Markets: Asian shares rose after tumbling the most in six weeks yesterday while Treasuries fell as sentiment among Japanese manufacturers increased to the highest since 2007 and investors gauged the impact of a partial shutdown of the U.S. government. Australia's dollar gained on retail sales data. The dollar held steady. (Bloomberg) (Reuters) (Financial Times)
Shut down: The US government will start to shut down numerous agencies on Tuesday and send tens of thousands of workers home after Republicans and Democrats failed to bridge their differences over the budget. A series of votes in the Republican-controlled House of Representatives and the Democratic Senate left the two sides stuck at the same position at midnight on Monday where they had started the day, with conservatives refusing to pass a short-term budget without a delay in Barack Obama's health law. (Financial Times) (NYT)
Silvio Berlusconi faces party revolt over coalition collapse: The possibility of an internal revolt against Mr Berlusconi was cited on markets as a factor that limited the backlash for Italian stocks and government bonds on Monday, with hopes rising that the eurozone's third-largest economy would avoid another destabilising election campaign. (Financial Times) (WSJ)
George Osborne aims for budget surplus by 2020: He told the Tory conference that his new fiscal straitjacket was intended to "secure sound public finances", helping to hold down interest rates and leaving open the prospect of tax cuts at the end of a second Tory term. (Financial Times)
"Japanese Prime Minister Shinzo Abe said Tuesday that he has decided to go ahead with a plan to increase the national sales tax next year. "I have decided to raise the consumption tax rate to 8% to 5% from April 1," Mr. Abe said at the beginning of a meeting of ruling party officials." (WSJ)
Japanese companies' confidence at six-year high: Tuesday's quarterly "Tankan" survey from the Bank of Japan, which takes the pulse of about 10,600 companies of all sizes across the country, showed that the headline measure of confidence among large enterprises was at its highest level since the final quarter of 2007, boosted by exporters cheered by a weaker yen and by non-manufacturers enjoying a revival in consumer spending. (Financial Times)
Japan's real borrowing rate turns negative: "Japan's real cost of long-term borrowing has dropped below zero, bringing an end to years of high real rates and marking a milestone for "Abenomics". Negative real interest rates are a key feature of Shinzo Abe's war on deflation, which aims to encourage bond-heavy investors to seek higher returns through domestic stocks, loans or property, or by buying assets abroad." (Financial Times)
Hedge funds' bets on falling share prices have dropped to $144bn, the lowest level since the data provider began monitoring in 2006, as traders predict an extended bull run for equities over the coming months. (Financial Times)
EU urges US to delay reforms to the $633tn derivatives market, in an intervention aimed at preventing Washington from extending its reach overseas. Under the Commodity Futures Trading Commission rules, a derivatives trading platform – whether based in London, Zurich or Hong Kong – must register and follow the US rule book if it trades with a US counterparty. (Financial Times)
US asset managers face tighter scrutiny after the US Treasury's Office of Financial Research issued a report on Monday detailing the ways in which the industry could create vulnerabilities in the financial system. (Financial Times)
Dimon visits White House amid settlement talks: JPM faces about $11bn in penalties and consumer relief. It has implied most of the faulty securitisations were done by Bear Stearns and WaMu before they were acquired, would prefer to not break down the claims to avoid shining a spotlight on JPMorgan, these people say. (Financial Times) The Justice Department's pursuit of possible criminal charges "is based in large part on information from a person inside the bank who is aiding the government, according to people familiar with the matter." (WSJ)
US insurers have offloaded more than $360bn worth of liabilities to subsidiaries in jurisdictions with weaker reserve rules underlining how insurers have shifted a swathe of their holdings into the shadows. (Financial Times)
"The planned sale of Nokia's handset business to Microsoft hit a potential setback after Indian tax authorities froze some of Nokia's assets in India" to ensure that the company has sufficient funds to pay an estimated $635 million tax bill. (WSJ)
Recep Tayyip Erdogan, Turkey's prime minister, has unveiled what he described as the most wide-ranging package of reforms in the country's history, including measures to permit the greater use of Kurdish languages, open up the electoral system and scrap bans on the use of the headscarf in public life. (Financial Times)
COMMENTS & CURIOS
"The time is ripe to address the regulatory treatment of sovereign exposures." Weidmann (Financial Times)
The Middle East has a way of making optimists look foolish, but that's not stopping the optimists. (Financial Times)
Chris Giles deep dive on the Jordà and Taylor paper. He's not convinced (Financial Times)
The Tories will fight populism with dull seriousness (Financial Times)
Japan VAT hike to test Shinzo Abe's political popularity (Financial Times)
Toyoda's legacy goes well beyond the lean (Financial Times)
The (oversupply) rut we can't get out of (NYT)
India's dangerous political vacuum (Financial Times editorial)
Tunisia's government falls, Arab democracy is born (Bloomberg)
OVERNIGHT MARKETS
Asian markets
Nikkei 225 up +66.16 (+0.46%) at 14,522
Topix up +6.78 (+0.57%) at 1,201
Hang Seng down -347.18 (-1.50%) at 22,860
US markets
S&P 500 down -10.20 (-0.60%) at 1,682
DJIA down -128.57 (-0.84%) at 15,130
Nasdaq down -10.12 (-0.27%) at 3,771
European markets
Eurofirst 300 down -7.45 (-0.59%) at 1,247
FTSE100 down -50.44 (-0.77%) at 6,462
CAC 40 down -43.33 (-1.03%) at 4,143
Dax down -67.11 (-0.77%) at 8,594
Currencies
€/$ 1.35 (1.35)
$/¥ 98.21 (98.21)
£/$ 1.62 (1.62)
Commodities ($)
Brent Crude (ICE) down -0.63 at 107.74
Light Crude (Nymex) down -0.35 at 101.98
100 Oz Gold (Comex) up +0.90 at 1,327
Copper (Comex) down -0.01 at 3.32
10-year government bond yields (%)
US 2.64%
UK 2.76%
Germany 1.78%
CDS (closing levels)
Markit iTraxx SovX Western Europe +0.9bps at 88.14bp
Markit iTraxx Europe +1.94bps at 104.38bp
Markit iTraxx Xover +7.53bps at 408.03bp
Sources: FT, Bloomberg, Markit
