News That Matters



The Financial Industry Regulatory Authority (Finra) has asked some high-frequency trading firms to supply details of their strategies and their trading algorithms, reports Reuters. Tom Gira, executive vice president of FINRA’s market regulation unit told the news agency that there is something worrying him about the industry. ”It’s not a fishing expedition or educational exercise


Italy’s squabbling centre-right government has cobbled together a compromise austerity package that relies heavily on a renewed crackdown on tax evasion to reach the goal demanded by the European Central Bank of a balanced budget by 2013,


Muammer Gaddafi vowed to stage a “long fight” for control of Libya that would see it “engulfed in flames” as world leaders in Paris backed a new administration for the country, reports the FT. His message came as some 60 nations and international organisations gathered at a summit in Paris and recognised the right of the national transitional council,


The National Hurricane Center has alerted Gulf of Mexico interests that a low-pressure system in the area will probably strengthen into a storm within two days, Bloomberg reports. The warning has prompted some oil and gas output to be shut in.


Russian Railways halted grain deliveries to the Black Sea port of Novorossiysk this week, obstructing Russia’s return to global wheat markets after it ended an export ban, the FT reports. The railway said a “massive” backlog of grain wagons was clogging lines linking farmland to the port.


China could move closer to letting its currency float more freely if it was easier for the renminbi to join the mechanism that underpins the International Monetary Fund’s own reserve currency, Berlin said on Thursday.


The global manufacturing recovery appeared to have come to a grinding halt in August, activity surveys suggested on Thursday, undermining hopes of a vigorous economic recovery in the second half of the year,




Yoshihiko Noda, Japan’s new prime minister, has appointed a first cabinet that puts younger and relatively unknown members of his ruling Democratic party into some key positions. Jun Azumi, 49, a former journalist who was previously the DPJ’s Diet affairs chief, was named finance minister, while Koichiro Gemba, 47, becomes foreign minister and Motohisa Furukawa, 46, is minister for economic and fiscal policy

Tracking Wall Street’s weak start for September, Japan’s Nikkei Stock Average shed 0.9%, Australia’s S&P/ASX 200 fell 0.9%, South Korea’s Kospi Composite was down 0.5% in choppy trade and New Zealand’s NZX-50 lost 0.6%. Dow Jones Industrial Average futures were up 21 points in screen trade. In the foreign-exchange markets, major currencies were locked in tight ranges ahead of the jobs data and key events for the euro over the next week.


The British government has ramped up its campaign against Scottish independence, with Chief Secretary of the Treasury Danny Alexander arguing that Scotland’s financial position would be far worse if it were to leave the U.K. Mr. Alexander, who is Scottish and held the position of secretary of state for Scotland briefly in 2010 before his promotion to treasury secretary, said Thursday that if Scotland became independent it would have one of the largest deficits in Europe.


The Federal Reserve announced an enforcement action against Goldman Sachs Group Inc., saying the company’s mortgage-servicing unit had engaged in “a pattern of misconduct and negligence” in its handling of home-mortgage loans. The Fed’s action on Thursday seeks changes in mortgage-servicing practices and unspecified monetary damages. It came as Goldman reached an agreement with New York state banking regulators over wrongful foreclosures, allowing it to complete the Sept. 1 sale of its Litton Loan Servicing unit to Ocwen Financial Corp.


A global economic slowdown could threaten regions of the U.S. that have managed to outpace the country’s sputtering recovery. In recent years, booming growth in China and other emerging economies has driven up demand for coal, oil and agricultural products, as well as for the technology and machinery needed for their rapid industrialization. That has been bad news for many U.S. consumers and businesses facing higher food and energy prices.


Business investment in Japan dropped for the first time in four quarters in April-June, due mainly to the March 11 disasters, a finance ministry survey showed, suggesting the economy contracted more than previously thought in the period. Analysts focus on the survey because the government uses it when revising its GDP data. Revised second quarter GDP figures are due out next Friday, and economists expect the data to show a deeper contraction than the preliminary 1.3% reading.


Greece is likely to miss its budget-deficit targets this year in the face of a deep economic contraction that is turning out to be even more severe than forecast, government officials said Thursday, conceding that the country is likely to face demands for still more budget cuts. Greece’s deficit could exceed 8.5% of gross domestic product, compared with an official forecast of 7.6%, as the government struggles to meet revenue goals, two senior Greek government officials said. The deficit is now estimated at “around 8.5%, or a bit higher. Tax collection remains the main problem,” one official said. “Many simply don’t have the money to pay taxes. We have to get the economy going but the austerity is holding everything back.”


French auto maker PSA Peugeot-Citroen said Thursday it plans to invest about €650 million to build a manufacturing facility at Sanand, the rapidly developing automotive cluster in the Indian state of Gujarat. The move fits in with Peugeot-Citroen’s goal of reducing its dependence on the mature markets of Europe. The company has said it is aiming to have half of its vehicle sales outside Europe by 2015, compared to 38% at present,


China is expanding its economic and political ties with countries across Africa, resulting in a rapid rise in influence here that has sparked concern from the U.S. government. Beijing’s investment and aid to African countries aims to tap both natural resources and a growing middle class. As China burrows into local economies, leaders from South Africa to Ethiopia have been touting its model for development—one that stresses state-led growth, validates tight-fisted political control and offers a powerful counterpoint to the free-market democracy mantra promoted by the U.S.

The island-province of Hainan in China’s sun-soaked south is often compared to Hawaii for its lush beach resorts and productive pineapple farms. It’s also home to what may be the nation’s highest rate of local-government debt, based on reports recently filed with the National Audit Office.  Which begs a question: If debt is dogging a tropical paradise like Hainan, what’s it doing to local governments in the country’s far less Edenic provinces, municipalities and autonomous regions? Answers are starting to emerge. Hainan was one of 10 governments across the country — ranging from the city of Beijing to Henan province in China’s heartland — that recently filed individual debt reports to supplement the audit commission’s 2010 nationwide assessment


Australia’s Prime Minister Julia Gillard said Friday she has no plans to step down as leader and intends to stay in office until the next scheduled election in 2013, as speculation swirls in the media that the Labor Party may seek to oust her. “I am not going anywhere,” Gillard said in an interview in her office with Sky News television, saying she hasn’t been approached by anyone asking her to step down. “We will have an election in 2013,” she said.


President Barack Obama will attempt re-election with an unemployment rate of 8.2%, the White House estimated Thursday as it laid out its economic forecasts. The unemployment rate the White House predicts for the fourth quarter of 2012 would be the highest for an incumbent since Franklin Delano Roosevelt successfully was re-elected in 1936 with a 16.6% unemployment rate. Jimmy Carter lost when he attempted re-election with a 7.5% unemployment rate. The U.S. unemployment rate will average 8.8% this year, falling from a previously estimated 9.3% as the economy grows at a moderate pace, the White House added.


Activity in the manufacturing sector grew slightly in August, according to a closely followed index released Thursday that nonetheless suggests the economy isn’t currently in a recession. The Institute for Supply Management said its manufacturing index slowed to 50.6% from 50.9% in July, marking the worst reading since July 2009.  The index extended its string of readings above 50%, which indicate expansion, to 25 months.

Gold seems to have a trading band of $1,810 and $1,840, and is unlikely to break the range ahead of the payrolls data,” said David Thurtell, a Citigroup analyst. Spot gold edged up 0.2 percent to $1,828.29 an ounce by 0238 GMT, little changed from a week earlier. U.S. gold inched up 0.1 percent to $1,831.30, headed for a weekly gain of 1.9 percent. Investors will keep an eye on inflation figures from Chinanext week to gauge the progress of Beijing’s battle against rapidly rising prices, while a two-day policy meeting of the U.S. Federal Reserve starting September 20 will also be in the spotlight.


U.S. crude ended marginally higher as companies evacuated personnel from platforms in the Gulf of Mexico and shut in 5.7 percent of production there ahead of a tropical disturbance over the central gulf. Front-month Brent settled down 56 cents at $114.29 a barrel, after hitting a low of $113.61. U.S. crude rose 12 cents to settle at $88.93 a barrel, after earlier touching a four-week high of $89.81 a barrel. Traders saw resistance around the $90 level for U.S. crude.


The global economy faces risks from both slowed growth and persistent inflationary pressure, which is spilling over from emerging to advanced economies, Ma Delun, a vice-governor at China’s central bank, said in comments reported on Friday. The People’s Bank of China vice-governor’s gloom about world economic prospects echoed earlier comments from Chinese Premier Wen Jiabao, underscoring that Beijing policy-makers are not counting on major foreign markets to recover quickly.


Euro zone governments are moving toward a compromise in a row over a bilateral deal between Finland and Greece that gives the Nordic country collateral in return for loans to Athens that other members of the currency bloc do not get. Ireland’s Finance Minister Michael Noonan said the initial deal between Finland and the Netherlands, which prompted some other euro zone countries to demand similar treatment, had been axed and that a new compromise was being hammered out. “(The collateral deal between) Finland and Greece, I understand that is off the table now. There are other arrangements being made to compensate,” Noonan told a financial parliamentary committee.

Hiring probably slowed in August as American companies became less optimistic about the strength of the recovery, economists said before a report today. Payrolls climbed by 68,000 workers after a 117,000 increase in July, according to the median forecast of 86 economists surveyed by Bloomberg News before a Labor Department report. The unemployment rate probably held at 9.1 percent, marking 26 out of the last 28 months where it has been at or above 9 percent. The first credit downgrade in U.S. history, political squabbling over debt reduction and fear of a default in Europe caused the Standard & Poor’s 500 Index to plummet 17 percent from July 22 to Aug. 8, probably prompting companies to cut back. The lack of hiring is one reason Federal Reserve Chairman Ben S. Bernanke last week said the central bank still has tools available to stimulate growth.

An age-old idea — the gold standard — is attracting new fans, amid growing investor concern that enormous government borrowing is weakening the dollar and spark hyper-inflation. The day of realization is coming, James Grant, editor Grant’s Interest Rate Observer told CNBC Thursday. “What can be said for the gold standard is that it is time tested. It has monetary properties. It worked imperfectly but consistently for a 100 years until it was interrupted,” said Grant

Italian employers’ group Confindustria slammed the government’s austerity plan as “weak and inadequate” on Thursday and expressed concern about how Italy’s economic problems are being handled. The group said that, despite recent amendments, the 45.5 billion euro ($65.29 billion) austerity package, approved by Silvio Berlusconi’s government last month, lacked clarity and did not contain structural measures to boost growth.

Fixed mortgage rates were mostly flat this week after hitting their lowest levels in decades. But few Americans are able to capitalize on them. Freddie Mac says the average rate on the 30-year fixed mortgage stayed at 4.22% for a second week. The rate hit 4.15% two weeks ago, lowest level on records dating to 1971. The average rate on the 15-year fixed mortgage, a popular refinancing option, fell to 3.39% from 3.44%. Two weeks ago, it reached 3.36%, lowest rate on records dating to 1991.

Investors are demonstrating a reluctance to trade in U.S. financial markets that’s “unlikely to improve substantially” any time soon, according to Mike Lee, a Citigroup Inc. analyst.The CHART OF THE DAY shows how Lee reached his conclusion: by tracking the Citigroup U.S. Market Liquidity Index, derived from five indicators in the swap and option markets. Within the past two weeks, the index rose to its highest level since May 2009, when a global financial crisis sparked by falling U.S. home prices was ending. “Deteriorating economic conditions and volatile markets have raised investor fears about a repeat,” Lee, based in New York, wrote two days ago in a report. That concern has weighed on liquidity, or the ease of buying and selling, he wrote. Citigroup’s index, which rises when liquidity shows signs of drying up and falls when it improves, reached last month’s peak on Aug. 25. The increase resulted mainly from a surge in the Chicago Board Options Exchange Volatility Index, known as the VIX, according to the report.

The US economy will avoid falling back into recession this year, and instead grow 1.7%, the White House has predicted. The figures come in the mid-year fiscal budget review by its Office of Management and Budget (OMB). They show that the Obama administration expects the economy to improve towards the end of the year. So far, official data shows that the economy grew only 0.4% in the first quarter and 1% in the second. In the OMB’s previous forecast back in February, it predicted that the US economy would expand 2.7% this year, but that had been seen as greatly inaccurate for many months.

Central bank flight to Federal Reserve safety tops Lehman crisis. A key warning signal of global financial stress has shot above the extreme levels seen at the height of the Lehman crisis in 2008.  Central banks and official bodies have parked record sums of dollars at the US Federal Reserve for safe-keeping, indicating a clear loss of trust in commercial banks. Data from the St Louis Fed shows that reserve funds from “official foreign accounts” have doubled since the start of the year, with a dramatic surge since the end of July when the eurozone debt crisis spread to Italy and Spain.


A total of 370,000 households are without any member who has ever had a paid job, the most on record, the Office for National Statistics (ONS) reported. The statistics agency has tracked the number of households which have never worked over every April to June period for the past 16 years. The number has been rising steadily since records began in 1996, more than doubling from 178,000 that year to the current 370,000 level.


House prices fell at their fastest rate in 10 months in August and “downside risks” are increasing, the Nationwide Building Society has warned. The average price of a house fell 0.6pc in August to £165,914 –0.4pc lower than a year ago. House prices have declined in two of the past six months, Nationwide said, with the last drop in April. Prices increased 0.3pc in July. A shortage of homes for sale and the Bank Rate at a record low have helped to support prices and Robert Gardner, Nationwide’s chief economist, said the August decline should not change the picture of “relative stability that has characterised the market over the past 12 months”.


A key Bank of England policymaker has contradicted the public statements of senior bankers by revealing that some privately expect the taxpayer to pick up the tab in the event of another financial crisis. In a paper published yesterday, Paul Fisher, the Bank’s executive director for markets, disclosed that “some banks have told us that they think they should not be required to hold capital and liquidity to deal with such extreme tail events – leaving the public sector to be the capital provider of last resort”. His comments clash with the public statements of bankers who claim lenders should not be a burden on the taxpayer.

Goldman Sachs showered its hedge fund clients with ideas on how to profit from financial chaos in the eurozone, as markets gyrated wildly last month. The giant investment bank provided ideas for complicated derivatives trades that would pay off if confidence ebbed in the soundness of the European banking system, and a top trading strategist told clients he believed the banks would need $1 trillion of extra capital to weather the crisis.

Shadow chancellor Ed Balls urged the chancellor to start “banging the table” and demanding a global deal to kick-start economic growth yesterday, after surveys from across Europe signalled that manufacturing contracted in August, raising fears of a double-dip recession. Visiting Vauxhall’s car plant in Luton with Labour leader Ed Miliband, Balls said the answer to the troubles of British industry lay in a worldwide pact to boost demand, while Miliband called on David Cameron to demand that the meeting of G20 leaders scheduled for November in Cannes be brought forward, to tackle a “poisonous cocktail” of weak growth and financial turmoil.

COMMONWEALTH Bank chief executive Ralph Norris was worried Australia might be stripped of its top-notch credit rating during the global financial crisis, and that a downgrade would ”ripple through the real economy”, WikiLeaks cables show. According to previously secret US government cables, Mr Norris ”expressed concern” over a potential cut in Australia’s AAA credit rating during a meeting in April 2009.


Home prices are expected to fall further during the spring selling season as vendors are forced to cut the asking price while buyers hesitate to step into a falling property market, say experts. Buyers advocate Christopher Koren of Melbourne-based Morrell and Koren said when the housing market comes off the boil, as it had done since the start of 2011, it can take 6 to 12 months before vendors realised and adjusted their price expectations. That gap between a vendor’s high asking price and weak buyer interest was a “classic symptom” of a falling market, said Mr Koren, who expected the difference to narrow during the next three months.


The sharp fall in China’s new export order index in the official August Purchasing Managers Index is partly caused by the sovereign debt problem in developed countries, China’s National Bureau of Statistics said in a statement today. China’s new export order index fell to 48.3 in August, signalling a contraction, from 50.4 in July. The statistics agency said high commodity prices and sluggish external demand also contributed to the sharp drop.

Michael Noonan, finance minister, was justified in telling parliament on Thursday that Ireland had made “considerable progress” in extracting itself from the emergency that forced it last year to negotiate an €85-billion ($118-billion Canadian) international support package. Wage cuts and price deflation have restored Irish competitiveness. In contrast to Greece and Portugal, its fellow occupants of the euro zone’s intensive care unit, Ireland’s current account deficit is moving into a surplus. The rebound is explained partly by the multinational companies, chiefly U.S.-owned, that use Ireland as a European base. But Irish policy makers have played their part, too.

China’s consumer prices will likely stay in a controllable range as more factors come into play to stabilize the country’s overall price levels, the China Securities Journal quoted a central bank official as saying on Friday. Li Dongrong, assistant governor of the People’s Bank of China, the country’s central bank, made the remarks at the 2011 China Financial Development Forum, noting that the country’s macroeconomy faces enormous pressures from rising prices.


The Ministry of Railways said Friday that the country’s railways transported a record number of passengers during the summer travel season, which lasted from July 1 to Aug. 31. More than 360 million trips were made on trains during the period, an increase of 11.8 percent year-on-year, the ministry said in a statement on its website. On average, the nation’s railways carried more than 5.81 million passengers every day. The summer season travel peak arrived on July 9, a day on which a record 6.5 million people took trains, the statement said.


China’s economic growth has been a source of strength in the crisis, but the nation also needs structural changes to stave off a “middle income trap”, World Bank President Robert Zoellick said Thursday. The world’s economic leaders need to “rebalance” their thinking as well as their economies. Fiscal and monetary policies have dominated the current discussion. That makes sense to a degree, but these policies are “insufficient for sustained growth”, Zoellick cautioned in an op-ed published on the website of the Financial Times Thursday.


Financing difficulties, rising costs, and labor shortages have left China’s small- and medium-sized enterprises (SMEs) with severe survival predicaments this year, said economic experts at an economic summit. SMEs contribute a lot to the employment rate and national economic development, Gu Shengzu, a member of the National People’s Congress Standing Committee, said, calling attention to the severe difficulties facing SMEs in 2011. “About 60 to 70 percent of China’s SMEs face adverse conditions,” said Gu.


South Korea recouped 60.5 percent of bailout funds poured into local financial institutions in late 1997 when the Asian financial crisis happened, the financial watchdog said Friday. According to a statement by the Financial Services Commission ( FSC), the government collected 102 trillion won (96 billion U.S. dollars) in public funds as of the end of July out of a total of 168.6 trillion won injected since November 1997 when the Asian crisis occurred. The recovery rate was raised to 60.5 percent in late July from 59.9 percent seen at the end of last year, the watchdog said.


The Peruvian government on Thursday unveiled a new contingency plan to cope with the possible worsening of the international economic crisis. Under the plan announced by Economy and Finance Minister Luis Castilla at a press briefing in Lima, the government intends to launch public investment projects in 2012, which were originally scheduled for the 2013-2014 period. According to Castilla, in order to counteract any potential negative impact on Peru’s economy, the government has created a new Fiscal Stabilization Fund worth 5.6 billion U.S. dollars, an amount that is three times higher than what was used during the 2008 financial crisis.


Europe’s pre-crisis debt-driven growth model is “unsustainable,” and needs to be changed in order to put a lid on the lingering debt crisis, a top official with the European Central Bank (ECB) said here on Thursday. “The crisis is not over. Not just in Europe is it not over, it is also not over in other regions of the world,” said Juergen Stark, a member of the ECB executive board, during the Alpbach Forum economic conference held here in Vienna. According to Stark, there were two options to solve the current crisis: either to continue the development model as in the past and then pick up the pieces when the bubble explodes, or to take effective measures to prevent the bubbles from forming in the first place. For him, the second option was more favored.


Austrian unemployment picked up by 0.4 percent in August on the year-on-year basis, ending a 17-month downward trend of the county’s unemployment rate, according to figures from the Austrian Labor Ministry Thursday. The unemployment rate in August reached 6 percent, with 219,247unemployed people registered in the Labor Ministry, while the number of training participants has dropped by 13.8 percent to 8651.

Terming the double-digit food inflation as “disturbing”, Finance Minister Pranab Mukherjee on Thursday said supply of food items needed to be improved to deal with the price rise.  “Food inflation has gone up … This is really disturbing,” he told reporters here.  His comments came after data showd that food inflation touched the double-digit mark after a gap of over five months. It was at 10.05 per cent for the week ended August 20, as onion, fruits, vegetables and protein-based items turned more expensive.

Growth of China’s consumer prices is estimated to have slowed down for the first time in four months in August as food prices started to stabilize, analysts said Friday. Major investment firm China International Capital Corp. (CICC) said the consumer price index (CPI) had probably grown 6 percent last month. It said prices of meat and grain remained steady, while vegetable prices dropped. China’s consumer prices surged 6.5 percent on-year to a 36-month high in July, driven mostly by food prices, which jumped 14.8 percent from a year earlier. The figure was far above the Chinese government’s yearly target of 4 percent for 2011.

As the death toll rises in Syria’s Arab Spring and the regime of President Bashar Assad becomes increasingly isolated on the world stage, Russian companies in Syria are losing out financially. As well as lucrative arms contracts, Russian firms have a substantial presence in the Syrian infrastructure, energy and tourism industries. And with exports to Syria worth $1.1 billion in 2010 and investment in the country valued at $19.4 billion in 2009, there is a lot at stake.  “All our deliveries to Syria have come to a standstill,” said Anton Kudratyev, director of sales with Uralmash’s Drilling Equipment Holding, a company that has exported to Syria for 14 years. “One has to be physically present in this market and be able to talk to people — and because of the current security situation we have been deprived of this possibility.”

President Jacob Zuma has urged Norway to invest in Africa, particularly in energy security to boost economic growth. Norway has the capacity and resources to make a significant contribution to the green economy, he said in a speech prepared for delivery in Norway’s capital Oslo on Thursday. “Norway can play a major role in investing in Africa’s energy security, the green economy and climate change.”

South African companies wanted to partner with Norwegian businesses in the oil and gas, environment and marine technology, innovation and knowledge-based industries.

After several years some of the regulators are ow slowly starting to understand the business of HFT. This is a blow to the HFT Industry, and could spark a witch hunt on HFT. We will monitor these developments regularly. For those new to the concept of HFT, please consider the effects of the below behavior. Overloading the US Options Market. Reuters reports on the just started hunt on HFT;  Securities regulators have taken the unprecedented step of asking high-frequency trading firms to hand over the details of their trading strategies, and in some cases, their secret computer codes.


Last chart of the Day. Yesterday’s reversal was confirmed today. Let’s see the action tomorrow. The retracement from the early August collapse topped out at 50%, and we should be looking for new legs down in the coming days.


Some good points by Stiglitz on Crisis, Contagion and the need for a New Paradigm. Full presentation, Stiglitz Presentation. •Didn’t predict the financial crisis –Standard models assert that bubbles can’t happen –Standard models assert that shocks are exogenous •Key “disturbance” to the economy was endogenous –Policy frameworks suggested that (a) keeping inflation low was necessary, and almost sufficient, for stability and growth; (b) government didn’t have instruments to prevent bubbles; (c) cheaper to clean up mess after bubble broke