Asian stocks rose, gold slumped and the dollar strengthened after better-than-expected US durable goods data. The Nikkei was flat but the Hang Seng rose 1% and the MSCI Asia Pacific was up 0.4%. However the Shanghai Composite continued to fall, sliding 1.2%. (Bloomberg)
Chinese interbank lending rates dropped after the PBoC made clear it would provide liquidity support where needed, and said it had already provided such support. The one-year interest-rate swap, the fixed cost needed to receive the floating seven-day repo rate, slid 16bps to 3.91% by late morning in Shanghai, according to Bloomberg calculations. The overnight and seven-day repo rates fell 40bps and 78bps respectively. (Bloomberg)(Financial Times)
"Italy risks potential losses of billions of euros on derivatives contracts it restructured at the height of the eurozone crisis, according to a confidential report by the Rome Treasury that sheds more light on the financial tactics that enabled the debt-laden country to enter the euro in 1999." (Financial Times)
Bond yields could undermine recovery in global banks' balance sheets: Under new capital rules, unrealised losses in these "available for sale" portfolios hit banks' equity capital. "I would think most institutions are going to have a fairly sizeable hit to their equity," said a senior executive of a top US bank. (Financial Times)
King criticises 'meddling' banks in final public BoE appearance: "Sir Mervyn complained that bankers left meetings with the new Prudential Regulation Authority about increasing their capital stocks and immediately called the prime minister and chancellor to put "tremendous pressure" on politicians to water down the rules." He said that in at least one case, calls were then made to the PRA about the banks' concerns." (Financial Times)
Dublin worries that Anglo Irish tapes will harm its attempts to win debt relief from the EU. "It makes it more difficult, of course it does, but we're going to continue to work to get the best possible outcome for the Irish taxpayer," said Eamon Gilmore, Ireland's deputy prime minister on Tuesday. (Financial Times)
US oil and natural gas operations are increasingly vulnerable to cyber attacks that can harm competitiveness and lead to costly outages at pipelines, refineries or drilling platforms, a new Council on Foreign Relations report says. (Reuters)
COMMENT AND CURIOS:
- Martin Wolf: Careless talk may cost the economy. (Financial Times)
- Ralph Atkins: Draghi must act so the eurozone is not a major casualty of US tapering. (Financial Times)
- Analysis: Young and educated with a dead-beat job in Europe. (Reuters)
- Peter Orszag: Young and educated with a dead-beat job in the US. (Bloomberg)
- Analysis: Young and educated with a dead-beat job in Japan. (Bloomberg)
- Shadow banking is carrying on unscathed in Wenzhou. (Bloomberg)
- Peer-to-peer lending delivers higher returns than equity investing in the same companies. (Financial Times)
- US is number one foreign investment destination for the first time in 12 years. (Reuters)
OVERNIGHT MARKETS: UP
Asian markets
Nikkei 225 down -0.21 (0.00%) at 12,969
Topix down -2.26 (-0.21%) at 1,076
Hang Seng up +202.08 (+1.02%) at 20,058
US markets
S&P 500 up +14.94 (+0.95%) at 1,588
DJIA up +100.75 (+0.69%) at 14,760
Nasdaq up +27.13 (+0.82%) at 3,348
European markets
Eurofirst 300 up +16.18 (+1.45%) at 1,130
FTSE100 up +72.81 (+1.21%) at 6,102
CAC 40 up +54.19 (+1.51%) at 3,650
Dax up +118.85 (+1.55%) at 7,811
Currencies
€/$ 1.31 (1.31)
$/¥ 97.78 (97.80)
£/$ 1.54 (1.54)
Commodities ($)
Brent Crude (ICE) down -0.47 at 100.79
Light Crude (Nymex) down -0.73 at 94.59
100 Oz Gold (Comex) down -23.30 at 1,252
Copper (Comex) unchanged 0.00 at 3.07
10-year government bond yields (%)
US 2.60%
UK 2.55%
Germany 1.80%
CDS (closing levels)
Markit iTraxx SovX Western Europe -0.03bps at 97.83bp
Markit iTraxx Europe -4.06bps at 128.16bp
Markit iTraxx Xover -16.74bps at 511.79bp
Markit CDX IG -5.49bps at 92.1bp
Sources: FT, Bloomberg, Markit
