Greek privatization plan for bailout barely passes | U.K. consumer pessimism deepens | Storm might take a bite out of U.S. growth
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November 1, 2012
CFA Institute: Financial NewsBrief - Aisa Pacific Edition
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Eurozone posts 11.6% jobless rate, another record
Reuters
The austerity-ravaged eurozone suffered another month of record unemployment in September with a rate of 11.6%. Among the more startling figures was a 23.3% jobless rate for those under age 25. "Given the ongoing financial difficulties of the European Union and the likelihood of continuing job losses in the public sector as austerity measures begin to bite, overall unemployment levels and youth unemployment in particular are likely to carry on rising for the foreseeable future," said Andrea Broughton, a researcher at the London-based Institute for Employment Studies. The Wall Street Journal (tiered subscription model) (10/31)
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Greek privatization plan for bailout barely passes
A key component of the Greek bailout broadly extending a drive to privatize public assets won bare majority approval in the Greek Parliament on Wednesday. The measure faced significant opposition from two parties in the coalition government. The Business Times (Singapore)/Reuters (10/31)
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U.K. consumer pessimism deepens
The U.K. may have technically emerged from recession, but consumer sentiment continues to lag, with the October reading falling to its lowest level in six months at -30, according to a survey by GfK NOP. "People are more worried about their own financial situation over the next 12 months. This certainly doesn't suggest there will be a spending boom on the back of the official emergence from recession," commented Nick Moon, managing director of social research at GfK. Reuters (10/31)
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Storm might take a bite out of U.S. growth
Reuters
Among the costs inflicted by Hurricane Sandy on the U.S. are a likely reduction in fourth-quarter GDP growth as the storm and its aftermath keep Americans away from work in the densely populated Northeast. On Wall Street, meanwhile, firms and banks scrambled to round up cash Wednesday after the storm disrupted key money markets. Bloomberg (10/31), Reuters (10/31)
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U.S. business activity in negative territory for 2nd month
The U.S. recovery may grow more dependent on consumer spending in weeks ahead after another month of contracting business activity pointed to a still-ailing manufacturing sector. "The manufacturing sector is struggling. You've got global weakness, which is hurting exports; you've got uncertainty with the fiscal cliff, which may keep people cautious," said Scott Brown, chief economist at Raymond James & Associates in St. Petersburg, Fla. Bloomberg (10/31)
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A quick primer on the U.S. "fiscal cliff"
The Wall Street Journal's David Wessel gives a quick rundown on what to expect from the politically imposed "fiscal cliff" that's widely perceived as a threat to the U.S. economy. The Wall Street Journal (tiered subscription model) (10/31)
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Chinese banks build up reserves against bad loans
China's leading banks have been steadily building up reserves in anticipation of nonperforming loans. The fear is that the banks' many construction loans over the past three years may prove unable to generate revenue for some time to come. The Wall Street Journal (tiered subscription model) (10/30)
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U.S. stimulus is welcomed by struggling Asian economies
U.S. stimulus that once would have raised alarms over hot money flowing into Asian economies is now being welcomed as nations across Asia try to boost growth rates. The new attitude marks a reversal of fears sparked in 2010 when Asian currencies soared against the U.S. dollar. The Business Times (Singapore) (10/31)
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Former supervisor of "London Whale" is sued by JPMorgan
Javier Martin-Artajo, who was the immediate supervisor of Bruno Iksil, the JPMorgan Chase trader known as the "London Whale," is being sued by JPMorgan in connection with $6.2 billion in derivatives trading losses. The court case comes after JPMorgan's earlier stated intention of trying to win back pay from traders and supervisors involved in the fiasco. Reuters (10/31)
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Market Activities
INTERNATIONAL MARKETS OVERVIEW
Poor earnings reports drove European stocks lower Wednesday, and the U.S. market reopened only to end the day with little change. The Stoxx Europe 600 declined 0.54% to 270.30, and the S&P 500 was steady at 1,412.16. Here is a continuously updated list of global stock indexes. The Wall Street Journal (tiered subscription model) (11/1), The Wall Street Journal (tiered subscription model) (10/31), CNNMoney (10/31)
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Asia shares advance on earnings
Favorable corporate earnings posted by several regional giants boosted shares Wednesday across Asia ahead of the reopening of markets in the U.S. The Nikkei rose 0.98% to 8,928.29, the Hang Seng was up 1.00% to 21,641.82, the Kospi added 0.66% to 1,912.06, and the S&P/ASX gained 0.70% to 4,517.00. MarketWatch (10/31)
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Economic Trends & Outlook
U.S. wary of Chinese indecision on economy's future
Concern is mounting among U.S. policymakers over whether China's incoming leadership can make the tough decisions needed to take the country's economy into a consumerist future. Financial Times (tiered subscription model) (10/31)
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S. Korean central bank warns of credit stress threat
The Bank of Korea warns that the nation's households and businesses alike face a widespread risk of insolvency. Homeowners are being hit mainly by rapidly declining home values, while a large share of workers are employed in the low-productivity service sector. Among businesses, it is feared that stresses afflicting a growing percentage of local businesses might filter up to their conglomerate owners. MK.co.kr (South Korea) (10/31)
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South Korea fears sudden exodus of foreign funds
Recent credit rating upgrades for South Korea and quantitative easing abroad have sparked an ongoing inflow of foreign funds into the country, but this could suddenly reverse, the Bank of Korea warns. A deteriorating situation in the eurozone or any other external shock would be perceived as a threat to the South Korean economy, which is export dependent. The Korea Herald (Seoul) (10/31)
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"Hot money" fears are relieved as Chinese central bank acts
Reuters
The 395 billion yuan that the Chinese central bank injected into the market has reduced concerns of a jump in foreign capital after the U.S. Federal Reserve's most recent round of quantitative easing. The People's Bank of China's action came through seven- and 28-day reverse bond repurchase agreements and was a record for one day. China Daily (Beijing) (10/31)
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India, Brazil government debt ratios lead developing nations
Though still lower than the average for developed countries, government debt ratios for India and Brazil are the highest among the top 10 developing nations at nearly 70% of gross domestic product, according to a report by Deutsche Bank. Overall, the so-called EM-10 countries have cut their average debt ratio in half since 2000, to 25%. "The EM-10 stand in marked contrast to the G-7, where government debt is currently projected to peak at almost six times the level of the EM-10 around the middle of the present decade," the report said. The Economic Times (India) (10/31)
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Taiwan's economy returns to growth mode
Taiwan's economy returned to growth in the third quarter. The GDP gain of 1.02% was lower than projected but improved on the 0.18% contraction in the second quarter. Separately, Taiwan and the U.S. signed a statement of intent designed to open up more trade among small and medium-sized companies. The Business Times (Singapore) (10/31), The Taipei Times (Taiwan) (11/1)
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Singapore manufacturers expect a bleak few months
Singapore's manufacturers are mixed in their opinion of conditions over the next few months, but about twice as many anticipate deterioration through March. Service businesses, meanwhile, predominantly expect little change in that period. The Business Times (Singapore) (10/31)
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Regulatory Update
Escrow duties are included in China custodian bank opening
Chinese regulators' plans to open more opportunities for custodian banks include the ability to manage escrow funds in China, according to the official China Securities Journal. The paper cites an unnamed source saying the China Securities Regulatory Commission is working on the change. Caijing Magazine online (10/31)
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