- Italy’s Monti: ECB to reassess future policies after EU summit decisions and Italian austerity package
- Sarkozy: Complete agreement reached with Merkel; No eurobonds, Treaty to be modified to incorporate budget rules, automatic sanctions, EU court cannot dispense penalties to violators; aims to get Treaty amended by March
- ECB bought EUR 3.7 bln in sovereign debt last week; total of EUR 207 bln bought to date
- Italian debt falls 67 bp in yield to near 6% after austerity package
- ISM non-manufacturing falls 52.0 in November from 52.9
- Chicago Fed’s Evans: More action need from Fed to support US economy
- IMF approves EUR 2.2 bln tranche for Greece but sees trouble ahead
- S&P to place all 17 euro area on watch for potential downgrades
- ECB’s Nowotny fears Germany will lose trust in ECB; fears Merkel/Sarkozy program won’t be enough
- S&P 500 rises 1% to 1257; Milan up 2.9%
- US 10-year note unchanged at 2.035%; Italian 10-year note falls 67 bp to 6.02%
- WTI falls $0.23 to $100.75; gold falls $25 to $1721
EUR/USD rallied as high as 1.3487 after Sarkozy and Merkel pressed ahead with a call for tighter EU budget rules and changes to the EU Treaty. The rally lost steam after the European close, slipping back below European highs in the 1.3455/60 area, triggering some stops. Selling accelerated later in the US afternoon as the FT reported that the the 6 remaining AAA credits in the euro area would be put on watch for downgrades by S&P. Later we learned the entire euro area would be placed on watch. EUR/USD fell as low as 1.3375 before stabilizing.
The S&P news, which was finally made official a short while ago, took the wind out of all the commodity currencies and gave the dollar a boost across the board.