Khamis, 22 Disember 2011

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The Star Online: Business


Deutsche Boerse, NYSE US$9bil deal wins U.S. approval

Posted: 22 Dec 2011 05:19 PM PST

WASHINGTON (Reuters) - Deutsche Boerse won U.S. antitrust approval to buy NYSE Euronext in a $9 billion deal to create the world's No. 1 exchange operator, but the transaction still faces serious regulatory headwinds in Europe.

The Justice Department said on Thursday that the deal, which was announced in February, won U.S. approval on condition that a Deutsche Boerse subsidiary, the International Securities Exchange, divest its 31.5 percent interest in Direct Edge.

There have been few critics of the deal in the United States, despite the NYSE's symbolism as a bastion of American capitalism. The exchange was founded in 1792 when share trading began on a block now designated as Wall Street.

Deutsche Boerse and NYSE must also continue to provide some services, under the Justice Department approval, to Direct Edge, the fourth-largest U.S. stock exchange operator, behind NYSE Euronext, Nasdaq OMX and BATS Exchange.

Direct Edge is run by a consortium that includes hedge fund Citadel and investment bank Goldman Sachs Group Inc .

"We are very pleased to have received the approval of the DOJ, an important milestone on our path to completing our compelling Trans-Atlantic combination," Duncan Niederauer, chief executive of NYSE Euronext, said in an emailed statement.

NYSE Euronext shareholders have already approved the deal.

Richard Repetto, an analyst at Sandler O'Neil, called the U.S. approval "irrelevant."

"The big issue is over in Europe, and whether the European competition commission is going to approve the deal. They expected this. They knew they would likely have to divest the ownership in Direct Edge," he said.

Potential buyers of the stake include BATS, he said. " I don't know whether they'd allow Nasdaq to own it because there'd be a lot of concentration again," he added.

ALL EYES ACROSS THE ATLANTIC

In Europe, there have been weeks of negotiations with antitrust regulators, in which staff made clear their reservations about approving a combination of Deutsche Boerse's Eurex and NYSE Euronext's Liffe on concerns that the merged entity would have a monopoly over European listed derivatives trading.

Both Deutsche Boerse and NYSE Euronext have said they would not pursue the merger if they were asked to divest either Eurex or Liffe. A formal decision by the European Commission is not expected until January or early February.

In a bid to soothe regulatory concerns, Deutsche Boerse and NYSE Euronext have offered to cap fees on trading in their European derivatives contracts for three years, and to sell the entire single-stock equity derivatives business of NYSE Euronext's Liffe unit.

The EU Commission has said it would make a decision on the deal by February 9.

In Germany, Deutsche Boerse's home regulator is insisting on concessions to win European approval, potentially further complicating the path to completing the deal.

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What will Santa leave in Wall Street's stocking?

Posted: 22 Dec 2011 05:16 PM PST

NEW YORK (Reuters) - Wall Street may not be on Santa Claus's list for presents this year.

The "Santa Claus rally" refers to the seasonal tendency for equities to gain in the final five trading days of the year and first two trading days of the new year.

Since 1969, the S&P 500 has gained on average about 1.6 percent during those seven trading days, according to the Stock Traders Almanac.

This year, the period runs from Friday, Dec 23. through Wednesday, January 4.

Some traders, however, are betting on a lump of coal in their Christmas stockings this year, suspecting that any malaise will be due to debt-stricken Europe, the source of so many disappointments this year.

"I don't buy into the whole Santa Claus thing this year. There were some bulls setting up for it but there is just too much news, too many headlines that can throw you off, " said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.

"I think you should be on guard all the time because we could be getting anything, like a downgrade on sovereign banks, any moment," he said. "If you are playing (the Santa Claus rally), it's a dangerous game to play."

Warnings from major credit rating agencies on a potential downgrade of several European nations has kept investors on edge. After Standard & Poor's back in August surprised financial markets with a downgrade of the United States' triple-A credit rating on a Friday evening, investors worry a similar move could come at any time - even between Christmas and New Year's.

The correlation between U.S. stocks and European sovereign bond yields remains high, so a negative headline out of Europe could hit the U.S. market.

Brown Brothers Harriman data to 1928 shows that stocks have traded higher 78 percent of the time during the year-end period, with an average gain of 1.8 percent. That compares with an average gain of 0.2 percent during any seven-day period since 1928, and a 56 percent chance of being higher.

When the market slips, however, the market suffers for months.

"In the 12 times the S&P 500 fell at least 1 percent during the Santa Claus rally, the index subsequently averaged a 1.9 percent loss during the first quarter of the new year," said Ari Wald, equity strategy researcher at BBH.

It could also be argued that the Santa rally came and went a bit early this year, with the one-day, 3 percent rally on the 20th accounting for all of what was to come.

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Jobless claims i US drop, signals economic momentum

Posted: 22 Dec 2011 05:11 PM PST

WASHINGTON (Reuters) - The number of Americans filing new claims for jobless benefits hit a 3-1/2 year low last week, bolstering views the economy was gaining momentum, even though third-quarter growth was revised down.

Other data on Thursday underscored the firming tone in the economy, with consumer sentiment scaling a six-month high in December and a barometer of future activity rising for a seventh straight month in November.

While the economy is wrapping up 2011 with a spring in its step, bickering over budget policy in Washington and the debt crisis in Europe have cast a cloud over its prospects next year.

A payroll tax cut and benefits for the long-term unemployed, both of which are due to expire at year end, have become tangled in partisan politics and it is unclear whether they will be renewed.

There were signs on Thursday the impasse had been broken, with House of Representatives Speaker John Boehner informing Senate Majority Leader Harry Reid he will set a vote on a Senate-passed two-month extension of the payroll tax cut, according to a Democratic leadership aide.

"The economy is carrying some clear momentum into 2012," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania. "If Congress doesn't kill that by failing to extend the tax breaks, we can look forward to a better year ahead."

Initial claims for state unemployment benefits dropped 4,000 to 364,000, the Labor Department said. That was the lowest level since April 2008 and just a month after the collapse of Bear Stearns.

The claims data, which covered the survey period for the December nonfarm payrolls report, helped to take the sting out of a separate report showing the economy expanded at only a 1.8 percent annual rate in the third quarter.

Growth, which had previously been reported to have expanded at a 2 percent pace, was held back by a sharp drop in healthcare spending, the Commerce Department said. A month ago, it had said healthcare spending had risen.

The revision to healthcare spending estimates reflected new source data, which showed losses at nonprofit hospitals.

However, spending on long-lasting goods was stronger than previously estimated, indicating consumer demand remained healthy.

Prospects for spending were boosted by the rise in consumer confidence. The Thomson Reuters/University of Michigan's sentiment index rose to 69.9 from 64.1 in November as measures of both current conditions and future expectations increased.

LABOR MARKET IMPROVING

The data helped stocks on Wall Street to post their third straight day of gains. The U.S. government bond market largely ignored the data, while the dollar was flat against a basket of currencies.

Even as much of the rest of the world is slowing down, with a mild recession forecast for Europe next year, the U.S. economy remains resilient.

The labor market is improving, households are spending, home building is picking up and factory output is expanding, putting the economy on course for at least a 3 percent growth pace in the fourth quarter. That would be the fastest pace in 18 months.

An index from the private sector Conference Board that seeks to predict the strength of future economic activity rose for a seven straight month in November, suggesting the economy could pick up even more speed by spring.

While claims for first-time unemployment benefits tend to be volatile this time of the year, they have dropped for three straight weeks. A four-week moving average, a better measure of trends, is now at its lowest level since June 2008.

"One unexpectedly low number can easily be a fluke; two are interesting; three are telling us something real is happening in the labor market," said Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York.

"The drop in claims in recent weeks, if sustained, is consistent with private payrolls growth ramping up to about 200,000 per month."

Nonfarm employment growth has grown by an average of 131,636 jobs per month so far this year, but not enough to significantly lower the jobless rate which is currently at 8.6 percent.

GROWTH GAINING STEAM

Last quarter's growth was still a step up from the April-June period's 1.3 percent pace. Part of the pick-up in output reflected a reversal of factors that held back growth earlier in the year.

The drop in healthcare consumption caused consumer spending growth to fall to a 1.7 percent rate from 2.3 percent. Consumer spending accounts for about 70 percent of economic activity.

Business inventories fell, but not as sharply as previously reported. Restocking by businesses is expected to support growth in the fourth quarter, helping to keep factories busy.

In addition, businesses showed little signs of cutting back on spending and profits continued to grow at a healthy clip.

Excluding inventories, the economy grew at a 3.2 percent rate, revised down from a 3.6 percent pace.

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