Timothy shuffling over to Europe and declaring that he had “a lot” of confidence in efforts by France and Germany to ramp up Euro-zone fiscal governance with proposed EU treaty changes seem to have done the trick. On the face of it, the Euro summit squeezed through an underwhelming Ã¢â‚¬Å“newÃ¢â‚¬Â agreement alongside the EU treaty with a tougher deficit and debt regime to insulate the region against the debt crisis. China on the other hand could only come up with a +$300b investment vehicle. Will GeithnerÃ¢â‚¬â„¢s Ã¢â‚¬Å“strong armingÃ¢â‚¬Â Europe pays off? The acid-test will be if such an agreement could ignite sustained recovery in appetite for Spanish and periphery bonds. Of course, the US has the Euros back; itÃ¢â‚¬â„¢s in everyoneÃ¢â‚¬â„¢s interest that the Euro survives.
Below are some other highlights of the week:
- USD:ISM non-manufacturing index fell to 52 in November from 52.9 a month earlier. Fifty is the dividing line between expansion and contraction.
- CAD: Canadian Building Permits surged +11.9%, supported by public sector offices and factories. Residential fell for the third consecutive month.
- CAD: No surprise from the BoC keeping rates on hold at +1%. The market had been expecting stronger Ã¢â‚¬ËœdovishÃ¢â‚¬â„¢ remarks; however, they were not forthcoming. This managed to give the loonie a temporary lift. Governor Carney continues to suggest the uncertain outlook for growth. Subdued price pressures imply no need in a change in the BankÃ¢â‚¬â„¢s neutral monetary stance. Policy makers again highlighted in the report the damaging impact of the loonie.
- CAD: Ivey PMI was at 59.9 vs. 54.4 seasonally adjusted in November. The employment index was at 49.4, indicating employment was lower than in the previous month.
- CAD: Housing starts were down -13.3% to an annual rate of +181.1k in November, mostly due to a big drop in the multiples. This is the weakest reading for housing in 9-months.
- USD: US weekly claims fell -23k to +381k, a new nine-month low. Continuing claims also fell, easing-174k to +3.583m
- CAD: Canada recorded a surprise Trade balance deficit (-$885m vs. +vs. +$1b) in October, following a big month surprise surplus. The drop came mostly on the back of a -3% fall in exports (biggest decline in eight-months) and a +1.9% advance in imports.
- CAD: Labor productivity rebounded in Q3 (+0.4% vs. -1%) and labor costs declined by the biggest amount in a decade (-0.5%). This was the first drop in five-straight quarterly increases.
- USD: Preliminary December Michigan CSI reading of 67.7 beat market expectations of 65.5. The improvement was due mostly to expectations.