Asian shares wilt, dollar off highs

GNN - Asian shares got off to a lackluster start on Wednesday after a plunge in oil prices dragged down U.S. shares, while the dollar took a breather after this week's rally.

Crude prices steadied after falling to multi-year lows on news top oil exporter Saudi Arabia cut its U.S. sales prices.

Investors warily tracked U.S. election results, in which Republicans were poised to make major gains and possibly capture control of the Senate in a midterm vote that could serve as a public referendum on President Barack Obama's job performance.

The dollar dipped as investors locked in profits after this week's rally, while a Reuters report saying central bankers in the euro zone plan to challenge European Central Bank President Mario Draghi's leadership style underpinned the euro.

Some members intend to raise their concerns with Draghi at the governors' traditional informal working dinner on Wednesday before the ECB's formal monthly rate-setting meeting on Thursday, the sources interviewed by Reuters said.

"We do not expect further easing at Thursday’s ECB meeting but it may give more insight into its new asset purchase programs," strategists at Barclays said.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was down about 0.1 percent in early trade, while Japan's Nikkei stock average .N225 gave up about 0.2 percent.

On Wall Street on Tuesday, the S&P 500 .SPX and Nasdaq Composite .IXIC ended lower after the big drop in oil prices, while the Dow Jones industrial average .DJI eked out a small gain, with energy shares under pressure from low oil prices.

U.S. data on Tuesday revealed a surprise widening of the trade deficit last month, which raised speculation that the initially reported 3.5 percent pace of third-quarter U.S. growth could be revised down. That in turn reduced the likelihood that the U.S. Federal Reserve would hike interest rates in 2015.

The Commerce Department said the trade deficit grew 7.6 percent to $43.03 billion, compared with a forecast of $40.00 billion among analysts polled by Reuters.

The data increased the safe-haven appeal of U.S. Treasury notes, pushing down the benchmark 10-year yield and weighing on the dollar. The yield stood at 2.335 percent in Asia, down from its U.S. close of 2.342 percent on Tuesday, when it fell as low as 2.303 percent.

The dollar index was flat on the day at 87.015 .DXY, after moving away from its four-year high of 87.406 touched on Monday.

The dollar was buying 113.60 yen, down slightly and well below a seven-year peak of 114.21 hit on Monday.

The euro edged up to $1.2550, moving off a two-year low of $1.2439 set on Monday and shrugging off downbeat data after the ECB news.

The European Commission on Tuesday downgraded its forecast for euro zone economic growth over the next few years, leading investors to raise bets the ECB might consider more action to stimulate the region's economy.

In commodities trading, U.S. crude futures CLc1 edged up about 0.1 percent to $77.28 after reaching the lowest intraday price since October 2011 on Tuesday, after the Saudi move.

(GNN,AIP,Reuters,ga)(Editing by Eric Meijer)

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Investors eye election outcome as results trickle in

GNN - With voters at the polls throughout the United States, investors expect a Republican takeover of the U.S. Senate, a result that could have a positive effect on parts of the market, particularly the energy sector.

Republicans would need to gain a net six seats in the Senate to gain control of the 100-seat body.

With Republicans in control of both houses of Congress and a Democrat in the White House, more of the gridlock that has characterized most of the six years of President Barack Obama's tenure is widely expected.

"Republican control of Congress would not end Washington’s dysfunction nor penchant for inaction," William Lee, strategist at Citi Research, wrote on Tuesday.

Investors with a stake in the energy sector, the sole industry group in the S&P 500 with negative year-to-date returns, hope a Republican Senate takeover will speed up approval of oil and gas pipelines, reform crude and natural gas export laws, and motivate the Obama administration to include those energy exports in new, or broader, trade agreements.

With voters giddy about gasoline prices under $3 a gallon, still, no party wants to be the one in charge of lifting a ban that could end raising gasoline prices again. Hence politicians have sought to maneuver around the issue and a possible spike in market volatility.

However, it is also possible that an emboldened Republican Party will attempt to force budget cuts and consider another battle over the debt ceiling in 2015, which could sap market confidence. Equity markets have been damaged in the recent past by such battles - most notably in 2011, when a budget fight led to the first-ever downgrade of the U.S. credit rating.

S&P E-mini futures were little changed in after-hours activity, losing one point on thin volume.

Other issues that may also find traction under Republicans include a potential repeal of the medical-device tax that is part of the Affordable Care Act, which could be a positive for the healthcare technology sector. Republicans could also try to slow adoption of online gaming, which could boost casino stocks.

Regardless of the outcome, history shows a bullish bias in stocks after midterm elections. Since 1928, the S&P 500 has posted a median return of 7 percent in the 90 days after a midterm, with returns positive 86 percent of the time, according to Barclays.

(GNN,AIP,Reuters,ga)(Reporting by Rodrigo Campos; Editing by Steve Orlofsky)

Exclusive: U.S. lacked hard proof in tax trial of ex-UBS banker, jurors say

GNN - U.S. prosecutors did not present enough hard evidence to link a former top UBS AG (UBSN.VX) banker to subordinates' schemes to help wealthy Americans hide $20 billion in secret accounts from tax authorities, jurors from the trial told Reuters on Tuesday.

A federal jury in South Florida on Monday took a little over one hour to acquit Raoul Weil, who headed the Swiss bank's global wealth management unit, of conspiring to defraud the Internal Revenue Service. The verdict was a major setback for Washington's efforts to crack down on offshore tax evasion by Americans, and raised questions about how aggressively the government will pursue similar cases against senior executives.

"There were no documents that tied that man to anything, that was our problem," said Tracey Demyer, a 43-year-old medical assistant and one of two jurors who spoke to Reuters. "Ninety percent of the crucial documents did not have that man's name on it."

Prosecutors had obtained the cooperation of several of Weil's colleagues who testified at his trial in Fort Lauderdale, but defense lawyers extensively cross-examined them in an attempt to undermine their credibility.

One banker, Hansruedi Schumacher, admitted under questioning from defense lawyer Matthew Menchel that Weil had nothing to do with a plan to distort legal advice against promoting certain offshore structures to American clients, according to a transcript of the trial.

The testimony of another of Weil’s underlings, Martin Liechti, was pivotal and unconvincing, a second juror, Miami physician Juan Carlos Palacios, said.

"The problem is that I believe Mr. Liechti, that he had discussions with Mr. Weil, but there was no evidence of that. That was the problem," Palacios said.

Mark Daly, lead prosecutor on the case, declined comment.

A Justice Department spokeswoman earlier said the decision would not impact the agency's efforts to hold offshore tax evaders and their enablers accountable.

As a result of the verdict, future efforts by the U.S. government to bring tax fraud cases "will require more than just the word of former alleged co-conspirators," David Weinstein, a former federal prosecutor now in private practice in Miami, said when the verdict was announced.

"Corporate defendants will also be less likely to cooperate with the government and may instead choose to begin fighting the allegations made against their institutions," he added.

"For a jury to acquit after only an hour means that there were some huge holes in the government’s case," David Weinstein, a former federal prosecutor now in private practice in Miami, said when the verdict was announced.

At least 25 people, including bankers, lawyers and asset managers, have been charged by U.S. authorities with assisting tax evasion via Swiss banks since 2008.

Of that 25, six have pleaded guilty, but no trials for the other 19 are imminent as most of those charged are overseas.

The Justice Department suffered a similar loss on Friday when a federal jury in Los Angeles acquitted Shokrollah Baravarian, a former senior vice president at the local branch of Israel’s Mizrahi Tefahot Bank, of conspiring to help U.S. clients defraud the IRS through the opening of secret foreign bank accounts.

ARRESTED AT ITALIAN HOTEL

Weil, 54, was arrested in October 2013 while on vacation with his wife at an upscale hotel in Italy, and pleaded not guilty last year after being extradited to the United States.

Prosecutors had obtained an indictment against Weil in 2008, at the start of a lengthy crackdown under which UBS in 2009 paid a $780 million fine. Its Swiss arch-rival Credit Suisse AG (CSGN.VX) earlier this year paid more than $2.5 billion in penalties for helping wealthy Americans evade taxes.

The Weil verdict comes as the Justice Department has been under pressure to charge senior bank executives for crimes at their institutions, and suggests the government may have a tough time tying high-level officials to misconduct by employees.

"They said that he flew into Miami to meet clients with one of the other witnesses. Where are their hotel records? Where are their flight records?” juror Demyer said. "It just didn’t seem like they did enough digging."

The jurors said they had discussed during deliberations the idea that Swiss banks were involved in helping Americans break the law, and that Weil, as a supervisor of the business, should have known what was going on, but that the jurors all came to an agreement that the government had not proved his involvement in the scheme.

"I know this is a business. These are bankers...we're not stupid about this. Weil didn't know about this? Give me a break," said Palacios.

"I looked (at) the evidence over and over and we couldn't get the connection," he said.

(GNN,AIP,Reuters,ga)(Reporting by Aruna Viswanatha and Kevin Drawbaugh in Washington, with additional reporting by Francisco Alvarado in Fort Lauderdale, Zachary Fagenson in Miami, and Nate Raymond and Noeleen Walder in New York; Editing by Lisa Shumaker)

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• Exclusive: U.S. Lacked Hard Proof In Tax Trial Of Ex-UBS Banker, Jurors Say (businessinsider.com)
• U.S. lacked hard proof in tax trial of ex-UBS banker, jurors say (dailymail.co.uk)
• Ex-U.B.S. Executive Raoul Weil Acquitted in U.S. Tax Cheating Trial (rss.nytimes.com)

Pimco Total Return Fund posts a record $27.5 billion in outflows in October

GNN - Pacific Investment Management Co suffered a record $27.5 billion in withdrawals from its flagship Pimco Total Return Fund in October, extending large net outflows following Bill Gross' surprise resignation from the firm.

The redemptions surpassed the $23.5 billion reported in September, according to a statement on Tuesday from Newport Beach, California-based Pimco. Its main fund, the world’s biggest bond mutual fund, now has $170.9 billion in assets, down from a peak of $293 billion in 2013.

Gross, who managed the Pimco Total Return Fund and co-founded the firm over 40 years ago, resigned on Sept. 26 to join rival Janus Capital Group Inc (JNS.N).

Pimco - which had assets under management of $1.876 trillion as of Sept. 30, representing a 5 percent drop in the third quarter - has been aggressively reassuring clients through meetings, conference calls and advertisements that the firm remains committed to the same investment strategies following Gross' exit.

"With Bill's recent decision to resign, the perception has been that there has been a dramatic shift at Pimco," Pimco CEO Doug Hodge said in a letter to clients last month. "However, the reality is that while Pimco has evolved into a globally diversified investment company, our DNA is fundamentally unchanged."

Gross' exit, eight months after his top deputy, Mohamed El-Erian, quit amid acrimony, has quickened speculation in the bond market about leadership stability and further outflows into the new year.

Pimco said outflows from the Pimco Total Return fund slowed considerably during the month of October, with nearly half of the $27.5 billion of outflows occurring in the first five trading days.

"Unfortunately, new management will need to convince shareholders that the process has not changed but performance has improved," said Todd Rosenbluth, S&P Capital IQ's director of mutual fund and ETF research. "But many investors viewed the Gross departure as reason to reconsider investing in Pimco Total Return. For many, the review process takes time, so outflows could persist as investors identify other funds with stronger records under current management."

David Schawel, vice president and portfolio manager of Square 1 Financial noted: "Eventually though, flows will be driven by performance and the new perception of leadership."

Jeffrey Gundlach's DoubleLine Funds, an investment firm that has been a major rival to Pimco, reported its ninth consecutive month of inflows in October, totaling $2.38 billion, a record for monthly inflows so far this year.

The DoubleLine Total Return Bond fund is posting returns of 5.94 percent year to date, beating 87 percent of the peers in its category, according to Morningstar data.

The Pimco Total Return Fund is posting returns of 4.07 percent for the same period, trailing 79 percent of its peers, according to Morningstar.

On Monday, Pimco rehired Marc Seidner as chief investment officer of non-traditional strategies, the sixth CIO named since El-Erian's departure.

(GNN,AIP,Reuters,ga)(Reporting by Jennifer Ablan; Editing by Dan Grebler)

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