HP takes $8.8B writedown on Autonomy investment | French rating cut prompts EFSF to postpone euro offering | U.S. housing starts hit highest level since July 2008
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21 November 2012
CFA Institute: Financial NewsBrief
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HP takes $8.8B writedown on Autonomy investment
Hewlett-Packard said it discovered that it was the victim of "serious accounting improprieties" in its $11 billion acquisition of the British software firm Autonomy, and will take an $8.8 billion writedown on the investment. Former Autonomy CEO Mike Lynch rejected the accusation. Reuters (21 Nov.), Bloomberg (20 Nov.), The Telegraph (London) (tiered subscription model) (20 Nov.)
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French rating cut prompts EFSF to postpone euro offering
The European Financial Stability Facility had planned to issue a three-year euro benchmark bond this week but has put its plan on hold after Moody's Investors Service downgraded France's credit rating. "The timing of the EFSF three-year euro offering is currently subject to a technical issue related to EFSF's Deeds of Guarantee," Chief Financial Officer and Deputy CEO Christophe Frankel said. "EFSF will look to bring its new three-year euro benchmark offering once the issuer is able to satisfy the Deeds of Guarantee language." International Financing Review (free content) (20 Nov.)
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U.S. housing starts hit highest level since July 2008
U.S. housing starts rose 3.6%, to an annualized rate of 894,000 last month, the Commerce Department said. Building permit applications for apartments declined, but was the highest for single-family homes since July 2008. Overall, permits for future construction were down 2.7% from September, a smaller decline than most economists expected. Bloomberg (20 Nov.), Reuters (20 Nov.), Shopfloor blog (20 Nov.)
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Lawsuit says Credit Suisse misled investors about RMBS
Eric Schneiderman, attorney general for New York state, is suing Credit Suisse Group over claims that the bank misled investors about the quality and monitoring of loans in residential mortgage-backed securities. The complaint "recycles baseless claims from private lawsuits," according to Credit Suisse, which said it plans to defend itself in court. CNNMoney (20 Nov.), Bloomberg (21 Nov.), Reuters (20 Nov.), The Wall Street Journal (tiered subscription model)/Dow Jones Newswires (20 Nov.)
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SAC Capital exec accused of $276M insider-trading scheme
U.S. prosecutors charged Mathew Martoma, a former portfolio manager at CR Intrinsic, a unit of SAC Capital Advisors, with what they said is the largest insider-trading scheme ever charged. They said he received profit and avoided losses, a combination worth more than $276 million by using information leaked by a doctor relating to clinical trials of an Alzheimer's drug by Elan and Wyeth. The New York Times (tiered subscription model)/DealBook blog (20 Nov.), TheStreet.com (20 Nov.), Bloomberg (20 Nov.)
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Market ActivityAdvertisement
Some Asian-Pacific markets advance after China rebounds
Several Asian-Pacific markets rebounded Wednesday after investors were encouraged by a wave of buying in China's Shanghai Composite, which rose 1.1%. Hong Kong's Hang Seng Index increased 1.4%. Japan's Nikkei 225 advanced 0.9%. Australia's S&P/ASX 200 edged down 0.4%. Taiwan's Taiex lost 0.8%. South Korea's Kospi gave up 0.3%. India's Sensex was up 0.7% at mid-afternoon. MarketWatch (21 Nov.), The Economic Times (India) (26 Feb.)
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French bond rally continues despite Moody's downgrade
Government bond buyers are paying little attention to Moody's Investors Service's downgrade of France's bond rating from Triple-A to Aa1. The strong demand has driven yields to their lowest level since the euro was launched nearly 14 years ago. The Wall Street Journal (tiered subscription model) (20 Nov.)
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Economics
Eurogroup remains deadlocked over Greek aid
A meeting of eurozone finance ministers that lasted nearly 12 hours ended Wednesday morning without an agreement on more aid for Greece. Eurogroup Chairman Jean-Claude Juncker said ministers will try again Monday. He appeared optimistic about the outcome, but International Monetary Fund Managing Director Christine Lagarde was more cautious with her comments. The Washington Post (tiered subscription model)/The Associated Press (21 Nov.), Kathimerini (Greece)/Reuters (21 Nov.), Reuters (20 Nov.)
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Japan seen sliding into recession
A diplomatic dispute with China and weakening global demand for Japanese products hurt Japan's exports, which fell for the fifth consecutive month in October, reaching a three-year low. Economists said Japan likely is in recession. Reuters (21 Nov.), Bloomberg (21 Nov.)
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Bernanke backs Fed's move to economic thresholds
Federal Reserve Chairman Ben Bernanke said he supports a proposal that the U.S. central bank announce numerical "thresholds" linking its monetary policies to unemployment and inflation. "It does have the advantage that it would help to distinguish between our anticipation for how the economy is going to evolve, and how we will react to those conditions," he said. Reuters (20 Nov.)
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U.S. deficit is decreasing at record speed
During the past three years, the U.S. government's deficit measured as a percentage of gross domestic product has declined at the fastest rate since World War II, according to the Office of Management and Budget. The Center on Budget and Policy Priorities calculates that, not counting budget cuts scheduled to take effect Jan. 1, nondefense discretionary spending is on track to reach 2.7% of GDP, well below a 30-year average of 3.9%. Investor's Business Daily/Capital Hill blog (20 Nov.)
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Analysis: Brazil's Petrobras gets back to basics
Graca Foster, head of Petroleo Brasileiro since February, is working to overcome political meddling by the government and to put the company back on track to profitability, according to The Economist. "Foster says the board -- which is dominated by government-appointed directors -- now understands that the firm needs to concentrate on pumping oil if it is to generate the revenues to invest in job-creating refineries and terminals," the magazine notes. "She rejects the idea that Petrobras is run for Brazil's good, rather than its own." The Economist (free content) (17 Nov.)
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Advisers prepare clients for gift-tax changes
Financial advisers are scrambling to put together plans for clients who haven't arranged gifts to be made before a gift-tax exemption is decreased next year. With six weeks left until 2013, there is still time to set up simple trusts that give high-net-worth individuals more control over gifts to heirs than simply handing them a check, advisers say. Reuters (20 Nov.)
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Geopolitical/Regulatory
Australia aims to curb computer trading
The Australian government rolled out measures to rein in automatic trading. Among the rules are so-called kill switches, pricing restrictions for dark-pool trading and stricter data reporting. The kill-switch measure is designed to protect investors from volatility that can stem from superfast, computer-driven transactions. Reuters (20 Nov.), Financial Times (tiered subscription model) (20 Nov.), The Wall Street Journal (tiered subscription model) (20 Nov.)
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ESMA pushes common rulebooks across EU
Common rulebooks for banking, insurance and securities markets should extend across the EU, instead of only the eurozone, European Securities and Markets Authority Chairman Steven Maijoor said, noting that "in securities markets, we hardly ever talk about eurozone and not eurozone." Maijoor's remarks come as efforts to establish a banking union raise fears of divisions along national lines or between the eurozone and nations outside. The Wall Street Journal (tiered subscription model)/Dow Jones Newswires (20 Nov.)
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Europe's 2013 bank stress tests will center on Basel III
Next year will bring an assessment of European banks' progress in implementing Basel III capital rules. "We need to manage a shift of focus from a one-off recapitalization effort to developing the path for full implementation of Basel III standards," said Andrea Enria, chairman of the European Banking Authority. "We are structuring the stress test of next year along these lines." Reuters (20 Nov.)
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Financial Products
Guardian adds investment options for retirement platforms
Guardian Insurance & Annuity added investment options to two qualified retirement plans. The Guardian Choice fund platform gives investors 33 additional options, and participants in the Guardian Advantage fund have 27 more choices. All of the options were screened by SWBC Investment Advisory Services. PlanAdviser.com (19 Nov.)
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Ethics
Analysis: Libor manipulation evolved into common practice
By steps and stages, manipulation of the London Interbank Offered Rate to profit on derivatives had become standard practice by the mid-2000s, industry experts say. However, the tale of how the practice grew began in the 1990s, when CME Group's popular Eurodollar contract provided a forum for betting on interest rates. Reuters (20 Nov.)
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Editor's Note
Financial NewsBrief will not publish Thursday and Friday
In observance of Thanksgiving in the U.S., Financial NewsBrief will not be published Thursday and Friday, Nov. 22 and 23. Publication will resume Monday, Nov. 26.
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