Market briefing---Matt (slow)
Bond futures---Su (fast)
NYSE---Deb (fast)
Euro
Interview: Greg --- Royal Bank--- Fund Manager
welcome to “world financial report.” i’m matt nesto. now to the latest on a major conflict developing in the futures industry. frankfurt-based eurax says it is on track to open an all electronic exchange offering u.s. bond futures, an exchange that would compete directly with the chicago board of trade. su keenan has more on the battle that moved from chicago to washington today. su?
>> in washington earlier today the commodity futures trading commission chairman says the proposed entry by eurex into the bond futures market may be delayed. in testimony before the house agricultural committee, the chicago board of trade urged a delay based on concern over the plan for operation. now a key issue here is market share. the all electronic-based eurex has in five short years become the world’s biggest futures market. they want to open their own exchange in february offering u.s. bond futures which would mean direct competition with the chicago board of trade. now futures and options on u.s. treasuries, in other words, agreements to buy or sell assets at a set future date in price, make up 75% of the board of trade’s business. the eurex is betting lower fees and an advanced trading system will help it take market share. there’s also controversy over a rebate system eurex failed to mention in its application. this is a plan to offer as much as $40 million in rebates to traders and brokers who steer business to the new exchange.
>> we are in discussions with our market participants regarding what would give them incentive to trade on our exchange. i assure you we’ll not produce any type of program that is not condoned under the law.
>> well, this issue of what is called in the industry, payment for order flow, gives eurex an unfair advantage cord to get chicago mercantile exchange, the largest futures exchange in the u.s.
>> we have been around a century but we did not propose a $40 million rebate scheme that would reward the top 10 fiduciaries. that was part of the marketing materials to their clients. now it is taken out. there are some things in the application that are not the way they should be.
>> a lot of conflict, a lot of sticking points. but late today, the eurex said it is sticking to its target start date and it reversed a statement it made in the hearing to suspend its rebates to brokers if they didn’t meet u.s. regulations. the eurex is saying it stands by its original plan. this is a story that will continue and we’ll follow it.
>> i guarantee we will. thanks a million for that. appreciate it. the largest u.s. pension fund is rejecting the reform plan put forward by the new york stock exchange interim chairman john reed. the california public employees retirement system, better known as calpers, says it will try to convince institutional investors and the securities and exchange commission to do the same. reed recommended an eight-member board to run it.
>> the regulatory framework is doomed to fail for lots of reasons. the foremost reason is the board members who ultimately will be accountable for the regulatory action against members are beholden to those members for their very jobs.
>> harrigan says reed’s board excludes institutional investors. calpers oversees $145 billion in assets. the market staged a late-day rally today. deborah kostroun was right there to watch the closing bell and all the action leading up to it. she joins us from the nyse with more. deb?
>> well, matt, we did see this late-day rally. a little surprising that it didn’t start earlier in the day when we had the initial jobless claims coming at their best level since january 2001. but also we had cisco systems helping to push things along. so we did see obviously by the closing bell the dow and s&p higher and also the nasdaq closing at that 22-month high. in today’s session, something actually we have been seeing since the low on march 11, transports have been some of the best performers. few take a look at transports and compare them to how the dow has been performing, you have the transports performing quite well once again in today’s session. the dow transport index hitting a 52-week high. in addition, you have―few look at this chart, the dow up 32% since the low of march 11. transports are up a whopping 53%. they have been outperforming the dow jones industrial average. the transports, once again, hitting a 52-week high. cyclicals also performing quite well. when you look at an environment where initial jobless claims are looking better, you are also looking at an environment where the economy is performing well. cyclical stocks perform well because you look at an economy that is ramping up. one of the many reasons you have railroad stocks performing well, because they’re transporting all kinds of good. ingersoll-rand and united technology hitting new highs in today’s session. cyclicals do perform well in that kind of environment. telecom, however, this was one of the areas of the market for the second day in a row that was the biggest drag on the s&p 500. the telecom services sharply lower. a lot of concern that the f.c.c. may free consumers to move home phone numbers to cellular phones. the f.c.c. may rule by the end of the week. to you in the studio.
>> thank you, deborah kostroun. let’s get to the numbers today. deb does a great job with the individual stocks . the dow, s&p and nasdaq all finishing higher here today. we are pointing out that 22- month high with the nasdaq. half percent gains for the dow and s&p. twice as much for the nasdaq here today. volume on the nyse just slightly above that 1.3 billion share six -month average. to the nasdaq and volume there as typically, over two billion shares on the day. wilshire 5000 also strong today. .6% higher. bonds not surprisingly on the slide here today. treasuries for the 10, five, three, two finishing lower on the session here today. well, the u.s. dollar touched its strongest level against the euro since a meeting of the group of seven industrialized nations all the way back in september, about six weeks ago, fresh evidence that the labor picture may be improving and help the rally and faster growth in the u.s. may mute calls for a weaker dollar to spur u.s. exports. to discuss the latest trends in the currency market, let’s bring in royal bank of canada’s greg gibbs. he joins us from sydney, australia. appreciate you joining us here today. talk about this move in the euro the weakness there. is this moment tear retreat back to normal levels at 1.14 or the beginning of a bigger move?
>> you mentioned the g-7 meeting back in september. these are getting close to those levels from which the dollar did stop a weakening trend.the dollar has weakened a lot against the yen over that period. the euro is back to crucial levels. i think the risk is we see the euro fall a little further on the basis of the stronger numbers we are seeing out of the u.s.
>> well, today the big mover, of course, for so many things was the jobs data that came out. they were going to have more tomorrow on a monthly basis. do you expect similar moves if the forecasters are correct?
>> well, the jobless claims are quite important. they have proved to be a reasonable leading indicator. around the 350 level on a weekly basis is the best numbers since the equity bubble burst back in 2000-2001. we are seeing genuine improvement in the jobs number. whether that follows through into the monthly data tomorrow, i don’t think it matters too much, as long as the numbers are in line showing the right trend. the market will project forward improvement into the next month and month after that anyway.
>> we sought bank of england raise its rate, your home team. the reserve bank of australia also raising rates recently. the european central bank not raising rates. 30 seconds there. any surprise or disappointment with the e.c.b. and any impact on currencies?
>> no surprises. the european economy is picking up, but it is doing more so slowly than other economies. we are looking at several months before we get rate moves there. in the u.k. they’re taking back an emergency cut they put in place in the middle part of the year. they’re seeing strong housing data and strong economic data.
>> we have to cut you o.going to a commercial break. i apologize.
