Markets: Caution continued to reign across Asian equity markets after US stocks fell for a third straight session and as investors looked ahead to key events later in the week. In Japan, the Nikkei 225 average was 0.5 per cent lower following a 2.4 per cent fall in its first trading day of the year on Monday. In China, the Shanghai Composite was down 0.4 per cent, a fourth straight decline that placed the index at a six-month low. (Financial Times Global Markets Overview)

The US Senate on Monday approved Janet Yellen as head of the Federal Reserve, making her the first female chief of the US central bank. She was approved in a 56-26 vote, with some senators who had threatened to vote against her unable to get to Washington DC because of flight delays. (Financial Times)

Rapid fall in capital flows poses growth risk: The flow of money through the global financial system is still stuck at the same level as a decade ago, raising fresh concerns about the strength of the economic recovery following six years of financial crisis. A dramatic slowdown in cross-border capital flows – shown in an analysis for the Financial Times by the McKinsey Global Institute – highlights how the US subprime mortgage and eurozone debt crises threw into reverse the globalisation of finance and raises doubts over whether flows will ever return to their pre-crisis peak. (Financial Times)

UK’s George Osborne limits cuts options with pensions promise: The chancellor set a tough challenge for a future Conservative government on Monday, committing it to cut welfare by an extra £12bn a year after the next election while protecting pensions – the biggest single item of social security spending. He explained that nearly half of the £12bn figure should come from measures such as restricting housing benefit or council housing subsidies for richer people. (Financial Times)

UK car sales top pre-recession levels making Britain’s car market the most buoyant in Europe: The 10.5 per cent increase in vehicles sold last year epitomises the surprise rebound in the UK economy, as households have confounded expectations by opening their wallets even as incomes remain under pressure. (Financial Times)

UK regulators launch formal probes into Co-op and its former executives: The probe by the Prudential Regulation Authority, part of the Bank of England, is its first enforcement action since its creation last year. The Financial Conduct Authority, which focuses on consumer and market issues, has also begun enforcement proceedings. Both regulators will examine the events leading up to the exposure in June 2013 of a crippling £1.5bn capital hole in the Co-op Bank’s finances. (Financial Times)

Freeze drives up US gas and power prices: “Spot US energy markets witnessed explosive price rises as utilities and power plants scrambled ahead of what forecasters warned would be the coldest day of the 21st century so far. The moves from New York to Texas brought back memories of the natural gas and power markets of the previous decade, before the shale drilling boom unleashed new supplies and damped volatility. (Financial Times)

J.P. Morgan officials excluded from penalties in Madoff deal, said people close to the talks. “Manhattan U.S. Attorney Preet Bharara and U.S. banking regulators intend to announce a total of more than $2 billion in fines this week, these people said. But all fines will be paid by the company as opposed to individuals, these people added.” (WSJ)

Morgan Stanley’s head of interest rates trading, Glenn Hadden, left the Wall Street bank on Monday, suggesting strategic differences with management. (Financial Times)

Samsung Electronics has estimated that fourth-quarter earnings missed analysts’ forecasts, amid slowing demand for its high-end smartphones in a saturated market and heightened competition from Apple’s new iPhones. It said operating profit for the three months to December would be about Won8.3tn ($7.8bn), down 18 per cent from the previous quarter’s record Won10.2tn. Analysts had bet on a roughly Won10tn operating profit. The earnings guidance was affected by a one-off special bonus, which analysts estimated at Won300bn to Won400bn, paid to employees to mark the 20th anniversary of the “New Management” strategy of Lee Kun-hee, its chairman. (Financial Times)

“Business bankruptcy filings in the United States dropped 24 percent in 2013 to their lowest level since at least 2006, according to a report on Monday. Overall, bankruptcies by businesses and individuals combined fell 13 percent, said the report, released by the American Bankruptcy Institute.” (Reuters)

IntercontinentalExchange is looking to sell at least a quarter of Euronext, the European stock exchange group, ahead of an initial public offering that is expected this year, according to people familiar with the situation. (Financial Times)

COMMENTS & CURIOS

Bad luck, not policy, is the scourge of the young (Ganesh, Financial Times)

Time to think more about Sarajevo, less about Munich (Rachman, Financial Times)

EU’s ‘Barnier rule’ looks like a shadow of what it set out to be (Jenkins, Financial Times)

File under “if only” (Financial Times)

In a period of low interest rates and QE, “Dr Copper can be a quack” (Financial Times)

Rising bad loans pose a threat for India (WSJ)

OVERNIGHT MARKETS

Asian markets
Nikkei 225 down -89.07 (-0.56%) at 15,820
Topix down -9.22 (-0.71%) at 1,283
Hang Seng up +69.65 (+0.31%) at 22,754

US markets
S&P 500 down -4.60 (-0.25%) at 1,827
DJIA down -44.89 (-0.27%) at 16,425
Nasdaq down -18.23 (-0.44%) at 4,114

European markets
Eurofirst 300 down -2.91 (-0.22%) at 1,309
FTSE100 up +0.06 (0.00%) at 6,731
CAC 40 down -20.11 (-0.47%) at 4,228
Dax down -7.15 (-0.08%) at 9,428

Currencies
€/$ 1.36 (1.36)
$/¥ 104.44 (104.18)
£/$ 1.64 (1.64)
€/£ 0.8312 (0.8306)

Commodities ($)
Brent Crude (ICE) up +0.52 at 107.25
Light Crude (Nymex) up +0.23 at 93.66
100 Oz Gold (Comex) up +1.90 at 1,240
Copper (Comex) at 3.41

10-year government bond yields (%)
US 2.96%
UK 2.98%
Germany 1.91%

CDS (closing levels)
Markit iTraxx SovX Western Europe -1.58bps at 57.68bp
Markit iTraxx Europe -0.45bps at 69.05bp
Markit iTraxx Xover -4.44bps at 278.76bp
Markit CDX IG +0.15bps at 62.9bp

Sources: FT, Bloomberg, Markit


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