Early weakness in Asia driven by US-follow thru selling and ongoing concerns about the us fiscal showdowns as well as the debt ceiling, if not by actual news, resulted in a red close in both the Nikkei and SHCOMP, as well as other regional indices such as the Sensex. This then shifted to Europe, where however stocks reversed the initial move lower and are seen broadly flat, with Bunds remaining bid on the back of month-end, as well as coupon and redemption related flows. However the move higher in stocks was led by telecommunications and health care sectors, which indicates that further upside will require another positive catalyst. There was little in terms of fresh EU related macroeconomic commentary, but according to a report published by the European Banking Authority, the EU’s biggest 42 banks cut their aggregate capital shortfall with respect to the “fully loaded” 2019 Basel III requirements to €70.4bln as of December 2012. This is amusing since not one European bank has actually raised capital, but merely redefined what constitutes capital courtesy of a liberal expansion of RWA, Tier 1 and various other meaningless definition which works until such time as the perilous European balance kept together by the non-existent OMT, is tipped over.