| Global News Coverage for Investment Professionals |  |
- G-20's stimulus stance drives Dow to highest close this year
The Dow Jones Industrial Average soared to its highest close this year on news that the richest countries will continue to prop up their economies with government spending. The Group of 20 finance ministers released a statement pledging to continue stimulus programs and hold interest rates at historic lows. The Dow's 2% increase was joined by a 2.2% climb for the Standard & Poor's 500 index and a 2% gain for the Nasdaq composite. European stocks followed the trend, with stock indexes rising in London, Paris and Frankfurt. Los Angeles Times
(10 Nov.), Bloomberg Businessweek
(09 Nov.), The Washington Post
(10 Nov.)
- Report: FHA running out of cash; bailout could come soon
The Federal Housing Administration has drawn huge amounts of money from its reserves, and its shaky financial condition could soon trigger an automatic taxpayer bailout, according to The Washington Post's review of the agency's finances. The FHA is a crucial supplier of funding for home mortgages in the U.S., principally through its mortgage insurance. By Sept. 30, the agency's reserves had fallen to less than the amount required by law, according to an FHA audit. The Washington Post
(10 Nov.)
- Court filing says Barclays paid too little for Lehman
A court filing contends that Barclays paid $5 billion too little for Lehman Brothers' investment-banking arm. There are claims that Lehman executives, who knew they would work at Barclays after Lehman's bankruptcy, undervalued securities Barclays purchased to take control of the unit. But a former Lehman executive, now at Barclays, has an explanation. "I was aware that ... Barclays was going to purchase a substantial block of assets for less than the amount that we had on our books to reflect a sort of bid offer that reflected both the size of the purchase, as well as inherent volatility in the market, which was significant that week," said Ian Lowitt, former chief financial officer at Lehman. NYTimes.com
(09 Nov.)
- AIG might be able to repay loans to U.S., Moody's says
Moody's Investors Service said American International Group might be able to repay money it borrowed from the U.S. government. Moody's cited the fact that the government is working closely with AIG in the restructuring process. "The slower approach to restructuring could help AIG to generate more favorable values from its business portfolio than would be the case under rushed asset sales," Moody's said. Bloomberg
(10 Nov.)
- Oil running out faster than IEA data show, official says
An official of the International Energy Agency said the world is much closer to running out of oil than the agency's statistics had shown. Under pressure from the U.S., the IEA distorted statistics to show that more oil would be available, the official said. "The IEA in 2005 was predicting oil supplies could rise as high as 120 million barrels a day by 2030, although it was forced to reduce this gradually to 116 million and then 105 million last year," the official said. "The 120 million figure always was nonsense, but even today's number is much higher than can be justified, and the IEA knows this." The Guardian (London)
(09 Nov.)
- Cadbury's board rejects Kraft's takeover offer again
Kraft Foods surprised analysts by not sweetening its $16.7 billion offer for U.K. confectionary company Cadbury. Cadbury's board of directors promptly rejected the offer, as it did with previous bids. With that, Kraft took the proposal directly to shareholders. "The repetition of a proposal which is now of less value and lower than the current Cadbury share price does not make it any more attractive," said Roger Carr, the firm's chairman. NYTimes.com
(09 Nov.)
- EU says Oracle's Sun buyout might violate antitrust rules
The European Commission notified Oracle that its proposed $7.4 billion acquisition of Sun Microsystems might violate EU antitrust laws. The commission's objection does not automatically prompt an antitrust investigation, although it might put pressure on Oracle to offer concessions. The EU said it is primarily concerned that Oracle's acquisition of Sun's MySQL database software might reduce competition. Bloomberg
(10 Nov.), CNET
(09 Nov.)
- Increased funding costs to challenge banks, study finds
As banks worldwide seek to refinance trillions of dollars in short-term debt that will expire in the next few years, they will face increased funding costs, according to a study by Moody's Investors Service. The U.S. and the U.K. will be hit especially hard with the flood of expiring debt, according to the study. "The key question is to what extent these banks will be able to pass on increased funding costs to customers as opposed to being forced to reduce margins or manage down their balance sheets," Moody's analysts wrote in the report. Financial Times (tiered subscription model)
(09 Nov.), Bloomberg
(09 Nov.)
- India's plan to sell assets sparks bank competition
The Indian government plans to sell shares in state-run companies, and Barclays, JPMorgan Chase and Bank of America Merrill Lynch are vying for that business. "The competition for this business is always extremely fierce," said Kevan Watts, country head for Bank of America. "It is a big opportunity: We are talking to many people in the government about how we can help with the disinvestment process." Bloomberg
(09 Nov.)
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- Appeal of gold broadens as U.S. dollar weakens
The appeal of investing in gold is growing as the U.S. dollar weakens, analysts said. Investors bid up the price Friday to a record level, more than $1,100 per ounce, as investors fear economic conditions will worsen. "It's a structural shift we're seeing on the investing side, from Asian central banks right down to individual investors buying ingots and coins," said Suki Cooper, a strategist for precious metals at Barclays Capital. NYTimes.com
(07 Nov.)
- Survey: Economists see stronger U.S. growth in 2010
Economists polled by Blue Chip Economic Indicators forecast higher GDP growth next year in the U.S. The economists said growth should hit 2.7%, up from an October prediction of 2.5%. "The major uncertainty surrounding the outlook for growth next year involves the degree to which private demand accelerates as the positive contributions to GDP from reduced business inventory liquidation and fiscal stimulus play out," according to the survey. Reuters
(10 Nov.)
- ECB to review financing operations, exit strategy
Juergen Stark, executive board member of the European Central Bank, said policymakers will review financing operations at their meeting in December. The ECB has an exit strategy in place and will begin withdrawing from stimulus measures and other support when inflation risk increases and the banking sector improves, Stark said. "Should money-market conditions improve before upside risks to price stability emerge, the enhanced credit support can be gradually withdrawn before we start changing policy rates," Stark said. Forbes/Reuters
(09 Nov.)
| Geopolitical/Regulatory | | |
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- Sen. Dodd to reveal financial-reform legislation
Senate banking committee Chairman Christopher Dodd plans to introduce his financial-reform bill Tuesday. The bill differs from the Obama administration's original proposal in that it seeks to establish a single financial regulator, removing power from the Federal Reserve. Establishment of the Consumer Financial Protection Agency is included, and the bill also seeks to make the Securities and Exchange Commission fund itself. Reuters
(10 Nov.)
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Sen. Dodd's regulatory revamp includes self-funded SEC: Senate banking committee Chairman Christopher Dodd's legislation to revamp financial regulation includes a wide range of measures, with much of the language taken from legislation introduced by U.S. Sens. Charles Schumer, D-N.Y., and Maria Cantwell, D-Wash., said a source close to Schumer. The bill also includes a measure to allow the Securities and Exchange Commission to retain fees it collects so it can fund itself. The Wall Street Journal (tiered subscription model)
(09 Nov.)
- Bills would limit size of financial institutions
U.S. Rep. Paul Kanjorski, D-Pa., is working on an amendment to legislation before Congress that would allow the government to limit the size, complexity and risk of financial institutions. His proposal is one of a few that Democrats are advancing that are designed to protect the broader economy from the collapse of a large firm. The proposals offer a range of solutions, including a return to banning mergers between investment and commercial banks. The Wall Street Journal (tiered subscription model)
(10 Nov.), Reuters
(06 Nov.), Bloomberg
(06 Nov.)
- Sources: U.K.'s Miliband declines EU foreign-policy post
U.K. Foreign Minister David Miliband declined to become the EU's first high representative for foreign policy, sources said. Because a politician who is left of center is being sought, many considered Miliband an ideal candidate. But he prefers to remain in Prime Minister Gordon Brown's Cabinet, the sources said. EurActiv.com
(09 Nov.)
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