece adopts privatization law, but other reform stalls
The Greek parliament passed a law clearing the way for privatization of major state-owned companies, but lawmakers rejected proposals to impose tax increases and merge health care programs to cut costs. The coalition government couldn't come up with enough votes to implement major reform it backs, raising concern that it might be breaking apart. Greek Reporter blog (31 Oct.), Reuters (31 Oct.), Kathimerini (Greece) (31 Oct.)
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Eurozone unemployment broke record in September
Unemployment in the eurozone rose to a seasonally adjusted 11.6% in September, a record high, the EU's statistics agency said. The jobless rate for people younger than 25 was 23.3%. Spain and Greece had the highest rates, with more than 25%. Deutsche Welle (Germany)/Agence France-Presse/Deutsche Presse-Agentur (31 Oct.), Spiegel Online (Germany) (31 Oct.)
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Obama leads Romney in 3 battleground states, polls find
In the final days of the U.S. presidential campaign, President Barack Obama holds slender leads over Republican challenger Mitt Romney in the key battleground states of Iowa, New Hampshire and Wisconsin, according to The Wall Street Journal/NBC News/Marist polls. Margins in New Hampshire and Wisconsin are narrow enough to give Romney a realistic chance of taking the lead, the polls found. NBC News/First Read blog (31 Oct.), The Wall Street Journal (tiered subscription model) (31 Oct.)
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ICAP opens securities and derivatives exchange
Seth Johnson, CEO of ICAP Securities & Derivatives Exchange, which launched Wednesday in London, said listed companies will have to meet higher standards for disclosure and governance, with a point system coming next year. "We are raising the bar for companies listed on the exchange," Johnson said. "The 133 companies already listed will have time to pull their socks up. If they don't, they'll be forced to leave." Reuters (31 Oct.)
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Market ActivityAdvertisement
China's stock prices lead gains on Asian-Pacific markets
Asian-Pacific markets were mixed Thursday, with Chinese stock prices posting solid gains, after two indexes pointed to strengthening manufacturing activity. China's Shanghai Composite jumped 1.7%. Hong Kong's Hang Seng Index rose 0.8%. Japan's Nikkei 225 moved up 0.2%. South Korea's Kospi fell 0.7%. Australia's S&P/ASX 200 gave up 1.3%. India's Sensex was up 0.3% after midday. MarketWatch (01 Nov.), The Economic Times (India) (26 Feb.)
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Traders sidestep ban on shorting government debt
Exchange-traded government-bond futures not covered by new rules are opening a way for traders to effectively short government debt, thereby increasing funding costs, something the regulations were intended to prevent. High volumes in European government-bond futures revealed the flaw in the rules, which ban naked short positions in sovereign credit default swaps. Meanwhile, traders, brokers and other market participants are questioning the rules, saying they create confusion and leave the market unprepared. International Financing Review (free content) (31 Oct.), Financial Times (tiered subscription model) (31 Oct.)
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Corporate-bond sales surge as investors hunt for returns
Sales of corporate bonds have reached $3.3 trillion this year, near a 2009 record, as investors pursue higher returns and companies take advantage of low borrowing costs. "There's a lot of money out there looking for a home," said Elisabeth Afseth, an analyst at Investec Bank. "Government bonds give you almost nothing, so you're left with corporate bonds, which give you a little bit more than nothing." Bloomberg (31 Oct.)
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Economics
Chinese factory output and orders increase
China's manufacturing sector shifted from decline to expansion in October, and factory orders increased. The government's purchasing managers index rose to 50.2, from 49.8 in September, on a scale in which anything higher than 50 points to growth. A manufacturing index by HSBC Holdings and Markit Economics reached an eight-month high. Bloomberg (01 Nov.), Xinhuanet.com (China) (01 Nov.)
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Conservatives reject U.K. measure on EU budget
British Prime Minister David Cameron suffered a setback in Parliament when senior members of his Conservative Party helped defeat a proposal for funding the EU's seven-year budget. Conservatives who refused to back Cameron said the budget, for 2014 to 2020, must be "reduced in real terms." The Guardian (London) (31 Oct.)
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Global construction firms face challenge from China
As construction companies in the U.S. and other developed economies bid on projects worldwide, China has replaced Japan as their most-feared competitor, according to The Economist. China State Construction & Engineering, the world's largest construction company, is renovating New York's Alexander Hamilton Bridge. "The world's biggest builders are getting a growing share of the work," the magazine notes. The Economist (free content) (27 Oct.)
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Sandy's 4 lessons for financial advisers
Financial advisers who weathered superstorm Sandy and other natural disasters said they learned four important lessons. Before a disaster strikes, advisers should help clients become comfortable with online meetings; buy a generator to provide backup power; emphasize to clients the importance of documenting even small amounts of property damage; and electronically back up client documents at several secure locations. Reuters (31 Oct.)
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EU will treat Turkey's membership request fairly, Merkel says
Negotiations about Turkey's application for EU membership will be conducted in good faith, German Chancellor Angela Merkel told Turkish Prime Minister Tayyip Erdogan. Erdogan said the EU will lose Turkey as a potential member if it is not granted membership by 2023. Reuters (31 Oct.)
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U.S. will hit borrowing cap near year-end, Treasury says
The U.S. debt ceiling is expected to be reached before 2013, the Treasury Department said. Default won't happen until early next year because of extraordinary measures. The debt ceiling is $16.4 trillion. MarketWatch (31 Oct.)
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Geopolitical/Regulatory
Cyprus drops MiFID from EU finance ministers' agenda
Cyprus, which is holding the rotating EU presidency, took the Markets in Financial Instruments Directive off the agenda for a Nov. 13 meeting of EU finance ministers. The move comes as EU governments debate rules intended to increase competition among clearinghouses. Bloomberg Businessweek (31 Oct.)
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FSB calls on derivatives regulators to iron out differences
The Financial Stability Board told regulators worldwide to accelerate efforts and coordinate derivatives rules. "Market infrastructure is in place and can be scaled up. Regulatory uncertainty remains the most significant impediment to further progress and to comprehensive use of market infrastructure," according to an FSB report for Group of 20 finance ministers. "However, progress to date in cross-border discussions has been slow. This risks delaying the full and timely implementation of the G20 objectives." Reuters (31 Oct.), Bloomberg Businessweek (31 Oct.)
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U.K. banking reform could backfire, expert says
Martin Taylor, who was part of the U.K.'s Independent Commission on Banking, said that if ring fencing does not resolve the industry's imperfections, the next step is to break up banks. However, it might not come to that because many banks probably would leave the country than face being deconstructed, Taylor said. The Telegraph (London) (tiered subscription model) (31 Oct.), Reuters (31 Oct.)
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Financial Products
Prudential rolls out high-yield mutual fund
Prudential Investments introduced a mutual fund targeting investors seeking higher income during a time of historically low interest rates. The Prudential Short Duration High Yield Income Fund buys high-yield bonds, foreign securities, emerging-market securities and securities sold by small- and mid-capitalization issuers. PlanAdviser.com (29 Oct.), Bloomberg (31 Oct.), The Wall Street Journal (tiered subscription model) (31 Oct.)
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