Asian shares were muted. The Nikkei rose 1 per cent following Monday's weak ISM manufacturing number in the US. (Reuters) Topix fact du jour: analysts expect its earnings to rise 57 per cent this year, compared to a global average of 19 per cent. (Bloomberg)
Japan's public pension funds are to be recruited to buy stocks and real assets in the Abe government's latest move to mobilise the country's savings for growth. A panel will be set up to review investment guidelines for the public funds, which have previously piled into Japanese sovereign bonds, including the mighty Government Pension Investment Fund. The guidelines would come into force by April 2015 under the draft plan. (Reuters)
Japanese wages rose by the most in a year in April. The 0.3 per cent increase in monthly pay follows recent salary rises at Toyota, Honda and Hitachi. (Bloomberg)
The Reserve Bank of Australia kept rates unchanged at 2.75 per cent. (RBA statement)
Concern is rising that volatility in Japanese and US government bond yields could swamp banks' Value at Risk models. While banks increasingly use "stressed" VaR as part of their regulatory capital calculations, preparing them for repeats of the worst volatility of recent years, traditional models can be used to set internal trading limits. One investment bank breached its limits after recent statements by Japan's new central bank governor. (Financial Times)
The most popular brand of bond mutual funds have been caught out by recent jumps in yields. US funds investing in higher-rated debt of less than 10 years' maturity lost 1.8 per cent in May, their worst performance since October 2008. (Financial Times)
No ECB "bazooka" planned for small-business credit crunch. The central bank is unlikely to commit large resources to improving SMEs' access to funding, after concluding that clean-up of banks' balance sheets would do more to encourage lending. Separate ECB plans to work with the European Investment Bank to reopen the ABS market for SME funding are not expected to have a large impact. (Financial Times) Small Italian companies are increasingly turning to "minibonds" to replace bank loans. (Wall Street Journal)
Europe "losing the 4G race": some 19 per cent of US network connections are expected to be using LTE, a 4G technology, by the end of 2013 -- compared to fewer than 2 per cent in Europe, despite recent efforts by companies including Vodafone to boost investment there. (Wall Street Journal)
North-west England could be sitting on a shale gas bonanza after a leading explorer vastly increased its estimate of the amount of gas lying in its licence area. IGas said that the region could contain between 15 and 172tn cubic feet, compared to a preliminary estimate of 9 tcf. (Financial Times)
European Commission plans to centralise bank resolution powers could rankle with Germany. A draft "single resolution mechanism" identifies the Commission as the "best placed institution" to deal with failing lenders, including the ability to overrule national governments and to finance rescues from a fund backed by "assets of euro area banks". Germany has resisted Commission control over bank closures, arguing that it conflicts with EU treaties. (Financial Times)
More on Japonica, the investor which announced a €2.9bn 'tender offer' for Greek bonds. The market shrugged off the proposal to buy the debt at a minimum 45 cents in the euro, a contrast with Japonica founder Paul Kazarian's past as an activist investor in US companies ranging from a maker of home appliances to an ice-cream giant. (Wall Street Journal)
COMMENT AND CURIOS
- Janan Ganesh on UK austerity politics: "entire limbs of Leviathan are off-limits". (Financial Times)
- Dani Rodrik analyses the Turkish protests -- and Erdogan's economic legacy. (Financial Times)
- Reconstructing the London Whale trades. (Bloomberg)
- The incredible endurance of the permanent contract, by Brian Groom. (Financial Times)
- But Australia's resources boom starts shedding jobs... (Bloomberg)
- How the world's No. 1 chess player is preparing for the most-anticipated match since the 1970s -- in Chennai, India. (Wall Street Journal)
OVERNIGHT MARKETS: UP
Asian markets
Nikkei 225 up +142.96 (+1.08%) at 13,404
Topix up +14.45 (+1.32%) at 1,111
Hang Seng down -65.19 (-0.29%) at 22,217
US markets
S&P 500 up +9.68 (+0.59%) at 1,640
DJIA up +138.46 (+0.92%) at 15,254
Nasdaq up +9.46 (+0.27%) at 3,465
European markets
Eurofirst 300 down -8.52 (-0.70%) at 1,207
FTSE100 down -57.97 (-0.88%) at 6,525
CAC 40 down -27.92 (-0.71%) at 3,920
Dax down -63.04 (-0.76%) at 8,285
Currencies
€/$ 1.30 (1.30)
$/¥ 99.61 (100.64)
£/$ 1.53 (1.52)
Commodities ($)
Brent Crude (ICE) down -0.26 at 101.80
Light Crude (Nymex) down -0.43 at 93.02
100 Oz Gold (Comex) down -0.70 at 1,411
Copper (Comex) unchanged at 3.33
10-year government bond yields (%)
US 2.12%
UK 2.00%
Germany 1.52%
CDS (closing levels)
Markit iTraxx SovX Western Europe at 85.95bp
Markit iTraxx Europe +4.8bps at 107.4bp
Markit iTraxx Xover +17ps at 438.4bp
Markit CDX IG -0.6bps at 78.5bp
Sources: FT, Bloomberg, Markit
