Oil industry closely watches developments in Venezuela | Obama seeks budget-deal support from Republicans | BNSF will test running locomotives on natural gas
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06 March 2013
CFA Institute: Financial NewsBrief
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Venezuela's Chavez dies after battle with cancer
Venezuelan President Hugo Chavez has died at age 58, after battling cancer for nearly two years. The social-welfare program he championed has reduced illiteracy and the poverty rate, which is at 20%, down from 80% in 1990. Business interests in the U.S. and Venezuela were critical of his nationalization of energy, telecommunication and banking companies, as well as more than 1 million acres of farmland. Los Angeles Times (tiered subscription model) (05 Mar.), The New York Times (tiered subscription model) (05 Mar.), CTV.ca (Canada)/The Associated Press (06 Mar.), Latin American Herald Tribune (Venezuela)/Agencia EFE (Spain) (05 Mar.)
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Oil industry closely watches developments in Venezuela
The death of Hugo Chavez could pave the way for foreign oil companies to return to Venezuela, energy industry analysts and executives said. If that happens, ExxonMobil and ConocoPhillips, which left after Venezuela nationalized its oil industry, could be big winners. CNBC (05 Mar.)
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Obama seeks budget-deal support from Republicans
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Graham/Reuters
Putting talks with GOP leaders on the back burner for a while, President Barack Obama is reaching out to rank-and-file Senate Republicans to build support for a budget deal with higher taxes to pay down U.S. debt. Obama told senators that he is willing to make changes in health care and retirement programs to get a budget compromise that includes higher taxes. The Washington Post (tiered subscription model) (05 Mar.), Bloomberg (06 Mar.)
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BNSF will test running locomotives on natural gas
BNSF Railway, which is owned by Warren Buffett's Berkshire Hathaway and is one of the biggest users of diesel fuel in the U.S., will test running locomotives on natural gas this fall. CEO Matt Rose said that if the test is successful, BNSF will move swiftly to retrofit locomotives to use natural gas. The Wall Street Journal (tiered subscription model) (05 Mar.)
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FBI joins forces with SEC to look at HFT
Members of the Quantitative Analytics unit at the Securities and Exchange Commission have been meeting with representatives from the FBI and other regulators to share expertise and tackle concerns related to high-frequency trading. The FBI's collaboration is part of an effort to keep up with quickly evolving trading strategies, sources said. Reuters (05 Mar.), Business Insider (05 Mar.), Financial Times (tiered subscription model) (05 Mar.)
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Analysis: Berlin has tech startups but lacks investors
Germany is increasingly looking to the high-tech entrepreneurs flocking to Berlin to transform its economy, but doubts are being raised about whether the city can help these early-stage ventures become global companies on a par with Apple, Facebook and Google. Berlin doesn't have the kind of bold investors that help California's Silicon Valley turn an exciting idea into a billion-dollar company, according to this analysis. Der Spiegel (Germany) (English online version) (05 Mar.)
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Market ActivityAdvertisement
Asian-Pacific markets surge after Dow sets a record
Shares rose on Asian-Pacific markets rose Wednesday after the Dow Jones industrial average reached an all-time high. Japan's Nikkei 225 jumped 2.1% to its highest level in 4½ years. Hong Kong's Hang Seng Index rose 1%. China's Shanghai Composite moved up 0.9%. Australia's S&P/ASX 200 added 0.8%. South Korea's Kospi edged up 0.2%. India's Sensex was up 0.6%. MarketWatch (06 Mar.), The Economic Times (India) (18 Apr.)
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Dow closes at record high
The Dow Jones industrial average closed at an all-time high of 14,253.77 on Tuesday, topping a record set in October 2007. "I'm surprised at the speed of the gains, which have come at a pace that we can't annualize," said Jim McDonald of Northern Trust Global Investments. "But stocks are still not expensive, and we can expect to continue getting a reasonable advance from here." Reuters (06 Mar.), Barron's (subscription required)/Stocks to Watch blog (05 Mar.)
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Spanish and Italian bonds attract investor interest
Analysts at European investment firms are recommending a return to Spanish and Italian bonds. "It's risk-on with regard to peripheral bond markets," said Christian Eckert of Lazard Asset Management. They do warn that despite potential profit, the trade carries high volatility. Bloomberg (05 Mar.)
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Economics
Decline continues in eurozone's service sector
In February, the Markit Eurozone Purchasing Managers Index slid for the 13th consecutive month. New business declined for the 18th straight month. Expansion in Germany was offset by contraction in France, Spain and Italy. Finfacts Ireland (05 Mar.)
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PBOC plans currency reform and flexibility
Yi Gang, deputy governor of the People's Bank of China, says the central bank is getting ready to implement reform that will increase flexibility in the exchange rate. "We will continue to reform and open up," he said. "I'm confident that the renminbi exchange rate will be more balanced and flexible and basically stable." Reuters (06 Mar.)
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Australia posts largest GDP growth since 2007
The Australian economy, fueled by resource investment and exports, grew in 2012 at its fastest rate in five years, according to Australian Bureau of Statistics data compiled by Bloomberg. Gross domestic product expanded 3.6%, the highest rate since 2007, which saw 4.7% growth. Bloomberg (05 Mar.)
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Geopolitical/Regulatory
European Commission notes concern about Spanish reform
The European Commission has expressed concern that Spain is backsliding on economic reform, which could lead to trouble for the banking system. "Progress in delivering of some key product and services market reforms has been slow. Persistent efforts are needed to compound the progress achieved to date," the commission said in a report after the commission, the European Central Bank and the International Monetary Fund visited Spain to review its progress. Bloomberg (05 Mar.)
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Banks seek dismissal of Libor lawsuits
JPMorgan Chase, Bank of America and other banks are being sued by local governments, community banks and customers regarding possible manipulation of the London Interbank Offered Rate. The defendants have asked U.S. District Judge Naomi Reice Buchwald to dismiss the cases, arguing there is no evidence they broke the law. Reuters (05 Mar.), Bloomberg (05 Mar.), The Wall Street Journal (tiered subscription model) (05 Mar.)
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FSA defends its role on Libor issue
The U.K. Financial Services Authority has published an internal report on when it first became aware of manipulation of the London Interbank Offered Rate. The FSA says it should have been better about detecting manipulation but that it did not have direct oversight of the benchmark at the time. Reuters (05 Mar.), The New York Times (tiered subscription model)/DealBook blog (05 Mar.), The Wall Street Journal (tiered subscription model) (05 Mar.)
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Group wants advisers barred from forcing clients into arbitration
The North American Securities Administrators Association wants U.S. legislation that would prohibit investment advisers from requiring mandatory arbitration when a client wants to resolve a dispute. "Harmed investors should be able to seek relief in any forum and not be forced into an expedited arbitration that could foreclose their ability to obtain relief," NASAA President Heath Abshure said. "Investors aren't going to invest if they can't sue if they're defrauded." InvestmentNews (free registration) (05 Mar.)
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Gensler reportedly is considering second term as CFTC head
The White House is in talks with Gary Gensler about a second term as chairman of the Commodity Futures Trading Commission, sources say. Gensler, who became chairman in May 2009, can remain in the job through year-end. He reportedly has expressed interest in other financial or economic positions in the Obama administration. Bloomberg Businessweek (05 Mar.), The New York Times (tiered subscription model)/DealBook blog (05 Mar.), The Wall Street Journal (tiered subscription model) (05 Mar.)
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Venture Exchanges and Investor Risk and Returns
CFA Institute report looks at reporting issues, fraud, and other problems by exchange
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Financial Products
Unconstrained bond fund is in Schroders' pipeline
Schroders is set to introduce a global bond fund to the retail market in April, to attract investors looking for higher fixed-income yields. The Schroder ISF Global Unconstrained Bond fund aims to deliver annual yields 4% to 5% higher than its benchmark, the Barclays Capital Global Aggregate Bond USD Hedged index. IFAOnline.co.uk (U.K.) (04 Mar.), International Adviser online (U.K.) (04 Mar.), Citywire (U.K.) (04 Mar.)
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