| Global News Coverage for Investment Professionals |  |
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- AIG CEO Benmosche tells board he might quit, sources say
American International Group CEO Robert Benmosche told board members that he might leave his job because of restrictions imposed by the U.S. government, sources said. He said he was "done" at a board meeting last week but relented and agreed to give the move more thought after seeing the board's shocked response, the sources said. In his three months leading AIG, Benmosche has developed a reputation for ruffling feathers with his provocative statements. The Wall Street Journal
(11 Nov.)
, MarketWatch
(10 Nov.)
- Banks jump to restructure commercial mortgages in U.S.
U.S. regulators recently announced guidelines for restructuring certain loans. Citigroup and other lenders are looking into nonperforming loans to see whether they can be restructured, which would help the banks avoid larger losses. "It's a positive all the way around," said James Smith, chief credit officer at National Bank of South Carolina. The Wall Street Journal
(11 Nov.)
- World Bank's Zoellick warns of asset bubbles in Asia
World Bank President Robert Zoellick said Asian nations, which are expected to grow faster, could face asset bubbles next year. "The good news is financial markets have broken the fall and there is a sense of revival in those markets," he said. "Most expectations are for a relatively slow growth process." But Zoellick warned that there are risks to be aware of in 2010. Governments should consider alternative approaches to interest rate increases, Zoellick said. Bloomberg
(11 Nov.)
- Fitch warns U.K. that triple-A rating is not secure
Fitch Ratings warned the U.K. that its triple-A credit rating is at risk and said the government must reduce its budget deficit to secure it. The pound fell sharply on the news but recovered when David Riley, Fitch's head of sovereign-debt rates, said he is confident the government will make progress in reducing the deficit. Industry leaders demanded action. "The AAA credit rating must be put beyond doubt and the budget returned to balance by 2015. We have called for any new administration to set out within 100 days of taking office a clear and credible path to achieve this aim," said John Cridland, deputy general director of the Confederation of British Industry. The Guardian (London)
(10 Nov.)
- EU issues with Oracle-Sun merger could strain U.S. ties
The European Commission's stance that there are competition issues to be resolved in the planned merger of Oracle and Sun Microsystems could strain ties with U.S. regulators, which cleared the merger, legal experts said. A U.S. antitrust official made a statement showing disagreement, and the EU did not care for the intervention, experts said. "The commission never likes to be seen to give in to pressure," said Alec Burnside, a lawyer at Linklaters. The commission does not seek to block the merger but raised issues to which Oracle must respond by January. The Wall Street Journal
(11 Nov.)
| Market Activity |  | |
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- Asian markets mixed on Chinese economic data
Asian-Pacific markets were mixed Monday as economic reports showed China's consumer and producer prices fell more than analysts had forecast. Japan's Nikkei 225 closed flat, South Korea's Kospi Composite gained 0.8% and Hong Kong's Hang Seng Index rose 1.6%. China's Shanghai Composite inched down 0.1%, Taiwan's Taiex increased 1% and Australia's S&P/ASX 200 climbed 0.5%. New Zealand's NZX 50 slipped 0.2%, Singapore's Straits Times Index advanced 1.2% and the Philippines' main index went up 1.7%. The Wall Street Journal
(11 Nov.)
- Fed officials forecast "tepid" recovery
In speeches made across the U.S., Federal Reserve officials warned that economic recovery will be weak and choppy. "The strength and durability of the expansion is in question. High unemployment, weak job growth and paltry wage increases are a recipe for sluggish consumer-spending growth and a tepid recovery," said Janet Yellen, president of the Federal Reserve Bank of San Francisco. Richard Fisher of the Federal Reserve Bank of Dallas said reliance on economic stimulus might eventually weigh on recovery. "The more demand you steal from the future, the less future demand there is for you to steal," he said. Reuters
(10 Nov.)
- Bank of England's forecasts indicate time for stimulus exit
Forecasts from the Bank of England are expected to say that inflation will reach its target of 2% and economic growth will return in the medium term. The predictions would support the Monetary Policy Committee's decision to inject £25 billion into the financial system rather than making a £50 billion infusion, as done previously. "It would seem that the bank is now in wind-down mode when it comes to quantitative easing -- weaning the economy and the financial markets off their life-support system," said Deutsche Bank economist George Buckley. Separately, former U.K. Finance Minister Kenneth Clarke said the central bank likely will not raise interest rates next year. Reuters
(10 Nov.)
, Bloomberg
(10 Nov.)
- APEC finance ministers seek flexible interest, exchange rates
A draft statement by finance ministers in the Asia Pacific Economic Cooperation calls for flexible interest and exchange rates as a response to the financial crisis. "We agreed that flexible prices, including exchange rates and interest rates, play a critical role in allocating resources efficiently and can facilitate the adjustments needed to support balanced and sustainable global growth," according to the statement. Economies with a large external deficit should increase savings, and those with large currency reserves should consume more, the statement says. Reuters
(11 Nov.)
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China to free up exchange rate, central banker says: Ma Delun, deputy governor of the People's Bank of China, said the government will gradually allow the yuan to appreciate in value. "Capital inflows have caused an imbalance in balance of payments. This added to the confusion over monetary policy," Ma said. "We are looking at stimulating domestic demand, and our foreign exchange policy will play an important role." Inflation was a concern, Ma said, and the exit from moderately loose money policy will be carefully compared with exit strategies of other major economies. Business Standard (India)
(11 Nov.)
- Many in financial services get laid off, pay cut -- not bonus
Huge Wall Street bonuses get publicity, but for many in the financial-services industry, there are only pay freezes, pay cuts and layoffs this year. "For us, it's not what you read in the headlines," said a Barclays employee. Analysts said Goldman Sachs, Morgan Stanley and JPMorgan Chase are likely to pay record-high bonuses this year, beating the previous high of $26.8 billion in 2007. But further down in the corporate hierarchy, for support staff who managed to hang onto their jobs, it is a different story. Bloomberg BusinessWeek
(10 Nov.)
- China's industrial production jumps 16.1% in October
China's industrial production rose 16.1% in October compared with the same month in 2008, the National Bureau of Statistics said. It was the largest increase since March 2008. Retail sales were up 16.2% year on year. And the trade surplus increased by nearly half from September, to $24 billion. "The economy is strengthening, exports will be growing very soon and inflation is bottoming out -- in this environment, the very loose policy has to change," said economist Paul Cavey of Macquarie Securities. "Interest rates and the currency may begin rising from around March." Bloomberg
(11 Nov.)
| Geopolitical/Regulatory | | |
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- Sen. Dodd's regulatory reform complicates White House's plan
The 1,136-page plan for overhauling financial regulation proposed by U.S. Sen. Christopher Dodd, D-Conn., could derail President Barack Obama's effort to get regulatory reform through Congress this year. Changes proposed by Dodd, chairman of the Senate banking committee, go beyond anything suggested by the White House and are significantly different from legislation making its way through the House. Under Dodd's approach, the Federal Reserve would lose of much of its power over banks. A banking authority would be formed to take the place of four agencies. Los Angeles Times
(11 Nov.)
, The Washington Post
(11 Nov.)
, The New York Times
(10 Nov.)
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Bernanke builds political ties to defend Fed's independence: Caught between populist anger from the left and suspicion from the right, Federal Reserve Chairman Ben Bernanke has in recent months worked hard to build personal and political ties with individual members of Congress. Bernanke was initially spurred to action by a bill from U.S. Rep. Ron Paul, R-Texas, that would direct the Government Accountability Office to conduct a wide-ranging audit of the Federal Reserve, including its bailout of companies. Nearly 300 House members and 30 senators signed on to support the bill. Bernanke said the measure would put the central bank's independence in jeopardy. The New York Times
(10 Nov.)
- EU finance ministers agree to boost capital requirement
EU finance ministers agreed to significantly increase the amount of capital financial institutions are required to retain to cover high-risk trading, but the reform must first be approved by the European Parliament and EU member states. "The council [of EU finance ministers] agreed on a general approach ... on a draft directive aimed at strengthening disclosure and capital requirements for the trading book and resecuritization instruments in the banking sector," according to a statement from the EU. Reuters
(10 Nov.)
- EU scrutinizes IASB proposal to overhaul fair-value rules
Officials from the European Commission sent a letter to the International Accounting Standards Board warning that its proposed overhaul of fair-value accounting rules could result in greater volatility in banks' accounts. Jorgen Holmquist, the commission's director general of internal markets, urged the IASB to consider changes to its proposal. "It would seem that the current draft may not yet have struck the right balance between 'fair-value' accounting and 'amortized-cost' accounting," Holmquist wrote in the letter. Financial Times (tiered subscription model)
(11 Nov.)
- First permanent EU president to be chosen Nov. 19
The EU scheduled a summit Nov. 19 to fill the highest-ranking positions created by the recently ratified Lisbon Treaty, including the region's first permanent president. The other positions scheduled for action are the chief of foreign relations and the secretary general of the council, an administrative position. EUObserver (Brussels)
(11 Nov.)
- European Commission called "narrow-minded" on finance
Most of the advice the European Commission gets on finance comes from representatives of large banks and insurers, according to a report by think tank Alter-EU. The report warns of excessive lobbying pressure from the companies. A European Parliament committee on finance endorsed the report. One committee member, Sven Giegold, called some commission thinking on finance "narrow-minded." EurActiv.com
(09 Nov.)
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- EGA looks to launch 7 ETFs tracking BRIC economies
EGA Emerging Global Shares Trust aims to launch seven exchange-traded funds focusing on Brazil, Russia, India and China. The subset includes infrastructure funds for Brazil, China and India; mid-cap funds for Brazil, China and India; and the Growing Asia Large Cap Index Fund. No single company would be allowed to account for more than 10% of the value of any one ETF. The operating expense would be 0.85% for each fund. IndexUniverse.com
(09 Nov.)
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- 2 former Bear Stearns fund managers acquitted of fraud
A federal jury in New York found two former Bear Stearns hedge fund managers not guilty of fraud and related charges in connection with the collapse of two hedge funds. Ralph Cioffi and Matthew Tannin were accused of lying to investors while the funds' values were dropping along with the subprime-mortgage market. "Jurors seem to have found that the government was trying to unfairly hold these defendants responsible for predicting the impending collapse of the economy at a time when even economists were uncertain as to where the world markets were headed," said Robert Mintz, a former federal prosecutor in private practice at McCarter & English. Bloomberg BusinessWeek/Unstructured Finance blog
(10 Nov.)
, Google/The Associated Press
(11 Nov.)
, Reuters
(10 Nov.)
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