First Impressions

Mary McDonnell, Simon Compliance – How to Manage (and even Succeed) in the Current Regulatory Marketplace

“It’s a lot harder to do something than to tell somebody else how to do something.”

Mary McDonnell got her start in the financial markets as a regulatory auditor for the Chicago Board of Trade, and though she has spent most of her career on the compliance and regulatory side, she did spend some time as a floor trader. She says this experience taught her to empathize with the traders she would be overseeing over the ensuing years. With that backdrop, she looks at the current regulatory environment and what it means in terms of opportunities, but also in terms of limits.

“If you understand what you cannot do, it leads you to what you can do – legally!”

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Quote of the Day

“A December hike by the Fed would give the Chinese a perfect excuse to let the renminbi go because they can make a strong case that they need to decouple their monetary policy from that of the U.S.”

David Woo, Bank of America Corp.’s head of global rates and foreign-exchange research, in the story, “BofA’s Woo Says China Will Scrap Yuan Support After IMF Victory”

Lead Stories

The market has spoken: The Fed will raise rates in December
Akin Oyedele, Business Insider
An interest-rate hike in December is clearly in sight.
After months of guessing, Friday’s October jobs report jolted the market’s confidence that the Federal Reserve could — and perhaps would — raise rates next month.

U.S. 10-Year Note Yield Rises to Highest Since July on Fed, Supply
By Min Zeng – WSJ
Investors continued to shed their holdings of U.S. government debt Monday, sending the yield on the benchmark 10-year U.S. government debt to its highest level since July.
Bond prices fell broadly Friday after the nonfarm employment report for October showed the fastest pace of jobs growth this year, bolstering expectations in the bond market of a possible interest rate increase by the Federal Reserve in December. Investors are concerned that the value of their bondholdings would shrink after the anticipated shift in the Fed’s ultraloose monetary policy.

Wall St. falls as rate hike looms and growth fears linger
U.S. stock indexes lost more than 1 percent on Monday, their biggest decline in six weeks, as investors braced for an interest-rate hike and fretted about weak Chinese trade data.
Nine of the 10 major S&P sectors were lower, led by consumer discretionary and energy stocks. The Dow Jones industrial average slipped back into negative territory for the year, with only two of its 30 components higher on the day.

Banking Giants Learn Cost of Preventing Another Lehman Moment
Seven years after the collapse of Lehman Brothers jolted the global economy, the world’s biggest banks may need to raise as much as $1.2 trillion to meet new rules laid down by financial regulators.

Dow Jones Industrial Average Drops As Chances Of US Interest Rate Increase Rises Sharply After Robust October US Jobs Report
American stocks were down Monday as investors digest the implications of Friday’s robust October U.S. jobs report, which greatly increases the odds of a U.S. rate increase next month for the first time in nine years. The odds of a rate increase rose from 58 percent to 70 percent after the U.S. Department of Labor said the U.S. economy added 271,000 jobs, far greater than expected, while the unemployment rate dropped to 5 percent.

U.S. Probes Treasuries Niche That Investors Claim Is Rigged by Big Banks
U.S. officials investigating the $12.8 trillion market for U.S. Treasuries are zeroing in on a practice of trading the debt before it’s issued, said a person familiar with the matter — spotlighting trades that several recent lawsuits allege are part of big banks’ efforts to rig Treasury markets.

Hedge Funds Raised Treasury Shorts by Most Since ’13 Before Jobs
Hedge funds picked just the right time to boost bearish bets on Treasuries by the most since March 2013.
Large speculators including hedge funds increased net short positions in 10-year notes by 128,601 contracts to 164,264 in the week ended Nov. 3, data from the Commodity Futures Trading Commission show. Treasury yields rose to the highest since July on Monday, after data at the end of last week showed U.S. employers unexpectedly added the most jobs this year in October.

Gulf oil ministers rebuff IMF fears over finances
www.cnbc.coOil ministers in Saudi Arabia and the United Arab Emirates (UAE) on Monday rebuffed concerns from the International Monetary Fund that the global slump in oil prices will have a “deteriorating” effect on Middle East countries’ current account balances.

Is US Monetary Policy Made in China? by Barry Eichengreen
AMSTERDAM – For much of the year, investors have been fixated on when the Fed will achieve “liftoff” – that is, when it will raise interest rates by 25 basis points, or 0.25%, as a first step toward normalizing monetary conditions. Markets have soared and plummeted in response to small changes in Fed statements perceived as affecting the likelihood that liftoff is imminent.

Hans Parisis: US Poised to Enter New Era of ‘Diverging’ Monetary Policies
The non-farm payrolls during October increased by an impressive 271,000, which was the largest increase since December 2014.
Maybe the most important point in the data was average earnings rose by 2.5 percent year-on-year, which was a six-year high. The total unemployment rate declined further to 5 percent.

Global GDP Worse Than Official Forecasts Show, Maersk Says
The world’s economy is growing at a slower pace than the International Monetary Fund and other large forecasters are predicting.
That’s according to Nils Smedegaard Andersen, chief executive officer at A.P. Moeller-Maersk. His company, owner of the world’s biggest shipping line, is a bellwether for global trade, handling about 15 percent of all consumer goods transported by sea.

New York Fed Says Student Loan Balances Are Increasing Among Down Market Borrowers
By John Sandman – The Street
A study by the Federal Reserve Bank of New York that examines borrowing patterns since the end of the Great Recession finds that people in upper income brackets have been taking on more mortgage and credit card debt while those with lower incomes are borrowing less–with the exception of money borrowed to go to school. Aside from home mortgages, student loans are the biggest consumer debt category in the United States.

Exclusive: ECB rate setters converge on December deposit rate cut
By Paul Taylor and Balazs Koranyi – Reuters
A consensus is forming at the European Central Bank to take the interest rate it charges banks to park money deeper into negative territory in December, four governing council members said, a move that could weaken the euro and push up inflation.

Central Banks

St. Louis Fed: There Is No Chance Inflation Will Be Out of Control Over the Next Year
Continued improvements in the labor market and robust wage gains in October have bolstered monetary policymakers’ confidence that inflation will trend back toward their 2 percent target in the medium term.

Fed’s Rosengren Signals Readiness to Lift Rates Amid Strong Data
Federal Reserve Bank of Boston President Eric Rosengren said encouraging U.S. economic data coupled with emerging signs of risk taking by some investors make it appropriate for the central bank to consider raising interest rates as soon as next month, while moving gradually thereafter.

The Federal Reserve Finds a New, Global Way to Evade Transparency
The National Interest
Policy transparency from the Federal Reserve, otherwise known as the Yellen Accord, allows other central banks to anticipate its actions and respond accordingly in their best interest. But forward guidance and transparency are now posing a problem for the Fed, and its recently articulated global mandate is a mechanism for diffusing it.

Federal Reserve to Examine U.S. Payments Usage
The Federal Reserve announced its plan to examine the payments usage in the United States. It would be the sixth triennial study, which aims to determine the current aggregate volume and composition if electronic and check payments in the country.

Fed rate hike ‘makes sense,’ says US central banker Williams
Tempe, Ariz. – Now that the United States is closing in on full employment and inflation is likely to rise to target levels, the “next step” should be to start gradually increasing rates, a top U.S. central banker said on Saturday.

Consumer inflation expectations fall to new low in Fed survey
Matthew Boesler – Bloomberg
NEW YORK – American consumers’ expectations for inflation three years ahead fell last month to the lowest level in records going back to June 2013, according to a monthly Federal Reserve Bank of New York survey released Monday.

Why the unemployment rate could fall to 3.8%
On the one hand, the expansion has lasted 77 months — the fifth-longest since 1900. On the other, it’s taken longer than any recovery since World War II to reach the same growth in output, according to Minneapolis Fed data.


Dollar Solidifies Payrolls Surge While China Trade Sinks Copper
Emma O’Brien – Bloomberg
The double whammy of a stronger dollar and weak Chinese trade data weighed on copper and Australia’s currency, with most Asian index futures foreshadowing declines after U.S. payrolls data bolstered prospects of an interest-rate increase this year.

FOREX-Dollar edges down from highs as investors take profits
By Jemima Kelly – Reuters
* Euro takes back some lost ground after hitting 7-month low
* ECB deposit rate cut now seen as less likely
* Long-dollar positions rose even ahead of payrolls data -IMM
The dollar edged away from a 6-1/2-month high against the euro on Monday, as investors took profits on the greenback’s surge after bumper U.S (Other OTC: UBGXF – news) . jobs data bolstered bets on the U.S. Federal Reserve raising interest rates in December.

BofA’s Woo Says China Will Scrap Yuan Support After IMF Victory
Justina Lee – Bloomberg
China’s support for the yuan is likely to be pulled once the currency has won reserve status at the International Monetary Fund, according to David Woo, Bank of America Corp.’s head of global rates and foreign-exchange research.

India Rupee Falls With Stocks as Modi Suffers Loss in State Poll
India’s rupee fell the most since August, while stocks and bonds retreated, on concern an election defeat for Prime Minister Narendra Modi’s party in the country’s third-most-populous state will hamper his ability to push through policies to strengthen the economy.

Indexes & Index Products

BMO launches nine ETFs for UK investors
BMO Global Asset Management has launched nine exchange-traded funds (ETFs) focusing on a mixture of equity and fixed income asset classes. Listed on the London Stock Exchange, the range includes five equity ETFs tracking indices developed by BMO in conjunction with index provider MSCI. The indices screen for quality companies with higher than average dividend yields.

What $1.5 Trillion in Stock Buybacks Doesn’t Buy
The third quarter was big for buybacks. Nearly one-quarter of the companies in the S&P 500 that have reported results have shrunk their shares outstanding by at least 4% over the past year, according to S&P Dow Jones Indices. The companies in the index that so far have detailed their buyback figures reported spending $106 billion repurchasing shares.

SPDJI adds ESG smart beta index
Funds Europe
S&P Dow Jones Indices (SPDJI) has created a ‘smart beta’ sustainability index that tracks high income European companies. The firm says the launch represents an expansion of its smart beta indices that are constructed along environmental, social and governance (ESG) lines.


Gold Inches Up on Support From Softer Dollar
By Tatyana Shumsky – WSJ
Gold prices edged higher on Monday as the dollar weakened and some bearish traders left the market to lock in gains on the recent selloff.
The most actively traded contract, for December delivery, rose 40 cents to $1,088.10 a troy ounce on the Comex division of the New York Mercantile Exchange.

Gold tracks its first three-year losing streak since 1998
With gold down more than 8 percent year to date, the beaten-down commodity is tracking for its third-straight year of losses. The last time gold fell three years in a row was between 1996 and 1998. And according to some traders, there’s even more pain ahead.


Goldman’s BRIC Era Ends as Fund Folds After Years of Losses
The BRIC era is coming to an end at Goldman Sachs Group Inc.
The bank’s asset-management unit folded its money-losing BRIC fund, which invests in Brazil, Russia, India and China, and merged it last month with a broader emerging-market fund. Goldman Sachs pulled the plug on the nine-year-old product because it doesn’t expect “significant asset growth in the foreseeable future,” according to a filing to the U.S. Securities and Exchange Commission.

Jaresko says Ukraine to lose IMF program if current tax laws remain
Ukraine’s current tax laws will result in the budget losing Hr 68 billion in 2016 and the country could also lose the Extended Fund Facility (EFF) program of the International Monetary Fund (IMF), Ukrainian Finance Minister Natalie Jaresko has said.

French GDP to grow 0.4%: Bank of France survey
PARIS–French economic growth will accelerate in the fourth quarter, a business survey by the Bank of France showed Monday.
Based on the central bank’s survey of business activity in October, French gross domestic product will grow 0.4% in the fourth quarter from the third.

OECD upgrades Irish GDP forecasts for 2015/2016
Irish Times
The OECD increased its growth forecast for Ireland on Monday, noting that the economy will continue its strong expansion in the next two years, as it revised its GDP growth figure upwards from the 5 per cent it predicted in September, to 5.6 per cent. It also raised its forecast for 2016 up from 4 per cent to 4.1 per cent.

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