Eurozone go rogue as EU rejects possibility of treaty change

rejected the possibility of a treaty change with UK Prime Minister one of the more vocal opponents to the idea of changes, saying: "My judgment was that what was on offer just wasn't good enough for Britain. It's better to allow those countries to do their own thing on their own." The 17 Eurozone countries did not take long to respond to the rejection declaring their intentions to continue working on solutions to (their own) solvency problems. Good news was presented as well, though, as the EU leaders agreed on fiscal policy changes, including budget restrictions, pushing forward the EUR 500bln rescue fund and limit bondholders' losses. The outcome even earned applause from ECB President Draghi who singlehandedly destroyed risky assets yesterday in his press conference, noting "It's a very good outcome for euro-area members and it's going to be the basis for a good fiscal compact and more disciplined economic policy in euro-area countries.".

Chinese CPI data opens up for more easing: Consumer price inflation in the world's second largest economy dropped more than expected in November, recording 4.2 percent year-on-year against expectations of 4.5 percent and an October reading of 5.5 percent. PPI decelerated a lot as well (2.7pct. vs. 3.4pct. expected and 5pct. prior), but despite the softness of these inflation gauges the economy did rather well. Industrial Production rose 12.4 percent year-on-year in November from 13.2 percent a month earlier while Retail Sales actually accelerated a bit to 17.3 percent from 17.2 percent. Clearly the soft inflation readings allow the Chinese even more room for further monetary stimulus and though they lowered the reserve requirement for the first time since mid-2008 last week there are still 550bps down to the level of the reserve ratio when the latest tightening phase began around New Years 2010.

US data to be ignored again? Yesterday's very solid Initial Jobless Claims data (381,000 vs. 395,000 expected and 404,000 prior) was mostly ignored due to aforementioned performance of ECB President Draghi and the same fate may befall the Trade Balance and University of Michigan Confidence reports today. Confidence shot up to 64.1 in November from 60.9 a month earlier and 55.7 at the low in August and hopefully the trend continues in today's preliminary December report. Consensus expects the improvements to moderate, predicting 65.8.