Dec 21, 2012
NYT Business Afternoon Update (December 21, 2012).: Retailers Try to Adapt to Device-Hopping Shoppers
Online merchants are trying to figure out how to tie together the several methods a customer may use on the way to buying something.
Stocks slumped, depressed by the setback late Thursday in Washington on progress toward a budget deal.
News Corporation's regulatory filing gave potential investors a peek at the challenges facing the new entity.
The Food and Drug Administration concluded that a genetically engineered salmon would have "no significant impact" on the environment.
A federal grand jury in New York returned an indictment Friday against Mathew Martoma, who was previously charged in what prosecutors have called the "most lucrative" insider trading scheme ever.
DealBooK P.M. Edition (December 21, 2012).: Breakup Fees in NYSE's Deal With ICE Show Lessons From Past
BIV | Today's Business News (December 21, 2012.2): Exclusive: Government deliberately left LDB bidders in dark over privatization cancellation.
Politics and Policy
Retail and Manufacturing
MarketWatch | Wall Street at Close Report (December 21, 2012).: U.S. stocks slide as budget hopes dim
By Kate Gibson, MarketWatch
NEW YORK (MarketWatch) — U.S. stocks fell sharply on Friday, denting weekly gains, after a Republican proposal to avert the fiscal cliff did not find support, reducing hopes for a budget deal before 2012 ends.
”If there is any policy maker that is not taking the fiscal cliff seriously, he should check with the Congressional Budget Office or check with any economist you can name, because it is very serious and it will lead to a recession if we go off the cliff,” said Hugh Johnson, chairman of Hugh Johnson Advisors LLC. “It’s for real.”
The CBO forecasts a recession in the first half of next year should the White House and Congress fail to reach a deal.
After falling as much as 189 points, the Dow Jones Industrial Average DJIA -0.91% shed 120.88 points, or 0.9%, at 13,190.84, a level that has it up 0.4% from the week-ago close.
All but two of the Dow’s 30 components finished in the red, led by Bank of America Corp. BAC +0.27% , down 2%.
Tallying a 1.2% weekly gain, the S&P 500 Index SPX -0.94% lost 13.54 points, or 0.9%, at 1,430.15, with consumer shares hardest hit among its 10 major sectors.
The Nasdaq Composite Index COMP -0.96% retreated 29.38 points, or 1%, at 3,021, leaving it up 1.7% on the week.
For every share rising, more than three fell on the New York Stock Exchange, where nearly 1.9 billion shares traded.
Composite volume topped 4.8 billion.
Shares of Research In Motion Ltd. RIMM -1.83% fell almost 23% a day after the company’s fiscal-third-quarter results, which beat estimates, but left investors fretting about changes to its high-margin services business and costs tied to the approaching launch of its new BlackBerry platform.
Friday’s economic data was positive, especially a 0.7% November rise in orders for durable goods, according to Johnson. Read: Durable-goods orders jump in November.
Still, investors would bypass the report, because the “focus is so overwhelmingly on Washington,” he said.
Those fiscal-cliff concerns found their way into a gauge of consumer sentiment, which fell in December. The University of Michigan-Thomson Reuters consumer-sentiment index declined to a final December reading of 72.9, the lowest level since January. Read: Consumer sentiment sinks in December.
House Speaker John Boehner on Friday said House members, the Senate and President Barack Obama must continue work to avert the looming fiscal cliff of tax increases and spending cuts.
The Ohio Republican spoke a day after he dropped a proposal to allow higher taxes on yearly income of $1 million and up, because he did not have enough votes to pass it, with the House then going into recess. There are plans to return Dec. 27 in the event there is some sort of deal to consider.
“It’s hard to imagine that we could have policy makers in elected office that are such ideologues in this day and age. But we do have them and shame on them,” commented Johnson.
The president and some legislators understand the importance of not going over the fiscal cliff, so “there’s a chance we forge an agreement in the Senate which will pass the House, not with the hardened Republican caucus, but with a consortium of Democrats and Republicans,” he added.
President Obama was expected to give a fiscal-cliff statement at 5 p.m. Eastern time.
Kate Gibson is a reporter for MarketWatch, based in New York.
|ADVFN III||World Daily Markets Bulletin|
Friday, 21 December 2012
|London Market Report|
Investors take profits ahead of Christmas
techMARK 2,126.82 -0.24%
FTSE 100 5,939.99 -0.31%
FTSE 250 12,362.38 -0.49%
While stocks managed to stage a small comeback in afternoon trade, the UK market finished the week on a dull note, with ‘fiscal cliff’ fears dampening the festive cheer ahead of Christmas.Economic data fails to give markets a boost
“Traders have spent much of the day taking profits ahead of the weekend as the last full trading week of 2012 draws to a close,” said senior sales trader Toby Morris from CMC Markets.
“With uncertainty about the outcome of the fiscal cliff talks higher than ever after the fiasco of last night’s cancellation of the Republican vote, investors have adopted a safety first approach, with last night a stark reminder that the current political uncertainty from the US can still lead to erratic moves in a thin market.”
Last night, Republican House speaker John Boehner was forced to withdraw his “Plan B” for dealing with the fiscal cliff due to a lack of support in the House of Representatives.
Boehner had thought that the Republican majority in the lower house would be enough to push through his proposal to avoid the impending automatic spending cuts and increase in taxes despite opposition from President Barack Obama and Democrats.
However, hard-line Republicans refused to support concessions on tax increases that left Boehner’s plan with insufficient votes to push the measure through even through just the House.
Speaking at a news conference today, Boehner said he would not walk away from negotiations over the fiscal cliff.
Further dampening the mood this morning was the news that UK gross domestic product (GDP) in the third quarter expanded at a 0.9% rate from the preceding three months. This final estimate was worse the initial 1% increase forecasted.
UK public sector net borrowing was weaker than expected in November, fuelling fear that Britain is moving closer to losing its treasured AAA credit rating. Borrowing came in at £17.5bn in November, £1.2bn higher net borrowing than a year before and above expectations of £16bnFTSE 100: Miners and financials in the red
Two surveys of consumer confidence also disappointed this morning: the GfK consumer confidence survey in the UK fell from -22 to -29 in December, missing the -25 forecast; while the forward-looking German GfK survey fell from 5.8 to 5.6 for January, missing the 5.9 estimate.
Meanwhile, the Chinese MNI flash business sentiment indicator fell from 53.78 to 52.23 in November.
Miners and financial stocks were bearing the brunt of the bearish mood on markets on Friday as investors cut positions in riskier assets on concerns over the US economy. However, Randgold Resources was bucking the trend as gold prices advanced.
Banks were under the weather after a new report said that government plans to create a ‘ring fence’ between banks’ retail and investment operations fall well short of what is required. The Parliamentary Commission on Banking Standards has called on the government to "electrify" the ring fence to stop banks taking advantage of loopholes. Lloyds and Barclays were both under the weather.FTSE 250: Regus gains after acquisition
ENRC was being weighed down by a ratings cut by Goldman Sachs to 'neutral' this morning. Meanwhile, insurance giant Aviva fell after selling Aviva USA Corporation - its life, annuities and asset management business - to life insurance holding company Athene Holiding for $1.8bn.
Xstrata was broadly flat despite saying that it is set to boost ore production by a further third at its Lady Loretta mine in north-west Queensland, Australia.
BAE Systems fell as investors shrugged off a £2.5bn deal with the government of Oman to supply of Typhoon and Hawk Advanced JetTrainer aircraft. This comes two days after the company warned that full-year underlying earnings could be hit by three pence per share if it cannot agree on pricing on a large Saudi Arabian Typhoon aircraft contract.
Water providers Severn Trent, United Utilities and Pennon were making gains after regulator Ofwat backed down over changes to water company licences.
Carnival was a high riser too, rebounding after a heavy fall yesterday when the cruise company reported a fall in full-year revenues after what it called its most challenging year ever.
Office space provider Regus gained after launching a fresh bid for smaller peer MWB Business Exchange (MBE) at a much lower price, a year and a half after it withdrew its initial offer.
Through its subsidiary Marley Acquisitions Limited (MAL), Regus is making a cash offer for 61.576p per share of MBE, valuing the company at £40m. Back in May 2011, Regus had made an indicative offer for MBE at 92.36p per share, valuing the company at a much higher price of £60m.
Jefferies said in a research report: "We view this as a strategically sensible transaction for Regus, cementing its leading market position in the UK serviced office market, with considerable potential cross-selling synergies."
High Street betting shop William Hill was under the weather after Numis Securites downgraded its rating for the stock to ‘reduce’.
In contrast New World Resources was on the up, shrugging off a downgrade from Goldman Sachs to ‘sell’.
BBC NEWS | Business (December 21, 2012).: Bank reform plans should be tougher, Banking Commission says
Bank reform plans should be tougher, Banking Commission says
Continue reading the main story
Government plans to ring-fence the banks - protecting retail banking from the riskier investment side - "fall well short of what is required", a report has warned.The Banking Standards Commission wants the government to "electrify" the fence so banks won't try to "game" the rules.
That means regulators having the power to fully break up a bank if it does not follow the ring-fence proposals.
The bank reforms will go before Parliament early next year.
The Parliamentary Commission on Banking Standards, known as the Banking Commission for short, was asked by Chancellor George Osborne to study the draft version of the government's Financial Services (Banking Reform) Bill.
This follows last year's recommendation by the Independent Commission on Banking, which was led by Sir John Vickers.
Sir John concluded that ring-fencing was the best way to protect "core" retail banking activities from any future investment banking losses, such as were seen during the global financial crisis.
The government's proposed bill hinged on three main aspects:
- ring-fencing or protecting retail banking
- ensuring that bank losses fall on bank creditors and not depositors or taxpayers
- making banks better able to absorb losses
"The proposals as they stand [in the Bill], fall well short of what is required," he said.
"What we've done with the Commission proposals is to put back some of that stiff separation into the ring-fence and then make clear that the key problem - that banks are going to be at the ring-fence all the time, which will be a nightmare for regulators - needs to be dealt with," he told the Today programme.
"And the way to do that is to say to banks 'If you don't try to game this ring-fence we won't see the need to separate you.'
"Then they will have a massive incentive then to get to a point where banks have certainty [not to be broken up]."
"That is why we recommend electrification. The legislation needs to set out a reserve power for separation - the regulator needs to know he can use it."
Ring-fencing explained Under the draft bill, ring-fencing would ensure that retail services of a struggling lender can be carried on independently and smoothly even if authorities let the rest of the group fail.
Continue reading the main story
Crisis jargon buster
Use the dropdown for easy-to-understand explanations of key financial terms:
A recommendation of the UK's Independent Commission on Banking. Services provided by the banks that are deemed essential to the UK economy - such as customer accounts, payment transfers, lending to small and medium businesses - should be separated out from the banks other, riskier activities. They would be placed in a separate subsidiary company in the bank, and provided with its own separate capital to absorb any losses. The ring-fenced business would also be banned from lending to or in other ways exposing itself to the risks of the rest of the bank - in particular its investment banking activities.
For example, in the case of a failing banking group, regulators could sell off its core activities - thereby maintaining continuity for depositors - while allowing the rest of the organisation to go through a bankruptcy process.
Thirdly, banks are to hold a sufficient capital buffer - as outlined by global regulators - which means that if banks do fail, losses can be absorbed by shareholders and other creditors rather than the taxpayer.
Under the draft legislation, the Treasury would have the authority to decide which banks ring-fencing should apply to, as well as specific activities to be undertaken, within ring-fenced banks.
The Prudential Regulation Authority, which will become the UK's regulator for deposit-taking institutions in April under the Bank of England, would have the power to ensure the ring-fenced bank to carry on with its business.
Mr Tyrie has also called on independent reviews of the effectiveness of the ring-fence proposals across all banks to take place at least once every four years.
"Remember at the moment banks will probably behave but in the long run they will find a way to gaming the ring-fence if they don't have a strong disincentive to do so," he told the BBC.
"In 10-20 years time... people will get complacent. At that point it's crucial to have a set of rules to keep banks well away from testing this ring-fence."
Anthony Browne, the chief executive of the British Bankers' Association (BBA), welcomed the report, but warned that uncertainty over banks' prospects could have a negative impact on their ability to lend.
Ed Balls, Labour's shadow chancellor said: "As Ed Miliband and I said at the Labour conference this year, if the letter and spirit of the Vickers proposals are not delivered and we do not see cultural change in our banks, full separation will be necessary.
"The Commission is clearly right to say the jury is still out and to demand a reserve power for full separation of the banks."
The Commission's report comes a month after Mr Osborne urged its members not to send the government's proposed reform "back to square one" by "unpicking" the consensus on how it should be carried out.
A Treasury spokesman said on Thursday evening: "The government is committed to reforming the financial sector and putting in place a regulatory structure that learns the lessons of the past and protects taxpayers in the future."
"It has been committed to building consensus and has consulted widely on these reforms over the last two and half years. The Banking Reform Bill is the next step in that.
"The government is grateful to the Parliamentary Commission on Banking Standards for its scrutiny of the draft bill and notes that it, 'welcomes the government's action to bring forward legislation to implement a ring-fence'."
The spokesman added that the government would study the report and respond in detail when the Financial Services (Banking Reform) Bill is formally introduced to Parliament early next year.
The Commission explained
- The Parliamentary Commission on Banking Standards was appointed in July following the Libor scandal and other episodes that damaged the reputation of banks in the UK
- It includes MPs and peers and is chaired by Andrew Tyrie, who also heads the House of Commons' Treasury Committee
- Members include the next Archbishop of Canterbury, Justin Welby
- It heard evidence from major figures in the banking sector
- Evidence included a warning from RBS boss Stephen Hester that ring-fencing banks' retail and investment arms could increase the risk of institutions needing to be rescued
- But Barclays chief executive Antony Jenkins told the commission that his bank was "embracing" the ring-fencing proposal
- The commission has also heard from Paul Volcker, a former chairman of the US Federal Reserve, about his US proposals to ensure bank safety