EU concedes January is out of the question for Basel rules | SEC: Big 4's Chinese affiliates withheld documents | Analysis: Troubled companies often pay big bonuses
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04 December 2012
CFA Institute: Financial NewsBrief
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White House rejects GOP plan to avert "fiscal cliff"
The White House turned down a proposal by House Republicans aimed at averting the "fiscal cliff" because it didn't include tax increases for the wealthiest Americans. "The Republican letter released today does not meet the test of balance," said White House Communications Director Dan Pfeiffer. "In fact, it actually promises to lower rates for the wealthy and sticks the middle class with the bill." Reuters (03 Dec.), The Washington Post (tiered subscription model) (03 Dec.), Bloomberg (03 Dec.)
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EU concedes January is out of the question for Basel rules
Although it is hoped the delay will be short, the EU says January is no longer a realistic deadline for implementing Capital Requirements Directive IV, put forward by the Basel Committee on Banking Supervision. Leverage limits, bankers' bonuses and liquidity rules are among sticking points. Bloomberg (03 Dec.)
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SEC: Big 4's Chinese affiliates withheld documents
The Securities and Exchange Commission accused Chinese affiliates of the Big Four global accounting firms of withholding documents from U.S. investigators looking into possible fraud by companies based in China. The commission said in an administrative order that the accounting firms failed to cooperate with investigations relating to potential accounting fraud by nine Chinese companies with securities trading in U.S. public markets. Bloomberg (03 Dec.)
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Analysis: Troubled companies often pay big bonuses
Companies in financial trouble often pay top executives big bonuses shortly before filing bankruptcy petitions. A review of more than 80 bankruptcy cases over the past five years by The Wall Street Journal found that more than 1,600 insiders received payments totaling more than $1.3 billion in the months before their firms filed for Chapter 11 bankruptcy protection. The Wall Street Journal (tiered subscription model) (03 Dec.)
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Market ActivityAdvertisement
Asian-Pacific markets mixed after Wall Street drops
Asian-Pacific markets were mixed Tuesday, some following Wall Street's lead after data showed that U.S. manufacturing has shifted to contraction. Australia's S&P/ASX 200 dropped 0.6%. Japan's Nikkei 225 declined 0.3%. South Korea's Kospi slid 0.3%. Markets in China and India were somewhat stronger. Hong Kong's Hang Seng Index edged up 0.2%. China's Shanghai Composite rose 0.8%. India's Sensex was up 0.2% at mid-afternoon. The Economic Times (India) (26 Feb.), The Wall Street Journal (tiered subscription model) (04 Dec.)
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Greek bond buyback offers better prices than expected
Bond investors were surprised over the terms offered by Greece's bond buyback program, which were more generous than they anticipated. The market expected an offer of 32 to 34 euro cents for each euro of face value. Greece is offering 30 euro cents to 40 euro cents. The New York Times (tiered subscription model) (03 Dec.), Kathimerini (Greece) (03 Dec.)
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Economics
IMF conditionally allows capital controls
The International Monetary Fund has withdrawn its objection, in certain situations, to nations' imposition of capital controls. "Capital flows can have important benefits for individual countries across the fund membership and the global economy. ... [They] also carry risks, however, as they can be volatile and large relative to the size of domestic markets," according to an IMF report. Bloomberg (03 Dec.)
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U.S. car sales jumped 15% in November
Americans bought 1.1 million vehicles last month, 15% more than in November 2011. The surge marked the fastest sales growth since January 2008. Consumers replacing 250,000 vehicles destroyed by superstorm Sandy helped drive up the numbers. Los Angeles Times (tiered subscription model) (03 Dec.)
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"Fiscal cliff" fears blunt hiring, economists say
Many employers who would ordinarily be hiring are refraining because of uncertainty over whether Congress will find a way to avert the U.S. "fiscal cliff," many economists say. Between July and September, worker productivity rose an annualized rate of 1.9%, indicating that employers are squeezing as much from workers as they can realistically expect to get, some experts say. But hiring hasn't picked up. NBC News/Economy Watch blog (03 Dec.)
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Corporations lack cash in U.S. but hold money offshore
Major U.S. companies are holding a large amount of cash offshore to avoid taxes while letting cash at home dwindle to a point of borrowing for basic functions such as paying dividends, buying back shares and paying taxes. The emerging picture of corporate cash abroad is in response to pressure on companies from the Securities and Exchange Commission to give investors an accurate evaluation of liquidity. The Wall Street Journal (tiered subscription model) (03 Dec.)
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Eurozone finance ministers OK rescue for Spain's banks
Long-anticipated financial aid for Spanish banks received approval from eurozone finance ministers. The action came hours after Spain formally requested help. Financial Times (tiered subscription model) (03 Dec.)
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U.S. manufacturing activity and factory orders decline
The Institute for Supply Management's Purchasing Managers' Index hit 49.5 last month, compared with 51.7 in October, marking a shift from expansion to contraction. It was the fourth contraction in six months. An index of new factory orders reached an essentially flat 50.3 in November, compared with 54.2 the month before. Shopfloor blog (03 Dec.), The Christian Science Monitor/Paper Economy blog (03 Dec.)
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CFA Institute report examines impact of internalization and dark pool trading on market quality.
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Geopolitical/Regulatory
Non-U.S. governments express concerns about Volcker rule
Representatives from governments worldwide have been meeting with Federal Reserve officials to voice concerns about the Volcker rule. Envoys from Japan, the U.K., Canada and Mexico have visited the U.S. central bank, while others have sent comment letters. The situation could pressure U.S. regulators to rein in the rule. The Wall Street Journal (tiered subscription model)/Real Time Economics blog (03 Dec.)
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Brazil adjusts trade policy as economy stalls
As Brazil's economy slows, the government is implementing trade policy that the U.S. considers protectionist. Brazil has capped vehicles imported from Mexico, tightened limits on the import of car parts and increased tariffs on many industrial products. The Washington Post (tiered subscription model) (03 Dec.)
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Experts criticize EU's proposed credit rating curbs
An EU proposal to prevent credit rating agencies from reviewing sovereign debt more than three times a year sparked concerns from market participants. The proposal is intended to limit the frequency of downgrades or warnings so governments' ability to raise money wouldn't be hindered as much. However, one market participant says the outcome could be the opposite. "I'm disappointed that politicians show such little understanding about how markets work and what credit opinions are about," said Georg Grodzki, head of credit research at Legal & General Investment Management. Financial News Online (U.K.) (subscription required) (03 Dec.)
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SEC plans to move forward on fiduciary standard
Creating a uniform fiduciary rule for financial advisers and brokers is a high priority next year for the Securities and Exchange Commission, the regulator says. The SEC's next chairman, Elisse Walter, is a longtime supporter of harmonizing rules that govern financial advisers and broker-dealers. AdvisorOne (03 Dec.)
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U.K. watchdog plans to ban products without inquiry results
The U.K. Financial Conduct Authority, which will launch in April, will temporarily bar questionable financial products, instead of wait for results of an investigation. The regulator has opened public consultation on how such bans would work. Reuters (03 Dec.)
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Financial Products
PowerShares prepares S&P 500 ETF with hedging
Trading is set to begin Thursday for an exchange-traded fund from PowerShares that provides hedged exposure to the Standard & Poor's 500 index. The PowerShares S&P 500 Downside Hedged Portfolio will use a rules-based strategy to shift fund allocation between the S&P 500, VIX futures and cash to hedge against downside risk. Benzinga.com (03 Dec.)
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