Leaders at WEF voice concerns about loose monetary policy | House Republicans back measure to avert U.S. default | BaFin official suggests replacing rate-setting process
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23 January 2013
CFA Institute: Financial NewsBrief
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Financial-transaction tax moves forward in Europe
A majority of EU finance ministers have authorized 11 eurozone nations to implement a tax on financial transactions. The countries, including Germany, France, Italy and Spain, have yet to negotiate details of the tax. Although the exact mechanism has not been determined, industry participants are expressing concerns. Financial Times (tiered subscription model) (22 Jan.), Deutsche Welle (Germany) (22 Jan.), Reuters (22 Jan.), The New York Times (tiered subscription model) (22 Jan.), The Wall Street Journal (tiered subscription model) (22 Jan.)
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Leaders at WEF voice concerns about loose monetary policy
The World Economic Forum's annual Global Risks survey of 1,000 business leaders and academics found continued fear of "systemic financial failure." With the U.S., Japan and perhaps the U.K. undertaking what the survey calls "essentially experimental" policies, the possibility of a currency war is a main talking point this week. Reuters (22 Jan.), The Wall Street Journal (tiered subscription model) (22 Jan.)
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House Republicans back measure to avert U.S. default
House Republican leaders are backing a plan to eliminate the risk of the U.S. government defaulting on its debt. The measure would suspend enforcement of the national debt limit through May 18. The White House issued a statement saying President Barack Obama "would not oppose" the move. The Washington Post (tiered subscription model) (22 Jan.), Reuters (23 Jan.), The Atlanta Journal-Constitution (subscription required)/Washington Insider blog (22 Jan.), The Hill/On The Money blog (22 Jan.)
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BaFin official suggests replacing rate-setting process
Elke Koenig, head of German financial regulator BaFin, has voiced concerns about whether reform of the way interbank-lending rates are set would be helpful. Koenig says the process might need to be replaced. "It has been shown that benchmarks, which are based on estimates submitted by market participants, are susceptible to manipulation," she said. "In my view, we need to work not on a reform of the existing system but on a replacement for it." Reuters (22 Jan.)
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Draghi proclaims worst is over in sovereign-debt crisis
European Central Bank President Mario Draghi has noted progress in the battle against the sovereign-debt crisis but also acknowledged ongoing challenges. "We can begin 2013 on a more confident note, precisely because significant progress was made during 2012," Draghi said. Bloomberg (23 Jan.), The New York Times (tiered subscription model) (22 Jan.), Reuters (22 Jan.), The Wall Street Journal (tiered subscription model)/Real Time Economics blog (22 Jan.)
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Microsoft reportedly might finance deal to take Dell private
Microsoft likely will invest several billion dollars in a deal to take publicly traded computer-maker Dell private, a person familiar with the matter said. If successful, the takeover by private investors will be the biggest leveraged buyout since the financial crisis. The New York Times (tiered subscription model)/DealBook blog (22 Jan.), PCWorld/Net Work blog (22 Jan.)
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CFA Institute in the News
CFA Institute updates "GIPS Handbook"
The 2010 edition of "Global Investment Performance Standards Handbook" introduced several important changes and additions. The 2012 "GIPS Handbook," available in PDF or e-book format, was updated to reflect changes in the standards and provide guidance and clarification on each provision, including highly anticipated guidance on applying the standards to alternative investment strategies and structures. Market Integrity Insights (22 Jan.)
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Market Activity
Many Asian-Pacific markets decline, with Japan falling most
Most Asian-Pacific markets fell Wednesday. Japan's Nikkei 225 slid 2.1% after stimulus announced by the Bank of Japan disappointed investors and the yen strengthened. South Korea's Kospi lost 0.8%. Hong Kong's Hang Seng Index gave up 0.1%. China's Shanghai Composite rose 0.3%. Australia's S&P/ASX 200 increased 0.2%. India's Sensex was up 0.2% at midafternoon. The Economic Times (India) (26 Feb.), The Wall Street Journal (tiered subscription model) (23 Jan.)
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Institutional investors are ready shift from debt to equities
Strategists are increasingly looking to pension funds and insurers to rebalance investment portfolios out of fixed-income securities and into stocks. U.S. equity funds' net inflow in the first two weeks of 2013 totaled $11.3 billion, the most for a two-week period since April 2000, according to Lipper. Reuters (23 Jan.)
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EU lawmaker warns of imminent carbon-market collapse
European Parliament member Bas Eickhout has called for an overhaul of the emissions-trading system. He says the target reduction must be increased 30% to save the system, which has been hit by a sharp decline in industrial output because of the economic crisis. Eickhout says this week's decline in prices "should redouble the resolve of decision-makers" to save a program pushed "to the brink." Bloomberg (22 Jan.), Bloomberg (22 Jan.)
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Google's Q4 earnings top forecasts
Google's stock price increased 5% in late trading Tuesday after the company reported fourth-quarter earnings that beat analysts' expectations. The data indicate that Google is starting to make progress in generating more revenue from mobile advertising. San Jose Mercury News (Calif.) (free registration) (22 Jan.), Forbes (22 Jan.)
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Economics
King argues against radical BoE changes
Bank of England Governor Mervyn King defended a decision not to adopt radical policies, which his successor, Mark Carney, seems willing to consider. Speaking about a shift to targeting nominal gross domestic product at the expense of inflation concerns, King said, "A long-run target of 2% inflation should be an essential part of our macroeconomic framework. It would be irresponsible to lose that." He conceded that compared with other developed nations, "our recovery has been noticeably slower." The Wall Street Journal (tiered subscription model) (22 Jan.)
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U.S. home prices rose 5.9% in 2012
House prices in the U.S. climbed almost as much in 2012 as they did at the peak of the housing bubble and are set to keep increasing at a slightly slower pace this year, according to Zillow. Prices gained 5.9% compared with 2011 and are forecast to rise an additional 3.3% this year, the firm said. The National Association of Realtors said existing homes sold in 2012 increased 9.2% compared with 2011, reaching their highest level in five years. MarketWatch (22 Jan.), USA Today (22 Jan.), Banker & Tradesman (Boston) (22 Jan.)
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Skilled workers seek greener grass as economy improves
As the recovering economy gives the U.S. labor force greater confidence, highly skilled workers are leaving the safety of their jobs to search for better opportunities. In a 2012 survey, 40% of employers said they were having trouble keeping workers with critical skills, up from 36% in 2011 and 16% in 2009. The Washington Post (tiered subscription model) (22 Jan.)
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Analysis: Japanese policy could be good for Germany
Bundesbank President Jens Weidmann's criticism of Japanese monetary easing is too harsh, Nicholas Hastings writes. The German central bank's focus on the immediate impact of currency competition is blinding it to how a healthier Japanese economy would benefit the world, Hastings argues. The Wall Street Journal (tiered subscription model)/The Euro Crisis blog (22 Jan.)
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Advisers' firm type influences retirement guidance
Retirement-income recommendations vary based on financial advisers' type of firm, according to Cogent Research. Registered investment advisers lean toward mutual funds. Broker-dealer advisers often suggest insurer products. Advisers at national wire houses are divided, favoring either insurer products or brokerage investments, mostly dividend-paying stocks. Financial Advisor online (22 Jan.)
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Geopolitical/Regulatory
Cameron wants to renegotiate U.K.-EU ties
U.K. Prime Minister David Cameron has called for negotiations to loosen the country's relationship with the EU and free it from some bloc regulations. He says that when the talks are finished, he will back a referendum on whether the U.K. should remain in the EU. MarketWatch (23 Jan.), BBC (23 Jan.), The Telegraph (London) (tiered subscription model) (23 Jan.)
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SEC bars Egan-Jones from rating certain bonds
The Securities and Exchange Commission has prohibited Egan-Jones Ratings from issuing ratings on municipal bonds, sovereign debt and asset-backed securities for at least 18 months. The ban is part of a settlement between Egan-Jones and the SEC regarding allegations that the firm misled investors about its expertise and filed inaccurate documents with the regulator. Bloomberg (22 Jan.), The Washington Post (tiered subscription model)/The Associated Press (22 Jan.), The Wall Street Journal (tiered subscription model) (22 Jan.)
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Financial Products
Hancock aims to use derivatives in actively managed ETF
John Hancock has asked the Securities and Exchange Commission for authorization to use derivatives in its first actively managed exchange-traded fund. The financial-services firm says the John Hancock Global Balanced ETF would use derivatives to increase the efficiency of market exposure and reduce risk. IndexUniverse.com (22 Jan.)
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