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Daily Agenda: Trading Quiet Heading into Holiday Weekend

Equity markets largely unchanged in early trading; Fitch raises concerns over student debt market; Staples takes on regulators.

Despite increasing uncertainty in credit markets, ongoing geopolitical threats and a supply glut rattling oil prices, investors appear to be largely untroubled going into the Christmas holiday weekend. The Stoxx Europe 600 fell by 0.2 percent in light trading this morning while early indications for U.S. stocks from S&P 500 futures markets are flat. The Shanghai Composite index declined by nearly 1 percent in response to a sudden rise in overnight repurchase rates, which are linked to margin loans, though volatility remains muted compared with frantic sessions during the late summer. Global investors appear content to take time off without any need for last-minute portfolio adjustments.

Fitch restates scale of student debt concern. As much as $71.2 billion in student loan-backed securities created via the Federal Family Education loan program is at risk of getting downgraded, according to a revised report yesterday from Fitch Ratings. The number corrects a number last week that estimated the amount at $37.5 billion.

Japan approves record-size defense budget. Japan’s cabinet today approved a new military spending budget for 2016 of some 5.05 trillion yen _$40 billion), the biggest defense allocation in the nation’s history. This marks the fourth consecutive increase in defense outlays since Prime Minister Shinzo Abe took office in December 2012. This past summer the Diet, the country’s legislature, approved a bill expanding the mandate of Japan’s military to more proactive operations. The moves come in response to a rapidly expanding projection of force by China’s military in the region, particularly near contested islands in the East China Sea.

So-called “bad bank” prepares for IPO. China Great Wall Asset Management Corp. today announced key strategic investments by two Chinese government-controlled entities as it prepares for an eventual initial public offering. The company is one of four created in the 1990s to purchase troubled assets from Chinese financial firms.

PG&E to stand trial. A federal court ruling yesterday paved the way of a trial to proceed against Pacific Gas & Electric Co. for alleged violation of safety standards in relation to a 2010 explosion in greater San Francisco that led to eight deaths and left dozens of people homeless. The ruling also limited potential criminal damages to $562 million from more than $1 billion and dismissed 15 of the 27 alleged U.S. Pipeline Safety Act violations and another charge thrown out over a dispute concerning the statute of limitations, for a total of 12 counts.

Staples refutes regulator concerns over Office Depot merger. In federal court filings published yesterday, lawyers for Staples argued that objections to the retailer’s merger with Office Depot raised by the Federal Trade Commission were flawed. Representatives for the company argued that rapidly expanding competition from online competitors such as Amazon.com negates antitrust arguments made by regulators with respect to the merger of the two brick-and-mortar office supply giants.

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