FBI looks into possible insider trading in Heinz options | Italy likely will seek rescue if Berlusconi wins vote, bank says | EU businesses increasingly turn to capital markets for funding
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20 February 2013
CFA Institute: Financial NewsBrief
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Obama warns of harm to economy if sequester takes effect
President Barack Obama said thousands of jobs and the U.S. economy will be put in danger if the budget sequester set takes effect March 1, imposing $85 billion of spending cuts. He appealed to Republican lawmakers to back a debt-reduction plan that relies on a combination of revenues from eliminating tax breaks for the wealthy and a spending reduction. Republicans said Obama was merely trying to shift the blame for the sequester. USA Today (19 Feb.), NBC News/First Read blog (19 Feb.), The Washington Post (tiered subscription model) (19 Feb.)
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FBI looks into possible insider trading in Heinz options
The FBI said it was investigating suspicious trading in H.J. Heinz options before the announcement of the company's acquisition by Warren Buffett's Berkshire Hathaway and Brazil's 3G Capital. Options traders noticed unusual activity the day before the deal was made public. Reuters (19 Feb.)
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Italy likely will seek rescue if Berlusconi wins vote, bank says
Mediobanca, Italy's largest investment bank, said the nation likely will seek an EU rescue if former Prime Minister Silvio Berlusconi scores a comeback victory in the upcoming general election. Borrowing costs will rise if Berlusconi returns to the government and offer a "perfect excuse" to seek aid, the bank said in a report. EUObserver (Brussels) (19 Feb.)
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EU businesses increasingly turn to capital markets for funding
Responding to a downturn in lending by banks, European businesses are going to the capital markets to fill the void. Debt issued by non-financial firms rose 14% in December. Financial Times (tiered subscription model) (19 Feb.)
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South Korea leads gains as Asian-Pacific markets rise
Markets rose across the Asian-Pacific region with South Korea's Kospi, closing up 2%, posting the biggest advance. Japan's Nikkei 225 rose 0.8%. Australia's S&P/ASX 200 moved up 0.3%. Hong Kong's Hang Seng Index added 0.7%. China's Shanghai Composite gained 0.6%. Taiwan's Taiex added 0.9%. India's Sensex edged up fractionally. MarketWatch (20 Feb.), The Economic Times (India) (26 Feb.)
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Dell profit drops as sales fall in most business lines
Dell reported that its fourth-quarter profit was down 31%. Sales declined across every business line except servers and networking, which saw revenues grow 18%, the computer company said. Reuters (19 Feb.), PCWorld/IDG News Service (19 Feb.)
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Survey: Money managers expect strong stock returns
Prospects are bright for higher returns from stocks this year, but the tide is turning against medium-term government bonds, according to a Towers Watson survey of money managers. Equity returns are expected to average 7% in the eurozone and the U.S., 6% in Japan and the U.K., and 10% in China, the managers say. Pensions & Investments (free access for SmartBrief readers) (19 Feb.)
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Analysis: HFT moves into currencies, derivatives, bonds
High-frequency trading is quickly expanding beyond equity markets into bonds, derivatives and currencies, prompting opportunities as well as concerns, according to this analysis. Financial Times (tiered subscription model) (19 Feb.)
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Economics
Business lending surges as banks seek growth
U.S. businesses are inundated with so many inexpensive loans that banks' margins are coming under pressure. Commercial and industrial loans increased 16% in 2012, according to SNL Financial. A Federal Reserve survey found narrowing loan spreads and relaxed lending standards. The Wall Street Journal (tiered subscription model) (19 Feb.)
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Japanese trade deficit reaches record $17.4B
Japan's trade deficit, amid higher energy imports and a falling yen, reached an all-time high of $17.4 billion last month, the Finance Ministry says. Exports increased 6.4% compared with January 2012, suggesting global demand is recovering. Bloomberg (19 Feb.)
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Recovery is emerging in eurozone, ECB official says
European Central Bank Executive Board member Joerg Asmussen expects the eurozone to see a better first quarter as economic recovery begins to take hold. "As we see incoming indicators, I would expect the first quarter to be stronger ... We expect a very gradual recovery over the course of the year," Asmussen said. Reuters (19 Feb.)
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Analysis: Business should back Obama's call for EU trade pact
U.S. businesses should quickly express support for a free-trade agreement with the EU, as endorsed by President Barack Obama during his State of the Union address, according to The Economist. "The only reason for business not to throw everything it has behind [the Transatlantic Trade and Investment Partnership] would be if there were a bigger global trade pact to be had," the magazine notes. "Sadly, there is not." The Economist (tiered subscription model) (16 Feb.)
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Index shows slip in homebuilders' confidence
U.S. homebuilders have become less optimistic this month, according to the National Association of Home Builders/Wells Fargo Housing Market Index. "This is partly due to ongoing uncertainties about job growth and consumer access to mortgage credit," NAHB Chairman Rick Judson said. "But it's also a reflection of the fact that builders are now confronting rising costs for building materials and, in some markets, limited availability of labor and lots as demand for new homes strengthens." Los Angeles Times (tiered subscription model)/Money & Co. blog (19 Feb.), eCreditDaily.com (19 Feb.)
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Advisers expect more revenue but lack plan to achieve it
Financial advisers are confident revenue will increase this year, but only 15% have a plan for achieving that growth, according an SEI poll. Among respondents, 53% say they anticipate a revenue increase of more than 15%. Financial-Planning.com (18 Feb.)
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Reining in Risk
CFA Institute report: Investors need better disclosure of derivatives and hedging activities

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Geopolitical/Regulatory
ESMA encourages code of conduct for proxy advisers
The European Securities and Markets Authority doesn't think proxy advisers need regulation but says such advisers, who help institutional investors decide how to vote with their shares, could use a voluntary code of conduct. Industry leaders support the idea, ESMA says. Reuters (19 Feb.)
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Industry groups voice concern about MiFID provision
Several industry groups have expressed alarm at the creation of a category of organized trading facilities that aims to formalize the structure of over-the-counter trades. The groups see a closing window to influence drafting of the Market in Financial Instruments Directive and wrote to express concern that "the introduction of an OTF for equities will create a two-tier market which risks leaving small and midsize companies behind and compromise a neutral price discovery process." Financial News Online (U.K.) (subscription required) (20 Feb.)
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SEC considers tougher tech rules for trading platforms
Securities and Exchange Commission Chairman Elisse Walter is looking into rules that would force exchanges and other trading platforms to undergo a technological review to test how they respond to disruption. The proposal would convert voluntary "automation review policies" into mandatory testing. Reuters (19 Feb.), Bloomberg (19 Feb.), The Wall Street Journal (tiered subscription model)/Dow Jones Newswires (19 Feb.)
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Senate panel might call hearings on "London whale" losses
A U.S. Senate committee examining JPMorgan Chase's trading losses attributed to the "London whale" has finished its investigation and is considering holding public hearings, sources say. Senators could concentrate on what top executives knew about the losses. The Wall Street Journal (tiered subscription model) (19 Feb.)
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Financial Products
Franklin Templeton readies its first ETF
Mutual fund firm Franklin Templeton has filed a registration statement with the Securities and Exchange Commission for its first exchange-traded fund, a short-maturity bond fund. The Franklin Short Duration Government ETF would invest primarily in U.S. Treasurys and mortgage-backed bonds maturing in three years or less. IndexUniverse.com (19 Feb.)
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