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THE NEWS WRAP: S&P hit with $US5 billion US government lawsuit over subprime mortgage ratings

Wednesday, 6 February 2013 | By Andrew Sadauskas

Standard & Poor’s has been hit with a $US5 billion lawsuit, accusing the ratings service of “defrauding investors” through its credit ratings prior to the global financial crisis.

 

No individuals were charged in the 119-page US Department of Justice lawsuit, filed late Monday in federal court in Los Angeles.

 

"There was no fraud. The ratings that were issued were believed by the people who issued them. And that's what the government has got to disprove," S&P lawyer Floyd Abrams says.

 

Future Fund warns of future uncertainty

 

The Future Fund has warned of uncertain global economic conditions, despite reporting a strong 12.8% return.

 

Chief executive Mark Burgess attributes the strong result to a turnaround in world sharemarkets last year, with strong performances delivered across all of the fund’s asset classes.

 

However, he also raised concerns about the long-term fiscal environment in the US and the potential impact of central banks tightening monetary policy.

 

Macquarie sticks by investment banking unit

 

Macquarie Group has announced it anticipates a 10% lift in profits and that it will maintain its investment banking unit, despite recently announced losses and weak capital markets.

 

Meanwhile Shemara Wikramanayake, the head of Macquarie's $330bn funds unit, played down the possibility of international bond markets declining.

 

"Yes, (in) the bond market, yields are going up a bit. Yields move inversely to prices and have been rising as investors sell down bonds as the global economic outlook improves,” Wikramanayake says.

 

"While there continues to be a huge amount of liquidity needing to be pumped into every major economy – it's happening in the United States, Europe, Japan – it's really hard to see the bond bubble bursting."

 

Overnight

 

The S&P500 was 1.18% lower at 1513.41. The Aussie dollar is up to US104.04 cents.