Financial markets slumped as investors believed the measures announced by the ECB were not sufficient to stabilize the liquidity problems in the Eurozone. Wall Street declined with DJIA and S&P 500 losing -1.63% and -2.11% respectively. In the commodity sector, crude oil prices tumbled with the front-month contracts for WTI and Brent crude slipping -2.14% and -1.30% respectively. Gold also plummeted in tandem with others in the sector.

The ECB lowered the main refinancing rate by -25 bps to 1.0%. However, the magnitude was considered too small by market participants. Worse still, the decision was not made unanimously, signaling some members dissent the rate cut. In addition, policymakers decided to implement two 3-year LTROs, increase collateral availability and reduce the requirement ratio. Concerning the economic outlook, ECB staff projections suggested the economy to weaken further in the coming year. The ECB staff revised lower economic projections, taking down the midpoint for real GDP for 2012 was revised down to +0.3% from +1.3% while that for 2013 stayed unchanged at 1.3%. Inflation forecasts were revised higher with HICP midpoint for 2012 rising +0.3% to 2.0%. HICP for 2013 was at 1.5%.

Some comments from President Draghi were also disappointing. The president said the QE measures (bond purchases) by the ECB would only be 'limited' and 'temporary'. Draghi said that the EFSF was the main vehicle for preventing bond market contagion. He also described the possibility of lending money to the IMF as 'legally complex' and 'not compatible' with existing treaties.

Concerning the dataflow in the US, trade deficit probably widened to $43.5B in November from $43.1B. The University of Michigan confidence might have rise to 65.9 in December from 64.1 a month ago. In China, it's just reported that headline CPI fell to 4.2% in November, from 5.5% a month ago, as driven by increased food supplies and retail fuel price cuts. Early this month,, the PBOC cut the reserve ratio for banks by -50 bps. Going forward, the Chinese government should continue to implement measures to stimulate growth.