Oil reversed gains after German leaders downplayed the importance of EU summit in the coming weekend. Both Finance Minister Schaeuble and Chancellor Angela Merkel's chief spokesman, Steffen Sieber stated that there will not be a conclusive solution for the sovereign debt crisis after the meeting. Stocks weakened with DJIA and S&P 500 sliding -2.13% and -1.94% respectively while Europe's Stoxx600 losing around -1.0% following a +1.5% rise earlier in the day. In the commodity sector, WTI crude oil for December delivery closed largely flat at 86.62 after rising to 88.4 earlier in the day while the equivalent Brent crude contract plunged -1.84% to settle at 110.16. In line with the broad commodity sector, gold also dropped after failing to re-test 1700.

While market sentiment had been lifted by hopes that substantial measures will be announced after the coming week's EU summit, German Finance Minister Schaeuble said that the 'summit will not present final solution for Eurozone debt crisis'. His comment was echoed by Steffen Siebert, Chancellor Merkel's chief spokesman, who stated that 'dreams that are taking hold again now that with this package everything will be solved and everything will be over on Monday won't be able to be fulfilled' as the search of credible solution 'surely extends well into next year'. These comments clearly damped optimism and triggered profit-taking. Indeed, we mentioned yesterday that it would be pre-mature to celebrate for resolution of the sovereign debt crisis. Even though the measures were laid out, implementation remains critical.

On the macro front, China's GDP grew +9.1% in 3Q11, weaker than consensus of +9.2% and +9.5% in the prior quarter. The government's tightening policy and global economic turmoil were key factors contributing to the slowdown. As indicated in the press released, the government pledged to focus on 'prosperity, relevance and flexibility', indicating tightening policy may be over. Yet, we do not believe the government will begin easing any time soon as inflation remains at elevated levels. We expect interest rates and RRR will stay where they are for some time.

The most disappointing US data released was the Empire State Manufacturing Index which came in at -8.5 in October, following a decline of -8.8 a month ago. The market had anticipated an improvement to -4. The index has been staying in contractionary territory for 5 consecutive months and this is a worrying sign for the entire US manufacturing sector. Looking ahead, the dataflow today includes US PPI which probably climbed +0.3% m/m in September after a flat reading a month ago. On annual basis, the reading eased to +6.4% from +6.5% in August. Core PPI probably rose to +0.1% m/m and +2.3% y/y in September. Net long-term TIC flow might have risen to $27.8B in August from $9.5B in July.