Markets Fluctuated on Fiscal Cliff Deadlock

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Financial markets fluctuated amid political tensions in Italy and the stalemate of the fiscal cliff talk between the GOP and the Democrats. Wall Street ended the day modestly higher with the DJIA and the S&P 500 adding +0.11% and +0.03% respectively. Crude oil soared earlier in the day after a report of Chinese demand. Sentiment was then dampened by macroeconomic news. The front-month contract for WTI crude oil slipped -0.43% while the equivalent Brent crude contract climbed +0.29%. Gold rose for a 3rd consecutive day with the benchmark Comex contract rising to a 5-day high of 1718.8 before settling at 1714.4, up +0.52%

Negotiation on resolving the fiscal cliff remained a deadlock although House of Speaker Boehner said that talks were ongoing during the week between the White House and the Republicans. However it seems that both sides refused to surrender some ground so as to get the deal done. The GOP said that it’s awaiting a Democrat counter proposal to its rejected $2.2 trillion plan. President Obama stated that it is essential to implement a package that "keeps taxes where they are for middle-class families" He stressed that he would not compromise on the principle that "the wealthiest Americans" should pay "a slightly higher tax rate".

Chinese customs showed that oil imports increased to 5.69M bpd, up +3% y/y, in November. Oil refinery runs soared above 10.1M bpd last month. Also, China's oil refinery throughput rose in November by 9.1% from the same period a year ago. Strong domestic demand also caused reduction in exports. The country’s overall exports grew +2.9% in November, compared with expectations for +9% and October's +11.6%.

On the dataflow, Germany’s ZEW current situation index probably climbed to 6 in December from 5.4 a month ago while economic sentiment might have improved to -11.5 from -15.7 in November. US’ trade deficit might have widened to US$42.6B in October from 41.5B in the prior month while Canada’s trade deficit probably widened to CAD1.2B in October from 0.8B in September.

Oil and Gold Reports contributed by Oil N' Gold

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