Jun 18, 2013
China stocks fall, Japan jumps, ahead of Fed meet Chinese and South Korean stocks fall on caution ahead of the Federal Reserve’s monetary-policy decision later in the day, while Japanese shares rally on a weaker yen and strong overnight gains on Wall Street.
News Corp. print assets start trading in Australia LOS ANGELES (MarketWatch) -- Shares of New Newscorp Inc. fell 15 Australian cents to 14.85 Australian dollars ($14.04) Wednesday as they began trading in Sydney. The company holds the publishing assets that were spun off by media conglomerate News Corp. More than 4.6 million New Newscorp shares were traded in the first 15 minutes of their debut, according to FactSet data. News Corp. , whose entertainment business assets will be owned under the 21st Century Fox name, fell 7.8%, but were off session lows. The split between the two companies will be effective on June 28. News Corp.'s properties include MarketWatch.com, the publisher of this report.
Uncertainty at Fed Over Its Stimulus Plans and Its Leadership / U.S. Home Construction Rose in May: The New York Times: ALERTS FGC BOLSA - FGC FINANCIAL MARKETS, June 18, 2013.
FGC BOLSA- FGC FIN
Compiled: June 18, 2013 10:09:47 PM
By BINYAMIN APPELBAUM
President Obama suggested late Monday that he was likely to nominate a new Fed chairman this year. Mr. Bernanke’s second four-year term ends in January.
U.S. Home Construction Rose in May
By THE ASSOCIATED PRESS
Housing starts rose 6.8 percent in May, and builders sought permits to build-single family homes at the fastest pace in five years.
New Effort to Quantify ‘Social Cost’ of Pollution: The New York Times: ALERTS FGC BOLSA - FGC FINANCIAL MARKETS; June 18, 2013
FGC BOLSA- FGC FIN
Compiled: June 18, 2013 08:38:27 PM
New Effort to Quantify ‘Social Cost’ of Pollution
By MATTHEW L. WALD
Supporters of the idea acknowledge the difficulties of trying to quantify pollution which perhaps helps to explain why there is little hope of consensus now on climate policy.
Making the Case for a Little More Inflation: The New York Times: ALERT FGC BOLSA - FGC FINANCIAL MARKETS; June 18, 2013.
FGC BOLSA- FGC FIN
Compiled: June 18, 2013 06:09:08 PM
Economic SceneMaking the Case for a Little More Inflation
By EDUARDO PORTER
Some economists are arguing for inflation above the long-favored 2 percent limit, as a way to jump-start the economy.
U.S. stocks rally, applauding Fed in advance: Wall Street at Close Report by MarketWatch; June 18, 2013.
By Kate Gibson, MarketWatch
NEW YORK (MarketWatch) — U.S. stocks rallied on Tuesday, with a two-day advance wiping out last week’s losses, as Wall Street gave an advance thumbs up to the upcoming Federal Reserve monetary-policy announcement.
“You can bet your last dollar, [Fed Chairman Ben Bernanke] is going to try to assure the markets that the Federal Reserve is not going to taper anytime soon,” said Hugh Johnson, chairman of Hugh Johnson Advisors, referring to the timing and pace of potential reduction in asset purchases by the Fed, which is currently buying $85 billion in bonds each month.
The Federal Open Market Committee begun its two-day meeting on Tuesday, with a monetary-policy announcement and Bernanke’s news conference due on Wednesday. Read: Three pitfalls the Fed faces on path to tapering.
“Folks are feeling a little confident that Bernanke might be able to settle down some of the concerns when they meet and he has his press conference,” said Bob Pavlik, chief market strategist at Banyan Partners.
Bloomberg Enlarge Image
Marking a sixth consecutive triple-digit move, the Dow Jones Industrial Average DJIA +0.91% rose as much as 160 points, and finished up 138.38 points, or 0.9%, at 15,318.23, with General Electric Co. GE +2.36% pacing gains that included all but two of its 30 components.
“The Fed meeting is the biggest issue, yesterday and today,” said Johnson of the two-session rally. That said, equities are likely to give up some recent gains should Bernanke succeed in reassuring investors, “because what he is going to say is going to be fully priced into the market,” he said. Read Market Extra on how stocks and other asset classes could react.
The S&P 500 index SPX +0.78% climbed 12.77 points, or 0.8%, to 1,651.81, with industrials the best performing of its 10 major sectors.
Steps Fed should take next
As the Fed starts its two-day meeting, questions arise over how the Fed should handle tapering its quantitative-easing program and what's in store.
Moving issues included Hormel Foods Inc. HRL -3.59% , its shares off 3.6% after the meat producer lowered its profit outlook for next year.
The Nasdaq Composite COMP +0.87% added 30.05 points, or 0.9%, to 3,482.18.
For every stock falling, more than two gained on the New York Stock Exchange, where 634 million shares traded.
Composite volume topped 3 billion.
Economic reports released before the open had U.S. housing starts rising 6.8% last month and U.S. consumer prices mildly higher in May.
As investors look to Wednesday’s conclusion of the FOMC meeting, President Barack Obama signaled the likely departure of Bernanke when his term expires in 2014.
In an interview with Charlie Rose that aired late Monday, Obama praised Bernanke for doing “an outstanding job,” and, when asked about the possibility of Bernanke serving another term, the president said “he’s already stayed a lot longer than he wanted.”
On Tuesday, oil futures CLN3 +0.79% added 67 cents to settle at $98.44 a barrel, while gold GCQ3 -1.10% declined to a nearly four-week low of $1,366.90 an ounce on the New York Mercantile Exchange.
The U.S. dollar DXY +0.01% rose against the Japanese yen, while the 10-year Treasury yield 10_YEAR -0.18% used in determining mortgage rates and other consumer loans stood at 2.187%.
Japan, its markets and monetary policy are also factors in Wall Street’s volatility and possibly on the mind of Bernanke and his colleagues.
The U.S.’s still-high rate of unemployment and low rate of inflation are two compelling reasons for the Fed not to reduce its asset purchases and to keep the federal funds rate at zero, or close to it.
But there is a third reason as well, Johnson believes, and that is to keep downward pressure on the dollar, “particularly when Japan is now clearly in the game of trying to put downward pressure on the yen.”
“I don’t want to say things are not cooperative, but let’s not be too naive,” Johnson said.
Interest rates in Japan as well as the direction of the yen have much to do with how U.S. equities are performing, said Pavlik at Banyan Partners.
The so-called carry trade involves converting yen into dollars, then using the U.S. currency to buy U.S. equities. “As the value of the yen stays low, and Japanese interest rates stay low, then the value of what they purchased increases, so it’s a very beneficial trade. They have almost free money to buy assets that are increasing in value,” Pavlik said.
“But when rates in Japan start to rise — think too much liquidity — all of a sudden it works against those that borrowed yen; as the cost of yen starts to increase, it’s like having a floating-rate home-equity loan,” said Pavlik, who adds that after being so low for so long, the recent rise in Japanese interest rates “starts to get people nervous.”
Kate Gibson is a reporter for MarketWatch, based in New York.
Stocks End Higher as Fed Meets, Russell 2000 Closes at All-Time High: Wall Street at Close Report by CNBC; June 18, 2013.
Stocks rallied to finish near session highs Tuesday, with the Dow soaring nearly 150 points, as members of the Federal Reserve kicked off their two-day meeting to discuss the future of the central bank's bond-buying program.
"All eyes are on the Fed," said John Fox, co-manager of the FAM Value Fund. "Economic news has been fine and continues the trend that we've been on, but tomorrow's going to have much bigger impact on what happens this week…but with inflation low and the job picture not satisfactory yet, I don't see a reason for the Fed to change anything."
|DJIA||Dow Jones Industrial Average||15318.23||138.38||0.91%|
|S&P 500||S&P 500 Index||1651.81||12.77||0.78%|
|NASDAQ||Nasdaq Composite Index||3482.18||30.05||0.87%|
The Dow Jones Industrial Average rallied 138.38 points to close at 15,318.23, adding to its triple-digit gain from the previous session.
The S&P 500 climbed 12.77 points to end at 1,651.81. And the Nasdaq jumped 30.05 points to finish at 3,482.18.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, closed below 17.
All key S&P sectors were in positive territory, led by industrials and telecoms.
Why Markets Are Resilient to Unrest Nick Parsons, head of strategy at National Australia Bank, questions whether the U.K. really wants to reform its corporate tax rules, and discusses market's resilience to the unrest in the Arab world.
The two-day Fed meeting is scheduled to start later today with a press briefing from Chairman Ben Bernanke on Wednesday. Investors around the globe will listen with acute interest for details on when the Fed may start scaling back its $85 billion monthly bond purchases. (Read More: Fed Meets as Faith in Its Bond Program Wanes) Major averages have been volatile since Bernanke said last month the Fed could begin to pare back its stimulus efforts if the U.S. economy gains momentum. The Fed is also expected to provide an update on its economic projections for 2013-2015. The Fed's latest projections, made in March this year, saw real GDP growth at around 2.6 percent in 2013 and 3.2 percent in 2014. In terms of unemployment, the Fed projected a rate of around 7.4 percent in 2013, improving to around 6.9 percent in 2014. U.S. stocks took a knock on Monday afternoon when the Financial Times reported that Bernanke is likely to signal the central bank is "close to tapering down" its $85 billion-a-month asset purchases. Stocks eventually recovered from lows when traders noted the article did not contain much new information. (Read More: Markets More Doubtful of Fed Easing Benefits: Survey)
Among techs, Dell rose after billionaire investor Carl Icahn sent a letter to Dell holders proposing the tech giant commence a tender offer for 1.1 billion shares at $14 a share. Icahn also announced a purchase of 72 million Dell shares fro Southeastern Asset Management. Hewlett-Packard climbed to hit a new 52-week high after the tech company said that Todd Bradley, the head of its largest unit, printing and personal computers, will move to a new role heading up HP's Strategic Growth Initiatives. Sony rallied after U.S. hedge fund Third Point raised its stake in the Japanese electronics giant to 70 million shares. Third Point CEO Daniel Loeb also urged Sony to spin-off its entertainment division, and offered to sit on Sony's Board of Directors. (Read More: How You Should Position for Rising Interest Rates) Adobe Systems and La-Z-Boy are among companies slated to post earnings after the closing bell. On the economic front, housing starts rose 6.8 percent in May to a seasonally adjusted annual rate of 914,000 units, according to the Commerce Department, missing expectations for a 950,000-unit rate. Meanwhile, consumer prices edged up 0.1 percent in May, according to the Labor Department. Consumer prices outside of food and energy rose 0.2 percent last month, just above the pace clocked in April. Outside of the U.S., the G-8 summit will wrap up in Northern Ireland. Talks continue between the European Union and the U.S. regarding the creation of the world's largest free-trade zone, despite France's determination to protect and exclude its cultural industries from the deal. (Read More: EU, US Launch Trade Talks, France Stiff-Necked)—By CNBC's JeeYeon Park (Follow JeeYeon on Twitter:
At the CFTC even Gensler is too much for the big banks
By Gregory Meyer
Financial Times, London
Tuesday, June 18, 2013
In the past month bankers and lawyers from Citigroup, Goldman Sachs, and JPMorgan Chase have streamed into a dark brick Washington office building where the future of finance is being shaped.
The high-powered visitors to the home of the Commodity Futures Trading Commission testify to its rise from an obscure US government agency to a global watchdog of financial derivatives, the scandal-hit Libor lending benchmark, and physical commodities from oil to silver.
The agency's tack is now more in question than at any time since Gary Gensler became chairman four years ago. He and one or two others on the five-member commission may be replaced as soon as July, lobbyists and commission officials say. This could slow or reverse Mr Gensler's clampdown on Wall Street banks.
"If there is 60 per cent turnover at the commission, that means there could be a 60 per cent change in direction of the commission," says Michael Dunn, a former CFTC commissioner at lobbyist Patton Boggs.
The banks, their opponents at liberal pressure groups and others have filed through the commission's glass doors to try to influence new rules transforming the $633 trillion derivatives market. Under Mr Gensler, the CFTC has shaved dealer banks' information advantage, set business conduct standards, and forced more swap contracts to be backed by clearing houses.
Mr Gensler's term expired in April 2012 but by law he can stay through to the end of the year if no successor is confirmed. As the sun sets on his tenure, one big reform plank remains incomplete: guidelines for foreign derivatives dealers, whose blow-ups could endanger the US economy.
If this does not pass, Mr Gensler has warned that the CFTC's painstakingly constructed regulatory framework could become a hollow shell as derivatives operations move offshore but retain Washington's implicit backing.
"If the offshore operations of financial institutions are allowed a free pass from reform," he said in a recent speech, "we will not fulfil Congress' intent to end 'too big to fail.'"
The term of commissioner Bart Chilton, a Democrat like Mr Gensler, expired in April but he can serve through 2014 unless he is reappointed or another commissioner is confirmed. He says: "There's work to be done and I'd like to continue to do it."
Lobbyists say one candidate to replace either man is Amanda Renteria, former chief of staff to Debbie Stabenow, the Senate Agriculture Committee chairman. The committee oversees the CFTC.
Ms Renteria holds a Harvard MBA and helped on the Dodd-Frank financial reform law that laid the groundwork for the CFTC's derivatives rules, associates say. Still, "you can tell looking at her resume she's not a derivatives market expert," says a former senior CFTC official, now an industry lobbyist.
Commissioner Jill Sommers, a Republican, has announced plans to resign. Names in circulation as possible replacements include Chris Giancarlo, executive vice-president at interdealer broker GFI Group, and Martha Scott Poindexter, Republican staff director on the Senate Select Intelligence Committee.
Mr Giancarlo has roots in off-exchange markets. In congressional testimony last December he was critical of what he called the "anti-competitive, single-silo, monopolistic structure of the futures market."
The prospect of a personnel shuffle hangs over the CFTC's pending business. Already three commissioners -- Ms Sommers; Mark Wetjen, a Democrat; and Scott O'Malia, a Republican -- have questioned whether the foreign guidelines should be completed before a July 12 exemption expires for offshore branches of dealers such as Goldman and JPMorgan.
The CFTC has other contentious tasks to complete. A customer protection rule proposed in response to the MF Global collapse and Peregrine Financial Group fraud has agitated brokers, who claim it will require $100 billion in extra margin collateral, making futures markets too costly to trade.
The agency is also trying to impose new constraints on commodity speculators after banking groups successfully sued to overturn initial limits.
"Gary is not the kind of person who comes up and slugs you in the nose, but he's persistent," Philip McBride Johnson, a derivatives lawyer and former CFTC chairman, says of Mr Gensler. "I don't know for sure if a new composition of the commission would be inclined to either slow down or back off."
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Northern Gateway restrictions could hurt other pipelines: Kinder Morgan: BIV Today's Business News; June 18, 2013.
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Tuesday, June 18, 2013
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