UK
RICS House Price Balance (Aug) 10.7% vs. Exp. 0.0%, (Prev. -8.1%, Rev. to -5.7%) (BBG/RTRS)

House prices in England and Wales rose for the first time in more than two years, adding to a raft of data suggesting conditions are levelling off as the economy regains its footing.

Last night it emerged, via a timely leak to the BBC, that Mr. Brown has bowed to the pressure form Darling and Lord Mandelson, business secretary and will accept the need for cuts when he addresses the Trades Union Congress conference. (FT)

Living wills ‘to be forced on banks’ (FT)

Alistair Darling in planning legislation this autumn to force British banks to draw up “living wills” so that they can be dismantled more easily in any future financial crisis. The bill will also give the Financial Services Authority statutory responsibility for financial stability.

Bank of England official Andrew Haldane said the crisis has shown that big banks are less stable than smaller ones and called for a revamp of lenders’ business models to make the financial system more resilient. (BBG)

Although the following news came out during yesterday’s session, it is getting coverage this morning across the major U.K. papers:

Moody’s fears fresh woes for U.K. banks (FT)

The troubles of U.K. banks are far from over, Moody’s warned yesterday, as the rating agency forecast further losses of GBP 130bln in the next few years as bad debts rise and pressure builds on profitability.

ASIA

JGB futures fell on Tuesday, after a decline in U.S. Treasuries the previous day prompted investors to take profits. JGBs were trading at 139.06 (-0.20) at 0607 BST. (RTRS)

GLOBAL

Obama says enforcing current trade agreements such as on China tires not meant to be provocative or protective. Also, US trade official says that US confident its curbs on China tire imports “fully consistent” with WTO rules. Finally, White House says tire trade dispute not expected to cause US, China friction on other issues such as North Korea. (RTRS)

US

Treasuries were under selling pressure amid heightened tensions between the US and China, after the latter accused Washington of “rampant protectionism” for imposing heavy duties on Chinese tyres. The trend lower carried on for much of the session despite efforts by Obama to ease tensions through a major speech to mark one year since the collapse of Lehman Brothers. The closing stages saw USTs make another move lower and at the pit close T-notes finished down 14 ticks at 117.175. At 0637 BST UST’s were trading 117.15+ down 2 ticks as JGB’s fell over 20 ticks and the Nikkei advanced 0.3%.

Fed’s Yellen says foreclosures show “no sign of turning around”. (RTRS/BBG)

Fed’s Yellen says US economy to “remain vulnerable to shocks” and sees “slim” odds for strong return in consumer spending. Says paying interest on reserves will be important part of tightening monetary policy, also fears that Fed will monetize government debt are growing and disruptive. In addition said the Fed needs to keep its foot on the policy acceleration for now and to tighten policy before U.S. jobless rate falls back to 5%.

Fed’s Lacker says exit strategy hinges on how recovery evolves. (BBG/RTRS)

Fed’s Lacker says sees “substantially” less risk of big bank failures. Says state of economy influences view on MBS and out of an abundance of caution it seems to make sense to taper end of MBS buying. Says Fed must decide if it wants to complete asset purchases, says not yet made up his mind.

Obama says he wants financial regulatory reform this year and sees his proposals passing and becoming law. (RTRS)

Obama says firms must meet stronger capital requirements and say that there is no return to days of reckless behaviour. Says he sees G20 taking on important role in coordination of economic policies going forward. Says taxpayers have earned 17% return on their investment in bailout measures.

Fed likely to maintain its buying of mortgage securities. (WSJ)

U.S. credit shrinks at Great Depression rate prompting fears of double-dip recession. (Telegraph)

Both bank credit and the M3 money supply in the United States have been contracting at rates comparable to the onset of the Great Depression since early summer, raising fears of a double-dip recession in 2010 and a slide into debt-deflation.

EUROPEAN

N/A

GEOPOLITICAL

Iran will not negotiate nuclear rights but powers free to raise any question in talks, according to an Iran official. Also, White House said Iran refusal to discuss nuclear program in coming talks would show lack of cooperation with international community. (RTRS)

FX

Sudden currency moves are undesirable as a rising JPY could have a big impact on exporters’ earnings, Japans outgoing Finance Minister Kaoru Yosano said. (RTRS)

Australia’s central bank felt the economy was substantially stronger than expected at its policy meeting this month, but decided there was enough uncertainty at home and abroad to argue against a hike for the time being according to the minutes of the Reserve Bank of Australia. (RTRS)

Fed’s Yellen says Fed does not have a target for the USD and takes its movement into account, also stating that a significant USD decline could fuel inflation thus creating new systemic risk. (RTRS)

COMMODITIES

Ecuador oil minister says oil market in phase of reasonable stability, warns on speculation. (RTRS)

Oil traded near unchanged and slightly below USD 69.00 on Tuesday, capping losses as buoyant equities and the dollar’s fall against the euro helped to offset concerns about an inventory build ahead of the U.S. autumn season. Oil was trading at USD 68.69 at 0613 BST. (RTRS)

EQUTIY NEWS

ASIA

Nikkei edged up 0.2% in choppy trade buoyed by Canon Inc and other exporters as the JPY held steady against the USD, but worries that it may only be a brief respite limited gains. (RTRS)

Japan Airlines – Co. may receive an investment from Air France- KLM according to a source familiar with the matter. (RTRS)

US

Equities finished in positive territory despite starting the session on the back foot, after renewed risk appetite, amid a weaker USD (relative to the day’s highs), continued to drive equity markets higher. The main beneficiaries of the weaker USD was the basic material sector, with US Steel (+1.87%) posting modest gains. Elsewhere, the financials were closely behind, after Fed’s Lacker said the US economic recovery seems to be on track and that he sees “substantially” less risk of big bank failures. A rally late in the session saw the major indices move into the positive territory and at the closing bell DJI closed up 0.22% at 9626.80, S&P500 closed up 0.63% at 1049.34 and NASDAQ 100 closed up 0.49% at 1693.76.

S&P report card says outlook on most US insurance sectors is negative. (BBG)

Apple – An accounting rule change that has been tentatively approved may give Apple a significant boost. The proposed rules would eliminate a provision that has forced Apple to spread the revenue from iPhone sales over the life of a cellphone contract. Worth noting that FASB still must approve the proposed rule change, but co.’s Q3 EPS may have been 58.3% higher under the proposed rules. (CNN Money)

Coca-Cola – Co. CEO says sees “turbulent skies” for company. (BBG)

Kraft Foods – Co. plans to hold talks in coming weeks with British bid target Cadbury that may lead to a new bid offer for the global no.2 candy and chocolate makes. (RTRS)

Citigroup – The US Treasury Department and Co. have begun discussing how to sell the 34% stake that the government acquired in the rescue of the bank, people familiar with the matter said. (BBG)

FTSE

Diageo – may raise its stake in Chinese liquor maker Sichuan Chengdu Quanxing Co. to 51% from 49%, according to Zhao Zongjun, an analyst at BOC International Holdings. (Southern Metropolis News)

U.K. Banks – Alistair Darling is planning legislation this autumn to force British banks to draw up “living wills” so that they can be dismantled more easily in any future financial crisis. The bill will also give the Financial Services Authority statutory responsibility for financial stability. (FT)

RSA – Co. is considering large acquisitions potentially valued at about GBP 600mln that may need to be supported by a rights offering. (FT)

Cadbury – Co. is expected to have talks with Kraft Foods in the coming weeks which could lead to another offer being received for the co. (RTRS)

BG Group – Co. and partners Petrobras and Repsol YPF have announced another new discovery in the Santos Basin pre-salt BM-S-9 concession area, offshore Brazil. (S&P)

CAC

Car Makers – European August car sales rise 3%, helped by scrapping incentives. (BBG)

Michelin & Cie. – CEO said lower raw-material costs are starting to feed through into the co.’s earnings. (La Tribune)

Air France-KLM – is in talks to invest in Japan Airlines according to a source familiar with the matter. (RTRS)

DAX

Car Makers – European August car sales rise 3%, helped by scrapping incentives. (BBG)

Volkswagen – CEO says crisis in world car markets “not over yet” but sees “growing signs” that car markets have bottomed out. Says August sales rise 9.5% and that co. is performing “much better” than competitors. (BBG). Co.’s Audi unit still expects sales volumes to fall 10% to about 900,000 autos this year. (Boersen Zeitung)

Deutsche Telekom – Co. plans no major US buy before year end, citing sources close to the supervisory board. (Handelsblatt) Elsewhere, co.’s T-Systems to acquire SAP AG European external hosting business. (RTRS) Co.’s two largest shareholders have told its management that the company has until middle of next year to turn round its ailing U.S. mobile phone business, citing people familiar with the situation. (FT)

K+S – Co. is interested in partnerships but is not seeking to take other rivals, says chief executive Norbert Steiner. (Frankfurter Allgemeine Zeitung)

EUROSTOXX

Repsol YPF – BG Group and partners Petrobras and Co. have announced another new discovery in the Santos Basin pre-salt BM-S-9 concession area, offshore Brazil. (S&P)

SMI

Nobel Biocare – Co. settles patent case with Materialise Dental and will pay an undisclosed amount to the Belgium-based group. (BBG)

Novartis – Co.’s once-daily QAB149 respiratory medicine improved lung function and significantly reduced breathlessness in a late-stage trial. (S&P)

BROKER MOVES

BT: RAISED TO `OUTPERFORM’ FROM `NEUTRAL’ AT CREDIT SUISSE

DEUTSCHE BANK: RAISED TO `OUTPERFORM’ FROM ‘NEUTRAL’ AT EXANE

K+S AG: CITI DOWNGRADES TO SELL FROM HOLD

ARCELOR-MITTAL: CITI UPGRADES TO BUY FROM HOLD

ENEL: UNICREDIT UPGRADES CO. TO OVERWEIGHT FROM MARKETWEIGHT

NOVARTIS: RAISED TO `BUY’ FROM `HOLD’ AT JEFFERIES

UBS: CUT TO `NEUTRAL’ FROM `OUTPERFORM’ AT EXANE