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Senate to quiz US regulators on Wall St commodity bets
Hearing on banks and commodities set for Jan. 15
Top officials from FERC, Fed and CFTC will appear
Alleged aluminum manipulation to be back in focus
January 8, 2014--A Senate panel will hold a hearing next week to question financial regulators over Wall Street's role in physical commodity markets, drawing fresh attention to a controversy over the possible risks posed by the involvement of the largest U.S. investment banks.
The Jan. 15 hearing by a subcommittee of the powerful Senate Banking Committee is to include testimony by top oversight officials with the Federal Energy Regulatory Commission and the Commodity Futures Trading Commission and an official from the Federal Reserve's banking supervision arm.
The hearing, the second called by Senator Sherrod Brown, an Ohio Democrat, comes as the Fed reconsiders exemptions given to banks since the early 2000s that allow them to engage in the previously prohibited trading of physical commodities.
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Source: Reuters
CBO-Monthly Budget Review for December 2013
January 8, 2014--The federal government ran a budget deficit of $182 billion for the first three months of fiscal year 2014, CBO estimates, $111 billion less than the shortfall recorded in first three months of last year.
Revenues are higher and outlays are lower than they were at the same point in fiscal year 2013.
view the CBO Monthly Budget Review for December 2013
Source: Congressional Budget Office (CBO)
BlueStar Launches New Technology Index; BIGI Undergoes Rebalance
January 8, 2014--BlueStar Indexes, a provider of Israel focused investment research, announced the launch of its second index, the BlueStar Israel Global Technology Index("BIGTech") .
BIGTech provides a benchmark for investors to track Israeli and Israel linked technology companies trading worldwide. Like the methodology for BlueStar's flagship product, the BlueStar Israel Global Index ("BIGI"), BIGTech's methodology allow's for the inclusion of Israeli companies listed on the Tel Aviv Stock Exchange and other exchanges such as the New York Stock Exchange, the Nasdaq Exchange, and the London Stock Exchange.
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Source: BlueStar Global Investors
Invesco makes a big push into alternatives
Six new liquid alternatives funds are part of firm's effort to help advisers handle risk
January 7, 2014--Invesco has launched six new liquid alternatives mutual funds in the past month, more than doubling its total number of such funds as it makes a big push into the fast growing space.
"A large part of our conversations with advisers is around risk mitigation, risk management and finding uncorrelated assets," said Andrew Schlossberg, head of U.S. retail distribution and global ETFs. "It's a big topic. We see it as a long-term topic of discussion with advisers."
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Source: Investment News
Commodity-Stock Correlations and the Business Cycle
January 7, 2014--Abstract:
Measured over long horizons, the correlation between stocks and commodities is close to zero. However, it varies widely over time. Using historical data extending back to 1960 we study the stock-commodity correlation and show: (1) stock-commodity correlation has a business cycle component: it is higher during periods of economic weakness. (2) The same pattern is observed in the average intra-commodity correlation.
Our results are consistent with recession-increased risk aversion causing investors to treat all risky assets the same, and also with firms adjusting variable input use more quickly during tough times. (3) This business cycle effect can explain the spikes in the stock-commodity correlation in the early 1980s and the late 2000s. (4) The link between stock-commodity correlation and business cycle is stronger for industrial commodities than for agricultural commodities.
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Source: United States Commodity Funds
Deep freeze puts $5 billion chill on economy
January 7, 2014--The record cold spell that has half the country in the deep freeze could cost the U.S. economy up to $5 billion.
That's because millions of Americans haven't been able to drive to work, fly or take a train to business meetings or vacations, go to the shopping mall or take the kids out for a movie and a meal. And they may also have to pay more just to keep warm.
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Source: NBC News
Latin America Equity Market Outlook
January 7, 2014--Growth confidence and politics are likely to underpin absolute and relative performance of Latin American equity markets in 2014. Weaker terms of trade have translated into deterioration in the regional current account balance, though the investment environment remains attractive given high levels of foreign direct investments (FDI) and low dependence on external debt.
The development of Latin America’s capital markets is a structural trend supported both by demographics and income growth, and we view the long-term risk-reward balance as favorable.
Following a year of downward revisions to growth forecasts in 2013, we expect Latin America to post moderately higher output in 2014, closer to the region’s non-inflationary potential of around 3.5% per annum.
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Source: Mirae Asset Financial Group
KCG Completes Consolidation of U.S. Broker-Dealers
January 7, 2014--KCG Holdings, Inc. has announced the consolidation and renaming of its U.S. broker-dealer operations into a single entity- KCG Americas LLC.
KCG was formerly Knight Capital Americas LLC. On July 2, 2013, Knight Capital was purchased in a $1.8 billion deal by high-speed trading firm Getco after the former was unable to recover from a technology meltdown that effectively destroyed the company.
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Source: Traders Magazine Online News
Morgan Stanley-US ETF Weekly Update
January 6, 2014--US ETF Weekly Update
Weekly Flows: $10 Million Net Inflows
$182.4 Billion Net Inflows in 2013
ETF Assets Stand at $1.7 Trillion, up 26% in 2013
No ETF Launches Last Week
No ETF News Last Week
US-Listed ETFs: Estimated Flows by Market Segment
ETFs posted net inflows for the fourth consecutive week (modest $10 mln last week)
Last week's net inflows were led by International-Developed ETFs at $935 mln; conversely, US Large-Cap ETFs exhibited net outflows of $870 mln, the most of any category we measured
Eight of the 15 categories we measured posted net inflows last week
ETFs exhibited net inflows 36 out of 52 weeks in 2013
ETF assets stand at $1.7 tln, up 26% in 2013; $182.4 bln net inflows in 2013
13-week flows remain mostly positive among asset classes; combined $59.7 bln in net inflows
Large-Cap ETFs have exhibited the strongest net inflows over the last 13 weeks at $26.4 bln; specifically, the SPDR S&P 500 ETF (SPY) has generated $13.2 bln in net inflows over the last 13 weeks
Commodity ETFs continue to struggle as performance has lagged and interest remains limited; over the last 13 weeks, Commodity ETFs have posted net outflows of $6.4 bln, the most of any category
US-Listed ETFs: Estimated Largest Flows by Individual ETF
SPDR S&P 500 ETF (SPY) posted net inflows of $640 mln this past week, the most of any ETF
Despite SPY's large net inflows, the iShares Core S&P 500 ETF (IVV), which tracks the identical index, exhibited net outflows of $2.0 bln
Notably, the United States Natural Gas Fund (UNG) generated net inflows of $166 mln last week; UNG's net inflows last week were its largest weekly inflow since we began tracking weekly flows in the beginning of 2010
The Vanguard FTSE Europe ETF (VGK) posted net inflows of $254 mln last week, another solid week; VGK has not exhibited a net outflow since the week of 4/15/13 as money has flowed into Europe in anticipation of improving GDP growth and subsequent earnings growth
Over the last 13 weeks, the Vanguard FTSE Emerging Markets ETF (VWO) has exhibited net outflows of $4.5 bln, the most of any ETF
US-Listed ETFs: ETF Dollar Volume
ETF monthly $ volume as a % of listed trading volume increased to 26% in December, which is in-line with the one- year average
Over the last five years, ETF monthly $ volume as a % of listed trading volume peaked in August 2011 at 36%
Amid the short week, ETF $ volume was $225 bln last week, up $67 bln from the prior week
Leveraged/Inverse ETFs accounted for 6.9% of ETF $ volume last week, but make up only 2.0% of ETF market share; this is not surprising as daily compounding makes Leveraged/Inverse ETFs more appropriate for active traders
US-Listed ETFs: Short Interest Data Unchanged: Based on data as of 12/13/13
The iShares Core S&P 500 ETF (IVV) had the largest increase in USD short interest at $708 mln
IVV's shares short at 7.7 mln are at their highest level since 5/30/08; notably, IVV and the S&P 500 Index continue to make new highs
652 ETFs exhibited short interest increases while 567 experienced short interest declines over the last period
Aggregate ETF USD short interest increased by $2.6 bln over the period ended 12/13/13
The average shares short/shares outstanding for ETFs is currently 4.3%, up from 4.1% last period
Five of the 10 most heavily shorted ETFs as a % of shares outstanding are commodity/currency related
The CurrencyShares Euro Trust (FXE) is the most heavily shorted ETF with a shares short as a % of shares outstanding of 250%
Based on multiple borrowings and the ability to continuously create new shares, shares short as a % of shares outstanding can exceed 100% (only nine ETFs exhibited shares short as a % of shares outstanding greater than 100%)
US-Listed ETFs: Most Successful Recent Launches by Assets
$6.8 bln in total market cap of ETFs less than 1-year old
Active and Fixed Income ETFs each account for 24% of the market capitalization of ETFs launched over the past year, the most of any categories
143 new ETF listings and 50 closures/delistings in 2013 compare to 2012's 155 ETF listings and 82 closures
2013's ETF listings are the fewest since 2009 when 125 ETFs were launched
The top 10 most successful launches make up 49% of the market cap of ETFs launched over the past year
Seven ETF sponsors and two asset classes (equities and fixed income) represented in top 10 most successful launches; we note that the representation of funds with an income orientation is currently five (down from seven at the end of the second quarter)
In 2013, BlackRock launched 21 ETFs that have a current market capitalization of $1.4 bln, the most of any sponsor over the past year; 28 different issuers launched ETFs in 2013
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Source: Morgan Stanley
Algo trading systems in FINRA sights
January 6, 2014--The Financial Industry Regulatory Authority (FINRA) will investigate market participants' algorithmic trading systems to ensure adequate monitoring is taking place and help the industry avoid algo-related trading errors, the organisation has stated.
In a statement outlining the US regulator's priorities for 2014 released last week, FINRA said it would assess--through examinations and targeted investigations-whether firms had adequate controls for testing and implementation of algorithmic trading strategies, including high-frequency trading (HFT).
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Source: The Trade News
