House adopts Senate bill that would avert much of "fiscal cliff" | Many Americans will pay higher taxes in 2013 despite deal | North Korean leader calls for an end to Korean conflict
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02 January 2013
CFA Institute: Financial NewsBrief
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House adopts Senate bill that would avert much of "fiscal cliff"
The House of Representatives, by a 257-167 bipartisan vote, adopted the Senate's budget bill, averting tax increases for most Americans. The measure prevents $600 billion of spending cuts and tax hikes from automatically taking effect Wednesday. Republicans gave up on demands for spending cuts that likely would have been blocked by the Senate. Bloomberg (01 Jan.), The Washington Post (tiered subscription model) (01 Jan.), Los Angeles Times (tiered subscription model)/Politics Now blog (01 Jan.)
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Many Americans will pay higher taxes in 2013 despite deal
The budget bill that would avert the "fiscal cliff" will preserve Bush-era tax cuts for many middle-class Americans, but other taxes will go up in 2013. A temporary reduction in employees' contribution to Social Security will end and the average household will pay an extra $1,000 this year. The income tax rate of individuals making more than $400,000 a year and of couples whose combined income is greater than $450,000 will rise to 39.6% from 35%. CBS MoneyWatch (01 Jan.)
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North Korean leader calls for an end to Korean conflict
North Korean leader Kim Jong-un said in a New Year's Day speech that the confrontation between the two Koreas should end. "An important issue in putting an end to the division of the country and achieving its reunification is to remove confrontation between the north and the south," he said. It was the first New Year's speech by a North Korean leader in 19 years. Reuters (01 Jan.), Yonhap News Agency (South Korea) (subscription required) (01 Jan.)
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Egypt's currency drops to lowest value in 7 years
The Egyptian pound Monday fell to its lowest level against the U.S. dollar since 2004 as many Egyptians rushed to convert their pounds to dollars amid political unrest. The government news agency MENA said the currency fell to 6.42 to the dollar. President Muhammad Morsi said that he wasn't worried and that the situation would stabilize in a few days. Deutsche Welle (Germany)/Agence France-Presse/Reuters (31 Dec.), Al Arabiya (United Arab Emirates) (31 Dec.)
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Asian consortium will pay $1.1B for stake in Canadian steel firm
An Asian group led by Posco, South Korea's biggest steelmaker, agreed to pay $1.1 billion for a 15% stake in ArcelorMittal Mines Canada. ArcelorMittal, the parent company of the Montreal-based steel producer, has been struggling to cope with weak steel prices and slashed its dividend last fall. The Globe and Mail (Toronto) (tiered subscription model) (02 Jan.), Reuters (01 Jan.)
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NYSE Euronext sale highlights weakness of 2007 merger
Though pitched differently, the sale of NYSE Euronext in a highly competitive environment stands as mute testimony to the failure of the merger of NYSE and Euronext in 2007. Financial Times (tiered subscription model) (31 Dec.)
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A year of technical trading problems ends with a glitch
In a year that included a number of technical trading glitches, 2012 ended with another one. On Monday, problems with more than two dozen stocks resulted in the halt of of their trade for four minutes on the New York Stock Exchange. Details of what caused the glitch were not released. The Wall Street Journal (tiered subscription model)/MarketBeat blog (31 Dec.)
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Market Activity
Asian-Pacific markets rally after U.S. reaches budget deal
Asian-Pacific markets rose Wednesday after the U.S. House of Representatives approved a bill averting the "fiscal cliff." Hong Kong's Hang Seng Index climbed 2.9%. Australia's S&P/ASX 200 added 1.2%. South Korea's Kospi increased 1.7%. Taiwan's Taiex gained 1%. India's Sensex was up 0.7% at midafternoon. Markets in China and Japan remained closed for the holiday. MarketWatch (02 Jan.), The Economic Times (India) (26 Feb.)
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Italian and Portuguese bonds rally
Bonds issued by Italy and Portugal rallied last year as debt sold by eurozone governments enjoyed their best performance in history. Gains in Italian and Portuguese debt marked a sharp reversal from 2011, their worst year on record. Bloomberg (31 Dec.), CNNMoney (28 Dec.)
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IPO market appears headed into slump
Fewer initial prospectuses filed with the Securities and Exchange Commission in the second half of 2012 suggest a slowdown in initial public offerings this year. Financial markets have become less receptive to emerging companies, market observers say. CNBC (31 Dec.)
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European corporate-credit markets rebounded in 2012
The European Central Bank's unyielding stand behind the euro and open spigots on funding lifted 2012's corporate-credit markets to their best year since 2009. "The man of the year for the bond market has to be [ECB President] Mario Draghi," said Chris Iggo, chief investment officer for fixed income at AXA Investment Managers. Bloomberg (31 Dec.)
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Economics
Major economies have less debt to refinance this year
The Group of Seven nations, combined with Brazil, India, China and Russia, will have $220 billion less debt that requires refinancing in 2013. The decrease comes as bond markets rally in all major economies for the first time since 2008. Bloomberg (02 Jan.)
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European spending and borrowing rules go into effect
Europe's fiscal compact imposing tough rules on government spending and borrowing by participating nations took effect Tuesday. Eurozone participants are Austria, Cyprus, Germany, Estonia, Spain, France Greece, Italy, Ireland, Portugal, Finland and Slovenia. Four non-eurozone countries also are participating: Denmark, Latvia, Romania and Lithuania. European Voice (Brussels) (tiered subscription model) (31 Dec.)
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DOL might propose fiduciary rule for retirement-plan advisers
Early this year, the U.S. Labor Department is expected to call for fiduciary duty by retirement-plan advisers. The proposal is controversial, and it remains uncertain whether the department will adopt it. Financial-Planning.com (30 Dec.)
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Analysis: Reasons to worry in slow U.S. recovery
Despite consistent growth during the past several years, the U.S. economy is recovering slowly, causing concern. The 2% growth of the past several years might indicate that the economy had lost growth potential even before the recession, or that government policy is lengthening the recovery instead of hastening it. The Wall Street Journal (tiered subscription model) (01 Jan.)
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Geopolitical/Regulatory
U.S. and banks reportedly near $10B foreclosure deal
U.S. regulators and banks are hammering out an agreement to end a drawn-out process of examining thousands of foreclosure cases for mistakes, sources say. The settlement could cost banks $10 billion, but both sides say the review is too expensive and not providing enough relief. The Wall Street Journal (tiered subscription model) (31 Dec.)
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Indian regulator plans insider trading crackdown
The Securities and Exchange Board of India plans to revise rules on insider trading by executives after Parliament approves the Companies Bill, which would outlaw abusive stock market practices. "The minute the Companies Bill is approved, we will revise the insider trading regulations," a SEBI official said. The Economic Times (India) (02 Jan.), The Financial Express (India) (01 Jan.)
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Ethics
Brazil gets serious about political corruption
Brazilians are enjoying the rare sight of corrupt politicians being tried, convicted and sentenced to lengthy prison sentences and big fines, according to The Economist. "The supreme court must still write its report on the trial, and hear appeals -- though it is unlikely to change its mind," the magazine notes. "So in 2013 Brazilians should be treated to an unprecedented sight: well-connected politicos behind bars." The Economist (free content) (22 Dec.)
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