The news out of Europe today is quite good, though you will be
hard pressed to see that come across from the headlines. The goal
for the meeting was to convince the EU members to create a more
unified fiscal union. And a big majority of the countries have
signed on to that plan. A lot of details still need to be worked
out, but the agreement provides a good enough basis to move in the
Europe aside, we also have favorable inflation readings out of
China this morning, highlighting that the Chinese authorities have
gained the upper hand in their fight against persistent
inflationary pressures. This improves the odds that the recent
monetary easing move by the Chinese central bank will remain in
place for some time. On the home front, we got a lower than
expected trade deficit number for October this morning. On the
docket for a little later is the preliminary December Consumer
Sentiment survey from the University of Michigan.
But the big story today is the EU summit meeting in Brussels.
Expectations had really gone up in the run up to that meeting in
the last few days, which had helped calm some of the anxieties in
the Euro-zone government bond markets, particularly of Italy. And
the European leaders appear to have made a lot of progress, with
the 10-hour meeting resulting in 7-page agreement. Not all 27
members of the European Union agree to the Franco-German plan to
move the union towards greater fiscal integration. But nobody
expected all of them to endorse the plan any way.
Aside from the U.K., Sweden, the Czech Republic, and Hungary,
the rest of the 23 EU members signed on to the plan. This means
that in addition to the 17 EU countries that were already in the
Euro-zone (using the Euro as their currency), an additional six
countries are coming around to the need for greater fiscal union.
This has to count as a key success of the plan. The agreement
provides for the harmonization of financial regulation, a financial
transactions tax, and an earlier roll-out for the permanent rescue
fund. By holding out, the U.K. appears to have isolated itself and
further adds to its difficult relationship with Europe.
In corporate news, we have a negative earnings outlook from
), with the chemicals and life science giant citing global economic
softness for its weaker outlook. We also have negative earnings
). On the positive side,
) reinstated its quarterly dividend, having suspended the same more
than 5 years.