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Investors cash out and seek safer havens as global economic problems mount
June 1, 2012--Investors continued their search for safer places to park their money going into June as Spain struggled to avoid becoming the latest Eurozone market to require bailing out and economic data in the US continues to disappoint.
Flows into EPFR Global-tracked US Money Market Funds during the week ending May 30 jumped to a 25 week high while US Bond Funds took in over $1.5 billion for the 24th week in a row and Gold
Funds recorded their biggest inflow since late January while Europe and Emerging Market Equity Funds extended their current outflow streaks.
While the Eurozone crisis remains the biggest short-term concern for investors, the dearth of yield and uncertainty about the true state of China’s economy are also shaping fund flows with Mortgage Backed Bond Funds posting inflows for the 64th straight week and China Equity Funds having their worst week year-to-date.
Despite the souring mood in global financial markets, Equity Funds managed to post net inflows of $6.2 billion. But this was all due to flows into US Equity Funds and half of the total inflows were into a single S&P 500 index fund. While Monday inflows were strong, flows into the equity funds were dissipating at midweek. Bond Fund inflows amounted to $1.5 billion while Money Market Funds took in a net $2.2 billion as the flows into US funds were largely offset by redemptions from Europe Money Market Funds that hit an eight week high of $7.6 billion.
Average daily volume of 11.2 million contracts at Eurex Group in May
Eurex Exchange: Eurex KOSPI Product with record monthly volume of 5.3 million contracts/Eurex Repo: GC Pooling and Euro Repo Markets continue to grow significantly
June 1, 2012--In May 2012, the international derivatives exchanges of Eurex Group achieved an average daily volume of 11.2 million contracts (May 2011: 12.9 million).
Of those, almost 8.45 million were Eurex Exchange contracts (May 2011: 10.0 million), and 2.8 million contracts (May 2011: 2.9 million) were traded at the U.S.-based International Securities Exchange (ISE). In total, 185.9 million contracts were traded at Eurex Exchange and 61.5 million at ISE. This makes May the best month in terms of trading volumes in 2012.
Eurex Exchange recorded 76.6 million equity index derivatives contracts (May 2011: 64.3 million), an increase of 19 percent y-o-y. The single largest contract was the future on the EURO STOXX 50® Index with 31.0 million contracts. The option on this blue chip index totaled 28.2 million contracts. Futures on the DAX index recorded 3.7 million contracts while the DAX options reached another 4.4 million contracts. The Eurex KOSPI Product continued to grow and reached 5.3 million contracts, the best monthly result since launch.
IOSCO Extends The Deadline For Comments On Its Consultation Report On MMFS
June 1, 2012--The International Organization of Securities Commissions (IOSCO) has announced today that it has extended by one month the consultation period for its report on Money Market Fund Systemic Risk Analysis and Reform Options.
IOSCO had received a number of requests to extend the original one month consultation period in order to allow respondents to comment in greater detail. Given the importance of the subject IOSCO has decided to provide more time for responses.
The new closing period for comments is now Friday 29 June 2012, 18h00, CET.
The report provides a preliminary analysis of the possible risks that money market funds (MMFs) could pose to systemic stability and consults on a range of policy options to address those risks.
view the Money Market Fund Systemic Risk Analysis and Reform Options-Consultation Report
Oil drops below $100 on global growth fears
Oil fell to a 16-month low below $100 a barrel on Friday as weak US jobs data, poor manufacturing figures from China and a spiralling euro zone debt crisis deepened worries over the prospects for global economic growth.
June 1, 2012--Brent crude oil futures tumbled to their lowest since February 2011, down $4.17 to an intra-day low of $97.70, before edging up in the afternoon. The contract lost 14.7pc in May, its biggest monthly decline since 2008.
US oil slipped to a low of $82.56, down $3.97, after losing more than 17pc last month, also its biggest slide since 2008.
"We've had constant worries about Greece, Spain, the euro, poor data from the U.S., and overnight the Chinese data was not positive," said Tony Machacek, an oil futures broker at Jefferies Bache.
JPMorgan to Spin Out 'Special Investments'
May 31, 2012--JPMorgan Chase is spinning out the "special investments group" from its troubled chief investment office as executives clean up the division that caused $2 billion trading losses, say people familiar with the matter.
The unit, whose investments include LightSquared, the wireless internet provider, will be moved to the bank’s corporate division and prevented from seeking fresh investment opportunities, bankers were told on Wednesday.
IMF Working paper-Tariff-Tax Reforms in Large Economies
May 31, 2012--Summary: This paper studies tariff-tax reforms in a calibrated two-region global New Keynesian model composed of a developing and an advanced region.
In our baseline calibration, a revenue-neutral reform that lowers tariffs in developing countries can reduce domestic welfare. The reason is that the increase in developing countries welfare due to higher output is dominated by the welfare losses stemming from the deterioration of the terms of trade. On the other hand, the reform increases output and welfare in the advanced countries and in the world as a whole. The effects that we highlight have not been studied in previous contributions to the literature, which typically looks at tariff-tax reforms using a small open economy framework. Nominal rigidities have important implications for adjustment dynamics in our model. In the case of a "point-for-point" reform, for example, price stickiness implies that the international dynamics of output is reversed compared to a revenue neutral reform.
view IMF Working Paper-Tariff-Tax Reforms in Large Economies
DCGX Academy-CONTINENT CRACKING: EU Woes drive global assets plunging, only tunnel no light
May 31, 2012--HIGHLIGHTS
INDIAN Rupee
INR fell to a record low, heading for the worst month since November, before a government report today that economists predict will show gross domestic product rose at the slowest pace since 2009. Bonds rose. GDP Forecast 6.1 % Q1 , matching the preceding period's pace that was the slowest in 11 quarters, according to the median of 31 estimates.
Overseas investors cut holdings of Indian equities by $176 mllion this month as Greek leaders' failure to form a new government after a May 6 election fueled concern the debt-stricken nation will leave the euro, sapping demand for riskier assets. GDP number is expected to show a slowdown and we may have a messy divorce in Europe," said Harihar,Mumbai-based treasurer at First Rand Ltd. "TheINR is running in line with the global view but considering the speed of the move, there seems to be panic in the market." The INR declined 6.5 % this month to 56.4150 per USD as of 9:30 a.m. .
FOREIGN EXCHANGE
Yen Rises Against Major Peers on Signs Debt Crisis Is Spreading
Intervention FromINR to Real Shows Focus on Inflation
Brazil Signals More Cuts After Reducing Rate to Record Low 8.5%
Canadian USD Drops the Most in a Week Amid Turmoil in Europe
FX: Barclays Capital Cuts EUR/USD Forecasts Over Next 1 Year
Asian Currencies Weaken Most Since September on Europe,
The yen gained against all of its 16 major peers as turmoil in the Spanish banking sector added to signs Europe's debt crisis is spreading to the region's larger economies, boosting demand for safer assets. The yen reached a more than three-month high versus the greenback as Japan's benchmark bond yield fell to the lowest level since 2003 amid losses in global shares. The euro slid for an 8th day against the yen.
Intervention From INR to Real Shows Focus on Inflation : Just three months ago, emerging nations from Indonesia to Brazil were intervening in foreign exchange markets to make exports more competitive. Now they are selling USDs to stem currency declines and quell inflation. Bank Indonesia said on May 29 it will start offering USD term deposits in two weeks to stabilize the rupiah, the second- worst performer in Asia this year,
Barclays Capital Cuts EUR/USD Forecasts Over Next 1 Year : Barclays Capital lowers EUR/USD forecasts to 1.25 from 1.30 in 1 month, to 1.21 from 1.28 in 3 months, to 1.19 from 1.25 in 6 months and to 1.15 from 1.20 in 1 year, it says in a monthly report yesterday. * These downward revisions are consistent with ongoing market stress in Europe, limited support from European policy makers, and a pro-European election result in Greece
COMMODITIES
Nickel Slump Seen Ending as China Faces Ore Curbs:
Commodities Heading for Biggest Loss in Eight Months on Europe
Oil Enters Bear Market on Europe Debt Crisis, Slow U.S. Economy
Gold Poised for Worst Monthly Run in 13 Years on European Crisis
China Plan to Open Metal Futures to Foreigners Seen Helping LME
Emerging Markets Drive Financial Services Growth, Report Finds
Report confirms developing world's growth surge has helped redefine global financial competition, creating a historic opening for firms that innovate
Financial institutions active in emerging markets have benefited from a growth in market capitalization of US$ 572 billion from 2006 to 2011.
Through 33 case studies, the report showcases financial services innovation in Asia, Africa, Latin America and Europe.
The Redefining the Emerging Market Opportunity: Driving Growth through Financial Services Innovation report is published by the World Economic Forum and The Boston Consulting Group
May 31, 2012--Emerging-market financial services companies, riding a new wave of opportunity
, are rapidly evolving into world-class competitors and now dominate the ranks of firms providing the highest total return to shareholders, according to a new report released today by the World Economic Forum.
The report, prepared in collaboration with The Boston Consulting Group (BCG), says financial providers worldwide should look to developing countries as the source of long-term business growth and shareholder return.
The study, entitled Redefining the Emerging Market Opportunity: Driving Growth through Financial Services Innovation, is being released today at the World Economic Forum on East Asia in Bangkok. It reports that the role of financial firms is rapidly expanding in the world’s developing countries, driven by economic growth that outpaces the slow expansion of developed economies. The result, the report concludes, is a historic opening to provide new financial services to low-income populations rapidly transitioning to middle-income status, as well as to regional companies evolving into world-class competitors.
Redefining the Emerging Market Opportunity: Driving Growth through Financial Services Innovation
Barclays Stockbrokers relaunches IFA offering ahead of RDR
May 31, 2012--Barclays Stockbrokers is rolling out a revamped service for intermediaries, providing access to a wider range of investments including exchange traded funds (ETFs), exchange traded commodities (ETCs) and structured product issues.
The firm is offering the service through a single online account, which provides access to multiple asset classes including stocks, bonds, as well as ETFs, ETCs, and the ability to buy new structured product issues.
BASF SE, Berkshire Hathaway, Commonwealth Bank of Australia Among Five Stocks Added to Dow Jones Global Titans 50 INDEX
Changes Follow Regular Periodic Reviews of Dow Jones Titans Indexes, Become
Effective After Close of Trading on June 15, 2012
May 31, 2012--Berkshire
Hathaway Inc. Cl B (United States) and Commonwealth Bank of Australia
(Australia) will be among five stocks added to the Dow Jones Global Titans 50
Index, following a regular annual review, Dow Jones Indexes announced today.
The additional two companies to be added are McDonald's Corp. (United States) and Qualcomm Inc. (United States). Companies exiting are Allianz SE (Germany), BNP Paribas S.A. (France), E.ON AG (Germany), Hewlett-Packard Co. (United States) and Petroleo Brasileiro S/A Pref (Brazil).