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German Economy Fares Well But Reform Agenda Still Unfinished
Germany's relatively strong performance sets conditions for domestic demand-led growth
Downside risks cloud near-term outlook
Accelerating structural, financial reforms would raise growth potential, also benefit euro area
July 3, 2012--Despite looming risks, Germany continues to perform relatively well, the IMF said in its annual report on the state of the economy.
The IMF called for policies to steer the recovery while guarding against downside risks, and noted that speeding up structural and financial reforms—along with rebalancing sources of growth—should help raise both Germany’s growth potential and generate positive outward spillovers.
According to the IMF’s assessment of Europe’s largest economy, economic activity is relatively robust, wages are rising, the unemployment rate (5.3 percent) is at post-reunification lows, and inflation expectations are well anchored. Furthermore, the fiscal deficit is narrowing (from 4.3 percent in 2010 to 1 percent in 2011) while corporate and household balance sheets are healthy. In addition, banks have ample liquidity and maintain adequate levels of regulatory capital, and lending rates are lower than elsewhere in Europe. This implies that the conditions are now in place for a domestic demand-led recovery.
view the IMF Country report-Germany 2012 Article IV Consultation
Source: IMF
IMF Working paper-Paths to Eurobonds
July 3, 2012--Summary: This paper discusses proposals for common euro area sovereign securities. Such instruments can potentially serve two functions: in the short-term, stabilize financial markets and banks and, in the medium-term, help improve the euro area economic governance framework through enhanced fiscal discipline and risk-sharing.
Many questions remain on whether financial instruments can ever accomplish such goals without bold institutional and political decisions, and, whether, in the absence of such decisions, they can create new distortions. The proposals discussed are also not necessarily competing substitutes; rather, they can be complements to be sequenced along alternative paths that possibly culminate in a fully-fledged Eurobond. The specific path chosen by policymakers should allow for learning and secure the necessary evolution of institutional infrastructures and political safeguards.
view the IMF Working paper-Paths to Eurobonds
Source: IMF
UK Official holdings of international reserves June 2012
July 3, 2012--This monthly press notice shows details of movements in June in the UK's official holdings of international reserves, which consist of gold, foreign currency assets and International Monetary Fund assets.
These reserves are maintained primarily so that the UK Government’s reserves could be used to intervene to support Sterling, or the Bank of England’s reserves could be used to support the Bank’s monetary policy objectives. If such interventions were to occur, then they would be shown and explained in this release. The Background note at the end of this release explains more about the reserves, and about these statistics.
In summary this month’s release shows that, in June 2012: No intervention operations were undertaken.
Movements in reserves and levels of reserves were as follows:
view the UK Official holdings of international reserves-June 2012
Source: HM Treasury
HM Treasury-Government announces new sanctions for directors of failed banks
July 3, 2012--The Government has published proposals that could prevent the directors of failed banks from holding similar positions at financial institutions in the future, the Financial Secretary to the Treasury, Mark Hoban, announced this afternoon.
The recommendations follow the findings of a report by the Financial Services Authority (FSA) into the failure of the Royal Bank of Scotland, published in December 2011, which highlighted how the errors made by senior management contributed to the bank having to be saved by the taxpayer. The Government is also consulting on the possibility of introducing criminal sanctions for serious misconduct in the management of a bank.
view the Consultation paper: sanctions for the directors of failed banks
Source: HM Treasury
Thomson Reuters Position Paper-The Practical Aspects Of Delivering A European Consolidated Tape
July 2, 2012--The Market in Financial Instruments Directive (MiFID) significantly opened up competition in trading of European equities, bringing several benefits for investors.
Yet, it also caused fragmentation, challenging both regulators and market participants in their ability to obtain a consolidated view of the market. A number of data collectors and aggregators, including Thomson Reuters, have emerged to address this unintended consequence of MiFID.
view the THE PRACTICAL ASPECTS IN DELIVERING A EUROPEAN CONSOLIDATED TAPE-position paper
Source: homson Reuters
89 billion euros turnover on Xetra in June
July 2, 2012--Order book turnover on Xetra and the Xetra Frankfurt specialist trading stood at €93.8 billion in June-a decrease by 15 percent year-on-year (June 2011: €109.9 billion).
Of the €93.8 billion, €89.2 billion were attributable to Xetra – a decrease by 15 percent y-o-y (June 2011: €105.3 billion). €4.6 billion were attributable to the Xetra Frankfurt specialist trading, unchanged y-o-y (June 2011: €4.6 billion). Order book turnover on Tradegate Exchange* totalled approximately €2.0 billion in June.
In equities, turnover reached €78.4 billion on Deutsche Börse’s cash markets (Xetra: €77.0 billion, Xetra Frankfurt specialist trading: €1.4 billion). Turnover in bonds was €2.0 billion, and in structured products on Scoach €1.9 billion. Order book turnover in mutual funds and exchange-traded funds (ETFs) amounted to €11.5 billion.
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Source: Xetra
ESMA publishes an update to the Q&A in the area of Prospectuses
July 2, 2012--The update published today contains new guidance on the format of summaries.
view the Questions and Answers
Prospectuses-15th updated version-July 2012
Source: ESMA
UBS anticipates RDR and Esma regulations with mammoth ETF splurge
UBS lists 64 exchange-traded funds on the London Stock Exchange in a single day -the largest ever daily listing of these products in the UK
July 2, 2012--UBS Global Asset Management has set a new record for the number of exchange-traded funds (ETFs) launched in the UK in one day with the listing of 64 ETFs on the London Stock Exchange (LSE) on June 28.
The listings cover global, Asian, European and North American equities, as well as specific equity strategies, alternatives and fixed-income assets, and follow the launch of two more ETFs by UBS on the exchange a week earlier. Of those 66 funds, 17 use synthetic replication to gain exposure to the underlying asset and the remainder are physically backed. Some of the ETFs have also been offered to investors on the Six Swiss Exchange, Xetra, Börse Stuttgart, Borsa Italiana and Nasdaq OMX.
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Source: Risk.net
PIMCO German Government Bond Index Source ETF
July 2, 2012--PIMCO, a leading global investment management firm and Source, a specialist provider of exchange traded products, have launched the PIMCO German Government Bond Index Source ETF ("BUND"), which is listed on Deutsche Börse (XETRA). BUND aims to track the Markit iBoxx €Germany Index.
In the current market uncertainty, many investors are seeking efficient ways to quickly switch between “risk-on” and “risk-off” positions. BUND delivers exposure to the German government bond market. The ETF benefits from PIMCO’s smart passive management to minimise tracking differences without the use of securities lending, and combines the transparency and operational ease that investors expect from Source ETFs with PIMCO’s scale and expertise managing government bond portfolios.
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Source: Source
Northern Trust Monthly Funds Market Review
July 2, 2012--This month's highlights include:
Ireland intending to implement AIFMD by the end of the year
Luxembourg-domiciled funds see assets under management rise to new record
EU publishes draft rules for OTC derivatives market changes
Research shows European financial services M&A activity fell during first quarter
Switzerland and Denmark join European countries looking to make FATCA agreements
EXCHANGE TRADED FUNDS
The majority of fund managers expect their exposure to exchange traded funds and products to rise, according to independent research carried out for Lyxor. More than half (54%) of the 131 UK and Ireland managers surveyed said their exposure to ETFs would increase over the next three years and almost a quarter (23%) anticipated that their exposure to ETFs would grow by 10% or more. Only 1.7% of the respondents said their exposure to ETFs would fall.
The survey also found that 81.3% of those surveyed held less than 10% of their assets in ETFs, underlining that penetration by ETFs remains low and has scope for future growth.
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Source: Northern Trust
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