Stocks fell on Friday causing the Dow Jones Industrial average to fall below 12,000. The markets are experiencing the longest weekly losing streak since the tech bubble burst in 2002. The market fell 172 points, or 1.4%, closing at 11,951, according to the USA Today. Experts blame the Friday loss on the unloading of risky mortgage bonds onto the market by the Federal Reserve as well as the ongoing negative economic news.
U.S. Banks cutting use of Treasuries
The Financial Times reports that large U.S. banks are cutting their holdings of Treasuries in fear that the Congress will fail to raise the debt ceiling prior to August 2nd, the day that the U.S. is projected to reach its debt cap. Banks are seeking to have greater cash on hand due to the amount of Treasuries held as collateral in the repurchase and swap markets (estimated at $4 billion). There is approximately $9.7 billion of Treasuries outstanding as debt.
Goldman to launch commodities index
Goldman Sachs and Clive Capital, the largest commodities hedge fund, are launching a Commodities Index that will be marketed to risk averse investors such as pensions or endowments. The index will be what is known as an "active" or "dynamic" index, according to the Financial Times, and will hold commodities in the proportions recommended to be held by the investors. It will track 19 raw materials from oil to gold to sugar.
IMF suffers computer hacking
The computer systems of the IMF (International Monetary Fund) were recently invaded by hackers, as reported by the Washington Post. Few details were available but fears exist that information obtained could disrupt world markets. This is the third raid on a large financial institution in recent weeks. The U.S. Treasury Department indicates that it does not believe this incident will harm the U.S. financial system.
Exchange merger potentially blocked
The proposed merger of the Toronto and London exchanges could be blocked due to the emergence of a strong Canadian bidder underwritten by major financial institutions. TMX Group, who owns the Toronto exchange, received a $3.67 billion bid from Maple Group Acquisition to acquire the Toronto exchange and undermine the London Stock Exchange bid. The bid from Maple included partners such as Desjardins Financial, Dundee Capital, GMP Capital and Manulife Insurance, all large Canadian financial institutions. Maple went to shareholders directly offering C$48/share which is believed to be a 24% premium to the LSE bid, according to the Associated Press.
Africans to create a free trade zone
Twenty six African governments are working to create a free trade zone within the continent,according to the Associated Press. It would encompass 600 million people and a combined GDP of $800 billion. Multinationals would be able to send products across African borders duty free as well as long as they set up factories and created jobs for Africans. The agreement would facilitate the building of infrastructure including roads and railroads.
European banks fighting U.S. tax laws
European banks are fighting the implementation of a sweeping U.S. tax law known as the Foreign Account Tax Compliance Act or Fatca, according to Financial Times. The law forces overseas banks to report any American clients they may have and their assets based on any information in the bank records that may indicate they are Americans. The banks indicate the implementation of the records search is very expensive. The law imposes a 30% withholding tax on payments to institutions from the U.S. if they fail to comply with the law. Critics fear it will cause these banks to withdraw from U.S. capital markets.
Another Texas Oil Boom
South Texas is experiencing an oil boom due to the development of the ability to hydraulically fracture shale and remove the oil. The new projects have already employed 12,600 individuals and are projected to provide billions of gallons of oil, according to the Associated Press. The Texas Center for Commerce and Business Research indicates the industry will create 68,000 jobs in Texas by 2020.