Markets: "Oil fell, with U.S. prices slipping for a fourth day, after an industry report showed crude supplies rose for a ninth week. Asian stocks erased losses as Chinese shares advanced, while Indonesia's currency weakened." (Bloomberg)
A pair of American B52 bombers flew across disputed islands in the East China Sea on Tuesday, just days after China claimed the area as its own "air defence identification zone". In what appeared to be a direct challenge to the Chinese claim, the Pentagon said that the flights were a long-planned training mission and insisted that the US would continue to operate in what it considers to be international air space. The Chinese were not informed. (Financial Times) (WSJ)
Japan's "ANA and Japan Airlines, the nation's largest carriers, flew through a new Chinese air-defense zone without notifying the country after Japan asked airlines to stop giving flight information to China." (Bloomberg)
"Germany's biggest political parties agreed early Wednesday on a deal to forge a coalition government led by Chancellor Angela Merkel. After 17 hours of negotiations, Ms. Merkel's conservative Christian Democratic Union, its Bavarian Christian Social Union sister party and the Social Democrats agreed to introduce a national minimum wage and toughen labor market rules, as well as boost spending on pensions, education and infrastructure." (WSJ)
The biggest US banks may have to spend a further $104bn to resolve mortgage-related legal issues as they try to put the costs of the subprime crisis behind them. S&P, the credit rating agency, estimates the banks, including JPMorgan Chase and Bank of America, may need to pay between $56.5bn and $104bn on legacy mortgage settlements with investors and counterparties. Payments at the upper end of the estimates would wipe out about two-thirds of the $154.9bn litigation buffer estimated to be held by the banks but would not cut into their regulatory capital. (Financial Times)
Private equity keeps $789bn of powder dry: Private equity groups are holding more cash for acquisitions than they had at the height of the leveraged buyout boom, in spite of a fall in the volume of deals being done – raising concerns about overcapacity in the industry. Data compiled by Preqin, the research group, show that the value of unspent commitments to private equity funds, known as "dry powder", has surged to $789bn this year – an increase of 12 per cent since December 2012, after four years of decline. (Financial Times)
"Chinese companies' borrowing costs are climbing at a record pace relative to the government's, increasing the risk of defaults and prompting state newspapers to warn of a limited debt crisis. The extra yield investors demand to hold three-year AAA corporate bonds instead of government notes surged 35 basis points last week to 182 basis points, the biggest increase since data became available in September 2007, Chinabond indexes show. That exceeds the similar spread in India of 120 basis points. The benchmark seven-day repurchase rate has averaged 4.47 percent in November, the highest since a record cash crunch in June and up from 3.21 percent a year earlier." (Reuters)
The UK's Serious Fraud Office is considering a criminal investigation into allegations Royal Bank of Scotland systematically defrauded companies by forcing them out of business, amid growing pressure on the bank over its treatment of SMEs. (Financial Times)
The board of Repsol is poised to accept an offer of $5bn compensation from the Argentine government for the nationalisation of its YPF subsidiary. The Spanish oil company's management, under pressure from its largest shareholders, has agreed in principle to settle the legal battle over Argentina's seizure of its majority stake in YPF but is demanding guarantees over how the $5bn will be paid, people close to the situation said. (Financial Times)
"Several private equity investors are studying the possibility of making a bid for Compuware, setting up a potential takeover battle for the business software maker less than a year after it spurned a $2.3bn offer from activist investor Elliott Management. Funds, including Thoma Bravo and Vista Equity Partners, a San Francisco-based buyout firm, have approached Compuware about taking the company private, according to people familiar with the discussions... Any offer is likely to be priced at a premium to Compuware's $2.34bn market capitalisation." (Financial Times)
"The U.S. Justice Department is probing Morgan Stanley for its hiring practices in China, according to a person familiar with the matter. The move comes as U.S. authorities expand their investigation into whether banks' hiring of politically connected Chinese employees may have breached U.S. bribery laws." (Reuters)
"The U.S. Federal Reserve was pressing JPMorgan Chase to distance itself from its metals warehousing business more than a year ago... A series of letters between JPMorgan's lawyers and the Fed, released to Reuters through a Freedom of Information Act request, show Wall Street's primary regulator took a tough stance on the bank's efforts to hold onto the global network of Henry Bath & Sons warehouses, part of the larger RBS Sempra commodity trading business it bought in mid-2010." (Reuters)
Aramark, the food and concession provider for facilities from stadiums to prisons, will begin investor meetings for an initial public offering as early as next week as it looks to raise up to $1bn from a listing, according to people familiar with its plans. An IPO of Aramark, which was acquired in a 2007 buyout worth $8.3bn, would pave the way for its private equity backers, led by Warburg Pincus, Thomas H. Lee and Goldman Sachs Capital Partners, to exit their investment. (Financial Times)
Archer Daniels Midland has tried to win the support of wary Australian farmers as its offer to buy GrainCorp faces intensifying political scrutiny in Canberra. The measures – new infrastructure spending and a temporary cap on handling fees – on offer illustrate the importance of the A$3.4bn ($3.1bn) takeover for the agricultural trader's plans to broaden crop supplies away from the US. (Financial Times)
Shares in HP jumped as much as 8 per cent in after-hours trading on Tuesday after the technology company reported earnings at the higher end of its forecasts, despite worries about a wobbly corporate IT market. (Financial Times)
For the first time since the financial crisis banks such as "Goldman Sachs, UBS and GLG Partners . are gathering investor money for debut hedge funds dedicated to the [Asia] region. Highbridge Capital Management LLC and Pine River Capital Management LP are restarting or expanding their Asian offerings. " (Bloomberg)
COMMENTS & CURIOS
Free movement within Europe needs to be less free writes Cameron (Financial Times)
The ferocious battle between Sunni and Shia is shattering the imperial borders drawn up a century ago (Financial Times Gardner)
An irresponsible game in the Pacific (Financial Times Editorial)
One of the great oddities in Chinese financial policy is that liberalisation happens as much negatively as positively (Financial Times)
After the Plenum, sell pianos and dairy (Financial Times)
NSA spying risks $35bn in US tech sales (Bloomberg)
Alfred Feld, who worked at Goldman 80 years, dies at 98 (WSJ)
OVERNIGHT MARKETS
Asian markets
Nikkei 225 down -10.89 (-0.07%) at 15,504
Topix down -2.39 (-0.19%) at 1,251
Hang Seng up +128.47 (+0.54%) at 23,810
US markets
S&P 500 up +0.27 (+0.01%) at 1,803
DJIA up +0.26 (0.00%) at 16,073
Nasdaq up +23.18 (+0.58%) at 4,018
European markets
Eurofirst 300 down -8.21 (-0.63%) at 1,294
FTSE100 down -58.40 (-0.87%) at 6,636
CAC 40 down -24.40 (-0.57%) at 4,278
Dax down -9.88 (-0.11%) at 9,290
Currencies
€/$ 1.36 (1.36)
$/¥ 101.57 (101.28)
£/$ 1.62 (1.62)
€/£ 0.8382 (0.8367)
Commodities ($)
Brent Crude (ICE) up +0.08 at 110.96
Light Crude (Nymex) down -0.24 at 93.44
100 Oz Gold (Comex) up +4.00 at 1,245
Copper (Comex) at 3.21
10-year government bond yields (%)
US 2.71%
UK 2.73%
Germany 1.69%
CDS (closing levels)
Markit iTraxx SovX Western Europe -0.67bps at 62.95bp
Markit iTraxx Europe -0.16bps at 77.95bp
Markit iTraxx Xover -0.34bps at 322.49bp
Sources: FT, Bloomberg, Markit
