Small banks might be hardest hit by Europe's transaction tax | House panel reportedly will release financial-product tax changes | NYSE Euronext will spin off European unit, CEO says
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24 January 2013
CFA Institute: Financial NewsBrief
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House suspends national debt limit
The Republican-controlled House of Representatives passed a measure suspending enforcement of the U.S. debt limit until May 18. The action averts a government shutdown and a possible default on debt. The legislation leaves unchanged automatic spending cuts that will hit the Pentagon particularly hard. The Washington Post (tiered subscription model) (23 Jan.), The New York Times (tiered subscription model) (23 Jan.), Reuters (23 Jan.)
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Small banks might be hardest hit by Europe's transaction tax
Major banks, which often have operations in Zurich or London, are not expected to be significantly affected by Europe's financial-transaction tax and will have an easier time shifting trading activity, experts say. Meanwhile, smaller banks might bear the brunt of the cost. "The idea ... is not the brightest," said Chas Roy-Chowdhury of the Association of Chartered Certified Accountants. "Banks in countries that have adopted the FTT will have the minimum level of transactions and will shift as much as possible to London." Reuters (23 Jan.)
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House panel reportedly will release financial-product tax changes
Dave Camp, chairman of the U.S. House Ways and Means Committee, is poised to release proposed changes to the taxation of financial products, including derivatives, a source said. "Today's marketplace features a wide array of products that can result in different tax or financial accounting treatment of economically similar products, including debt, equity -- and mixtures of the two -- and financial derivatives, such as options, futures, and forward contracts and swaps," Camp said. Bloomberg (23 Jan.)
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NYSE Euronext will spin off European unit, CEO says
NYSE Euronext CEO Duncan Niederauer says the company's European exchange, Euronext, will be spun off in an initial public offering, rather than sold to a competitor. Nasdaq OMX Group and London Stock Exchange Group have informally expressed interest in acquiring Euronext, sources said. Equity Research Desk says Euronext probably would be valued at $1.39 billion. The Wall Street Journal (tiered subscription model) (23 Jan.)
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Yahoo and Dell join Google in Dutch tax haven
The list of companies avoiding U.S. taxes by routing revenue through subsidiaries in the Netherlands keeps growing, including Yahoo, Dell, Google and Merck & Co. Securities filings in the U.S. show that Yahoo's offshore operations allowed the company to reduce 2011 taxes by $42.8 million. Using a similar technique, which is legal, Google cut its global tax bill by $2 billion in 2011. Bloomberg (23 Jan.)
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2013 — The year of the leverage ratio
The leverage ratio is set to become a key metric for banks. From Q1'13, banks in the U.S. and Europe will disclose more consistent and comparable figures for assets and leverage. SNL Financial monitors developments affecting hundreds of European financial institutions; providing standardised data, in-depth analysis and exclusive news. Find out more.
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Reader Survey
Germany's repatriation of gold reserves is a sign of:
German preparation for systemic events with the fiat-currency system  36.25%
The German government bowing to public pressure to repatriate its gold  27.27%
Declining trust among nations  24.01%
Growing German independence within the eurozone  12.47%
Poll analysis:
Germany's central bank, the Bundesbank, made waves in markets last week when it announced plans to repatriate a significant portion of its foreign gold holdings. Specifically, it is aiming to maintain at least 50% of gold holdings within national borders by 2020, up from 31%. The most popular response to our poll about the Bundesbank's decision reveals that 36% of 857 respondents think Germany is preparing for a systemic-risk event. The second- and third-most-popular responses are that the German government is bowing to public pressure and that the move is a result of declining trust among nations. A separate poll conducted through our Asia-Pacific NewsBrief shows that 36% of respondents think Germany is preparing for a systemic-risk event, whereas about 28% see the move as motivated by declining trust among nations, and about 23% think the German government is bowing to public pressure. Interestingly, the Bundesbank is reducing gold held in Paris down to zero. Clearly, the role and importance of gold have grown substantially since the onset of the financial crisis in 2008. As J.P. Morgan once famously quipped, "Gold is money. Everything else is credit." -- Ron Rimkus, Content Director, CFA Institute
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Asian-Pacific markets mixed, with Japan rebounding
Asian-Pacific markets were mixed Thursday, but Japan's Nikkei 225 posted its first gain this week, closing up 1.3%. Australia's S&P/ASX 200 gained 0.5%. Hong Kong's Hang Seng Index edged down 0.2%. China's Shanghai Composite and South Korea's Kospi each dropped 0.8%. India's Sensex was down 0.5% at midafternoon. The Economic Times (India) (26 Feb.), The Wall Street Journal (tiered subscription model) (24 Jan.)
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Apple shares drop 10% after iPhone sales fall short
Apple's share price fell 10% in after-hours trading Wednesday after an announcement that iPhone sales fell short of analysts' forecasts. The data fueled investor concern that Apple is gradually losing its dominant position in consumer electronics. For the third quarter in a row, revenue was less than predicted. Reuters (23 Jan.), Wired.com/Gadget Lab blog (23 Jan.)
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Canada's bonds rise after central bank abandons rate hike
Canadian bonds posted strong gains for the second consecutive day after a Bank of Canada statement convinced traders that the central bank is unlikely to raise interest rates in the near future. The yield on the 10-year bond fell from 1.913% to 1.868%. The Wall Street Journal (tiered subscription model)/Dow Jones Newswires (23 Jan.)
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Economics
IMF: Global economic growth is slower but risks are lower
Global economic growth is slowing, but "acute risks" are fading, such as the disintegration of the eurozone, said Olivier Blanchard, chief economist at the International Monetary Fund. The fund expects 3.5% global economic growth this year, slightly below the projection it made in October. The IMF also forecasts 2% growth in the U.S. The Washington Post (tiered subscription model) (23 Jan.)
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Carney touts accountability and teamwork at BoE
Bank of Canada Governor Mark Carney says he plans to ensure the Bank of England's committee structure is used to its "full effect" and that his position is not about a single individual. "I would make the distinction between the responsibilities of the institution and the power of any individual within that institution," Carney said. "Part of my responsibility when I am there is that as the Bank of England gets additional responsibilities on the micro- and macro-prudential side, to ensure that the committee structure, the new governance structure, the other aspects, work to their full effect." Reuters (24 Jan.), Bloomberg (23 Jan.)
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Manufacturing growth accelerates in China
Chinese manufacturing activity is at its highest level in two years, according to an HSBC Holdings index of purchasing managers' sentiment. The benchmark reached 51.9 this month, compared with 51.5 in December, on a scale in which anything higher than 50 indicates growth. CNNMoney (24 Jan.)
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Japan posts record-high trade deficit for 2012
Soaring fuel imports and declining machinery exports drove Japan's trade deficit to an all-time high of $78 billion in 2012, the Finance Ministry says. Export volume declined in December more than economists had expected. The New York Times (tiered subscription model) (23 Jan.)
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Most affluent investors use advisers for retirement planning
About 60% of high-net-worth investors use a financial adviser to plan for retirement, and 23% seek guidance from an adviser with no connection to their retirement-plan provider, according to Spectrem Group. Affluent individuals most often seek advice from independent financial planners and full-service brokerages. PlanAdviser.com (23 Jan.)
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Geopolitical/Regulatory
EBA wants big banks to prepare "living wills"
The European Banking Authority wants 39 banks to create a document that enumerates how they would survive a crisis without being a burden on taxpayers. "The plans shall be submitted to the respective competent authorities and discussed within colleges of supervisors," according to the regulator. The process will occur under the guidance of the Financial Stability Board. Reuters (23 Jan.)
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ICAP becomes focus of FSA's Libor investigation
The U.K. Financial Services Authority is investigating ICAP regarding possible manipulation of the London Interbank Offered Rate. The regulator might be attempting to determine whether ICAP passed information between banks. Financial Times (tiered subscription model) (23 Jan.)
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Boeing's battery mishaps raise questions about FAA
The failure of two lithium-ion batteries on Boeing's 787 Dreamliner -- one causing a fire and the other damaged enough to force an emergency landing -- is calling into question the ability of the Federal Aviation Administration to evaluate technology. Administrator Michael Huerta says the U.S. agency has expertise and can bring in outside experts when necessary to determine whether aircraft technology is safe. The New York Times (tiered subscription model) (23 Jan.)
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Merkel is willing to discuss U.K. relationship with EU
German Chancellor Angela Merkel says she is receptive to discussing U.K. Prime Minister David Cameron's call to negotiate a looser, more-limited relationship with the EU. "We are prepared to talk about British wishes, but we must always bear in mind that other countries have different wishes, and we must find a fair compromise," she said. The Guardian (London) (23 Jan.), Spiegel Online (Germany) (23 Jan.)
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Dodd-Frank is less than half implemented, GAO says
The Government Accountability Office says in a report that less than half of Dodd-Frank Act rules had been implemented by the end of 2012. The GAO blames the complexity of the task as well as difficult coordination by overlapping and interconnected regulators. "Although regulators have established mechanisms to facilitate coordination ... several regulators indicated that coordination increased the amount of time needed to finalize rulemakings," according to the report. Reuters (23 Jan.)
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Financial Products
Schwab launches 2 target-date mutual funds
Charles Schwab Investment Management has brought to the retail market two target-date mutual funds structured as trusts to be eligible for use in retirement plans. The Schwab Managed Retirement Trust Fund 2055 holds a mix of actively managed and passive investments. The Schwab Indexed Retirement Trust Fund 2055 principally pursues passive investments. Schwab Target Funds also were launched for 2045, 2050 and 2055. PlanAdviser.com (23 Jan.)
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