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US stock market report

According to the executive chairman of futures exchange operator CME Group (NasdaqGS: CME), levying a tax on derivatives trades would translate to higher food prices around the world.

Per CME’s Terry Duffy, such a financial transaction tax, floated by Germany and France in August and formally proposed by the European Commission in late September, would force traders to build-in the added cost to their pricing and raise expenses for food producers. “If you want to see the price of food rise, just throw on a transaction tax,” he said, speaking at a Chicago event hosted by the Futures Industry Association.

The current plan has little support from the governments of the United States and United Kingdom but, banks and exchanges are taking the Franco-Germany plan more seriously than previous efforts, with broader political support for taxing the financial sector and fiscal pressures mounting on the euro zone.

The European Commission has estimated the tax could bring in about EUR55 billion per year. U.S. regulators are working on a plan to develop so-called “position limits” required under the Dodd-Frank financial law to rein in speculative traders in futures markets.

Duffy said the relatively small number of trading firms that provide the lion’s share of liquidity in global derivatives markets means that a transaction tax would put a “giant burden” on those participants that currently allow farmers and energy companies lay off risk in “a matter of seconds.”

That bid-offer spread will widen and it will cause the cost of business to go up all around the world,” said Duffy.

Federal Reserve officials were very uneasy about their forecast of a gradual pickup in economic growth over coming quarters, according to FOMC Meeting Minutes of the central bank’s interest-rate meeting on Sept. 20-21.

Fed members saw “significant downside risks” to growth. with risks including household deleveraging, bigger-than-expected fiscal tightening or a potential spillover from Europe economic crisis.

Fed officials agreed to consider how best to use their monetary policy and liquidity tools to deal with such economic disruptions, if and when, they occurred. During the meeting, the Fed adopted an Operation Twist to extend the maturities on its balance sheet with two officials, wanting to do more. Fed officials seemed eager to disclose more about their economic goals, suggesting there could be more developments on this front in coming meetings.

Speaking before the European Parliament in Strasbourg, European Commission President José Manuel Barroso called for a “fully coordinated” plan to strengthen the banking system, since the feedback loop between sovereign debt and banks has intensified.

The tentative coordinated plan calls for assessment of the exposure to sovereign debt held by all systemically important European banks. After accounting for sovereign-debt exposure, regulators would then temporarily require a significantly higher ratio of highest-quality capital.

Banks would be required to first seek private sources of capital, with national governments providing support if necessary. The European Financial Stability Facility, the euro zone’s rescue fund, would provide recapitalization through loans, if support was not available. Those banks requiring help would be barred from paying dividends or bonuses.

Free-trade deals between the U.S. and Colombia, Panama and South Korea are poised for approval by the House and Senate today after nearly five years of negotiations.

According to the U.S. International Trade Commission (ITC), the free-trade deals could potentially boost U.S. exports by $13 billion a year. According to the ITC, the agreement with South Korea is worth more than $11 billion in U.S. exports a year, right now.

President Obama has insisted that Congress approve funding for workers who have lost their jobs due to international competition alongside the trade agreements.

The Senate has approved the ‘trade adjustment assistance’ and the House is expected to vote on it today. The country’s biggest federation of labor unions, the AFL-CIO, has urged lawmakers to oppose the deal with Colombia due to killings of union members in the South American country.

Per the U.S. Chamber of Commerce, estimates for the failure to pass the three pacts would cost more than 380,000 American jobs.

Harrisburg, Pennsylvania officials announced today that the city council approved plans last night to file for bankruptcy protection under Chapter 9.

The state capital has been struggling under $300 million in debt tied to an incinerator. Councilman Brad Koplinski said the bond insurance company Assured Guaranty Ltd. which backed much of the city’s incinerator debt, has to step up with at least $100 million in concessions to make any plan to resolve the debt work.

A spokesman for Mayor Linda Thompson said the council’s actions could accelerate the state approving a takeover of Harrisburg. Municipal bond defaults remain very low and bankruptcy filings are rare.

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