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IMF-Global Financial Stability Report
June 17, 2011--Since the publication of the April 2011 Global Financial Stability Report (GFSR), financial risks
have risen for three reasons. First, while a multi-speed global recovery remains the base case, downside risks to this baseline have increased. Second, concern about debt sustainability and support for adjustment efforts in Europe’s periphery is leading to market pressures and worries about potential contagion. Political risks are also raising questions about medium term fiscal adjustment in a few advanced countries, notably, the United States and Japan.
Third, notwithstanding some recent pullback in risk appetite, the prolonged period of low interest rates
may push investors into riskier assets in a “search for yield.” This trend has the potential to build financial imbalances for the future, particularly in some emerging markets. Against these tensions, deep-seated challenges remain. Although there has been progress, improvements in financial
system robustness have been insufficient so far. Markets may lose patience and become disorderly if
political developments derail momentum on fiscal consolidation and financial repair and reform. Given these risks, policymakers need to accelerate actions to address long-standing financial
vulnerabilities as outlined in the GFSR, before the window of opportunity to do so closes.
IMF World Economic Outlook Update Mild Slowdown of the Global Expansion, and Increasing Risks
June 17, 2011--Activity is slowing down temporarily, and downside risks have increased again. The global
expansion remains unbalanced. Growth in many advanced economies is still weak, considering the depth of the recession. In addition, the mild slowdown observed in the second quarter of 2011 is not
reassuring. Growth in most emerging and developing economies continues to be strong. Overall, the global economy expanded at an annualized rate of 4.3 percent in the first quarter, and forecasts for 2011–12 are broadly unchanged, with offsetting changes across various economies. However,
greater-than-anticipated weakness in U.S. activity and renewed financial volatility from concerns about the depth of fiscal challenges in the euro area periphery pose greater downside risks.
Risks also draw from persistent fiscal and financial sector imbalances in many advanced economies, while signs of overheating are becoming increasingly apparent in many emerging and developing
economies. Strong adjustments—credible and balanced fiscal consolidation and financial sector repair and reform in many advanced economies, and prompter macroeconomic policy tightening
and demand rebalancing in many emerging and developing economies—are critical for securing growth and job creation over the medium term.
IMF Fiscal Monitor Update-Staying the Course on Fiscal Adjustment
June 17, 2011--Consolidation is proceeding at a broadly appropriate pace in many advanced economies —
notably in most of Europe and in Canada—helped by recovering activity and revenues. In the United States, the 2011 deficit will be lower than previously forecast and similar to 2010 in
cyclically adjusted terms, thereby making the planned fiscal adjustment in 2012 less abrupt. Consensus on a credible medium-term fiscal adjustment plan is urgently needed. Similarly,
defining a more detailed medium-term adjustment plan is essential in Japan.
Rising risk perceptions in Greece, Ireland, and Portugal underscore the need to implement their adjustment
programs and to develop a comprehensive and consistent approach to crisis management in the euro area. In many emerging economies, fiscal consolidation is proceeding at an appropriate pace. In others, fiscal policy needs to be tightened faster than currently envisaged, to reduce
overheating risks.
view the IMF Fiscal Monitor Update-Staying the Course on Fiscal Adjustment
Resource Windfalls, Macroeconomic Stability and Growth: The Role of Political Institutions
June 17, 2011--Summary: We use a new dataset on non-resource GDP to examine the performance of commodity-exporting countries in terms of macroeconomic stability and economic growth in a panel of up to 129 countries during the period 1970-2007. Our main findings are threefold.
First, we find that overall government spending in commodity-exporting countries has been procyclical. Second, we find that resource windfalls initially crowd out non-resource GDP which then increases as a result of the fiscal expansion. Third, we find that in the long run resource windfalls have negative effects on non-resource sector GDP growth. Yet, the effects turn out to be statistically insignificant when controlling for government spending. Both the effects of resource windfalls on macroeconomic stability and economic growth are moderated by the quality of political institutions.
Will Natural Gas Prices Decouple from Oil Prices across the Pond?-IMF Working paper
June 17, 2011--Summary: We show that US natural gas prices have decoupled from oil prices following substantial institutional and technological changes. We then examine how this interrelationship has evolved in Europe using data for Algeria, one of Europe’s key gas suppliers.
Taking into account total gas exports and cyclical conditions in partner countries, we find that gas prices remain linked to oil prices, though the nexus has loosened. Both high oil prices and a modest industrial recovery in partner countries have kept gas exports at low levels in recent years, suggesting changing market forces. The paper then shows how such shifts can have important macroeconomic implications for a big gas exporter such as Algeria.
view the IMF Working paper-Will Natural Gas Prices Decouple from Oil Prices across the Pond?
TMX Group – London Stock Exchange Group Merger Proposal Receives Positive Recommendation from Glass Lewis
June 17, 2011-- TMX Group Inc. today announced that Glass, Lewis & Co., LLC (Glass Lewis), a leading independent governance analysis and proxy voting firm, has published a report recommending that TMX Group shareholders vote in favour of TMX Group's proposed merger with London Stock Exchange Group plc (LSEG).
The Glass Lewis report stated: “In light of our approval of the LSE-TMX merger from both a strategic and financial perspective, our consideration of the factors discussed [in our report], and the unanimous support of the board, we believe the proposed merger with LSE is in the best interest of shareholders.”*
TMX Group will hold an Annual and Special Meeting of shareholders to approve the merger agreement and other resolutions on June 30, 2011 at 10:00 a.m. (ET). The meeting will be held at the Design Exchange, 234 Bay Street, Toronto. For information about the merger and how to vote, please visit www.tmx.com/merger.
Agriculture: Higher prices here to stay, says OECD-FAO report
June 17, 2011--Higher food prices and volatility in commodity markets are here to stay, according to a new report by the OECD and the UN Food and Agriculture Organisation (FAO).
The OECD-FAO Agricultural Outlook 2011-2020 says that a good harvest in the coming months should push commodity prices down from the extreme levels seen earlier this year. However, the Outlook states that over the coming decade real prices for cereals could average as much as 20% higher and those for meats as much as 30% higher, compared to 2001-10. These projections are well below the peak price levels experienced in 2007-08 and again this year.
view the OECD-FAO Agricultural Outlook 2011-2020
Maple Group Comments On Glass Lewis & Co. Report
June 17, 2011-- Maple Group Acquisition Corporation ("Maple"), a corporation whose investors comprise 13 of Canada's leading financial institutions and pension funds, today commented on the report issued on June 16, 2011 by Glass Lewis & Co., a proxy advisory firm based in San Francisco, California.
In its report, Glass Lewis called Maple's proposed transaction "strategically compelling" but recommends that TMX Group shareholders should vote for the LSE takeover, largely on the basis that "…[Glass Lewis] believe[s] the LSE-TMX merger has a greater probability of obtaining all necessary regulatory approvals."
Maple believes this conclusion, and much of the information and analysis in the Glass Lewis report, is deeply flawed. Specifically, Maple noted the following:
In reaching this conclusion, Glass Lewis does not mention, and appears to give no weight to, the extraordinary condition of the LSE offer which requires provincial securities regulators in Quebec and Ontario to abandon a key Canadian public interest protection limiting any one shareholder from owning more than 10% of TMX Group.
Glass Lewis does not mention, and appears not to have been aware of or considered, the statement made by Ontario Minister of Finance Dwight Duncan on June 9, 2011, in which Minister Duncan said,
"…the 10% ownership rule for the TMX is critically important…I encourage Industry Canada and, to the extent it becomes involved, the Competition Bureau to, where appropriate, take the decisions of the securities commissions into consideration. The commissions are conducting a public comment process and will carefully consider the views of the public in making their determination about each transaction."
IASB rules to hit profit reporting
June 17, 2011--Companies that follow international accounting standards will no longer be able to pad their reported profits by predicting strong returns on investments held by their pension schemes, and will not be able to “smooth” earnings by averaging investment gains and losses over several years, under new rules unveiled on Thursday.
The International Accounting Standards Board, which sets rules aimed at making it easier for investors to compare the results of companies based in different jurisdictions, said the new rules would take effect in January 2013. It first began consulting on the proposals in 2008.
TABB Research Examines Electronic Alpha Capture and its Impact on Commission Allocations
New Report Focuses on Buy Side and Sell Side Use of Alpha Capture Systems, the Impact of Systems’ Performance Metrics and Emergence of an Elite Sell-Side Service Based on Pay-for-Performance
June 18, 2011-- At a basic level, electronic alpha capture is poised to become a major work flow tool forevery portfolio manager and broker-dealer to prioritize data points and opinions, pushing the most relevant ideas to the surface.
According to TABB Group in new research, “Alpha Capture: The What, Who and How Much,” this tool can give portfolio managers the freedom to focus on their primary job – generating alpha. Equally important, alpha capture technology could impact how the buy side allocates commission dollars to its research providers.
Not only can this technology enable the highest conviction ideas to “bubble to the top,”says Adam Sussman, a TABB partner, head of global research and co-author with contributing analyst Kerry Massaro, but by tracking and monitoring industry performance, these systems can enable star sales people and broker-dealers to rise above their competition. In the not-so-distant future, the performance metrics within alpha capture systems could be used universally to determine which brokers get paid and how much.