European leaders travel to Chile for trade summit | Rep. Ryan rules out U.S. government shutdown in March | Fed is expected to continue bond buying for a while
28 January 2013
CFA Institute: Financial NewsBrief

Top Stories
U.S. wants trade deal with EU, negotiator says
Ron Kirk, the U.S. trade representative, told the World Economic Forum that the U.S. is ready to press ahead with a trade agreement with the EU. It would add $50 billion a year to the U.S. economy, he said. The final language will have to be written in a way that overcomes objections by U.S. farm groups, he said. The New York Times (free-article access for SmartBrief readers)/DealBook blog (27 Jan.)
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European leaders travel to Chile for trade summit
The Community of Latin American and Caribbean States hosted an EU delegation that included German Chancellor Angela Merkel, European Commission President José Manuel Barroso and European Council President Herman Van Rompuy. More than 40 world leaders and 61 delegations met in Chile to discuss a general strategic partnership between the two regions as well as finalize several free-trade agreements. The EU delegation also pushed for Brazil and Argentina to further open their manufacturing sectors. The Washington Post (tiered subscription model)/The Associated Press (24 Jan.), The Wall Street Journal (tiered subscription model) (27 Jan.)
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Rep. Ryan rules out U.S. government shutdown in March
Rep. Paul Ryan, chairman of the House budget committee, said automatic cuts in the U.S. government's spending will be allowed to take effect in March but there won't be a shutdown. "No one is talking about shutting the government down," Ryan said on the NBC program "Meet The Press." Reuters (27 Jan.), The Hill/Hill Tube blog (27 Jan.)
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Fed is expected to continue bond buying for a while
The Federal Reserve's policy committee is widely expected to leave the U.S. central bank's bond-buying program in place for a few more months. But a debate is heating up within the Fed over when it should start to scale back its stimulus efforts. Fed governors who opposed the stimulus are becoming more vocal in calling for an early end to the asset purchasing. The New York Times (free-article access for SmartBrief readers) (27 Jan.)
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BATS says it miscalculated error estimate
BATS Global Markets revised down an estimate of processing more than 400,000 trades in error over four years. The company says only 12,000 trades violated the best-quoted price, and the total damage was less than $17,000. Financial Times (tiered subscription model) (25 Jan.), The Wall Street Journal (tiered subscription model) (25 Jan.)
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Market Activity
China leads gains among Asian-Pacific markets
Most Asian-Pacific exchanges rose Monday with China posting the strongest gains and Japan falling back on profit-taking. China's Shanghai Composite rose 2.4%. Hong Kong's Hang Seng Index rose 0.4%. Taiwan's Taiex added 0.6%. Japan's Nikkei 225 closed down 0.9%. South Korea's Kospi fell 0.4%. India's Sensex was flat at midafternoon. Australia's markets were closed for a holiday. MarketWatch (28 Jan.), The Economic Times (India) (26 Feb.)
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Pfizer aims for $2.2B IPO of animal-medicine unit
Pfizer hopes to raise as much as $2.2 billion in an initial public offering of its animal-medicine unit, Zoetis. That would be the biggest IPO by a U.S. company since Facebook's. Zoetis makes drugs and vaccines for pets and farm animals. The Wall Street Journal (tiered subscription model) (27 Jan.)
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European banks work on first CLOs since crisis
Responding to investor demand for high-yielding assets, European bankers are working to offer collateralized loan obligations, which comprise corporate loans mainly for leveraged buyouts. Financial Times (tiered subscription model) (27 Jan.)
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Register by 7 February 2013 and receive a US$200 discount.
New-home sales in U.S. dropped 7.3% in December
Sales of U.S. new homes fell 7.3% in December, the Commerce Department said. Still, sales totaled 367,000 for all of 2012, the most since 2009. The 19.9% increase for the year marked the sharpest jump since 1983. Bloomberg (25 Jan.)
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Chinese industrial profit rose 17.3% in December
China's industrial profit increased 17.3% last month compared with December 2011, the National Bureau of Statistics said. It was the fourth monthly increase in a row. For all of 2012, industrial profit was up 5.3% compared with 2011. Market News International (27 Jan.)
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Japan expects 2.5% GDP growth next fiscal year
Japan's government says it expects gross domestic product to increase 2.5% in the budget year that begins in April, anticipating that stimulus measures backed by Prime Minister Shinzo Abe will increase domestic demand. The projection also anticipates recovering demand for exports. The forecast is close to an estimate the Bank of Japan made public last week. Reuters (27 Jan.)
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U.K. moves closer to triple-dip recession
The U.K. economy contracted 0.3% in the fourth quarter compared with Q3, leaving the country on the verge of its first triple-dip recession. Economists surveyed by Bloomberg News had expected a 0.1% decline. Britain has recovered about half of the economic output lost during the Great Recession. Bloomberg (25 Jan.), The Guardian (London) (26 Jan.)
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Uncertainty hits foreign investment in Venezuelan oil
Venezuelan President Hugo Chavez's battle against cancer has created a political vacuum, sources say, reducing investment in the oil industry. The government hasn't announced a line of credit from China since April. Indian and Russian oil companies have suspended planned investment in Venezuela. Bloomberg (25 Jan.)
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Hybrid advisers top fee-only ones in asset growth
Assets under management of dually registered financial advisers, who can accept fees and commission, are increasing faster than those of fee-only advisers, according to Cerulli Associates. Hybrid advisers' assets increased 19.1% in 2012, while fee-only advisers' assets expanded 14.7%. (23 Jan.)
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Germany works to regulate high-frequency trading
German Chancellor Angela Merkel's coalition government is expected to decide Monday whether to force high-frequency traders to register with exchange regulators and disclose algorithms. Amendments to draft law would also prohibit traders from obtaining price information when not actually planning to trade. Reuters (27 Jan.)
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Shadow banking might be next regulatory target
Mark Carney, head of the Financial Stability Board and incoming governor of the Bank of England, emphasized at the World Economic Forum that regulation of shadow banking is still on the agenda. He acknowledged that while it might have become a "forgotten bit of reform," it will still be addressed. "Shadow banking, over-the-counter derivatives; these are the areas that absolutely amplified the last crisis and will do so again unless we complete our agenda," Carney said. An FSB proposal is expected ahead of a Group of 20 meeting this fall in Russia. Reuters (26 Jan.)
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Weber reportedly calls for industrywide Libor settlement
UBS Chairman Axel Weber thinks an industrywide settlement of investigations into manipulation of the London Interbank Offered Rate would be good for the sector, sources say. UBS has agreed to pay $1.5 billion to settle Libor-rigging allegations. Reuters (25 Jan.)
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SEC is targeting weak trading controls, Khuzami says
The Securities and Exchange Commission is "very focused" on ensuring that exchanges and traders that experience system or programming failure suffer consequences, Enforcement Director Robert Khuzami says. "You are going to see a variety of cases in this area," said Khuzami, who is poised to leave the agency soon. "It may not be an intent-based violation, but the consequences are real and harmful in terms of investor losses and market impact." Bloomberg Businessweek (25 Jan.)
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Financial Products
IShares aims to launch momentum-driven ETF
BlackRock's iShares filed a registration statement with the Securities and Exchange Commission for an equity exchange-traded fund pursuing an index-linked momentum strategy. The iShares MSCI USA Momentum Index Fund would buy stocks in the MSCI USA Index that have potential for above-market momentum. (25 Jan.)
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