Financial markets had little response to the EU summit over the weekend. Although some measures were announced in an attempt to contain the sovereign debt crisis in the eurozone, much uncertainty remained. The implementation risks of the plan are also high, making its feasibility and effectiveness questionable. In the commodity sector, WTI crude oil remained steady at around $99 and $108 respectively while gold moved sideways around $1,710.

The EU rescue plan can be summarized in four points. First, a fiscal rule (embedded in a constitutional rule) will be implemented and member countries are required to confine their structural deficits to 0.5 percent of GDP. An automatic correction mechanism was also introduced for cases of excessive deficit. Second, countries having excessive deficits must submit to the European Commission and the Council an economic program explaining structural reforms to reduce the deficits to an acceptable level. New provisions will ensure that states running government debt in excess of 60 percent of GDP will reduced it by 1/20th of the deviation each year. Third, the leveraged European Financial Stability Facility will be implemented as soon as possible and will remain active until mid-2013. The European Stability Mechanism will begin operation in July 2012. Member countries will evaluate the adequacy of the overall EFSF/ESM commitment of 500 billion euro in March 2012. Fourth, members are planning to lend 200 billion euro to the International Monetary Fund, which will then use the money to assist debt-ridden European economies. The decision on this issue will be made within 10 days.

We have a light calendar. In Japan, domestic GCPI rose +1.7 percent y/y in Novmber, the same as a month ago, and exceeded market expectations of +1.5 per cent. The U.S. budget deficit might have widened to $150 billion in November from $98.5 billion in the prior month.

Commitments of Traders

Speculators were mixed towards the energy complex, being bearish on crude oil and heating oil but bullish over gasoline and natural gas, in the week ended Dec. 22. Net length for crude oil futures slipped -675 contracts, to 155 804. Net length for heating oil plunged -4 092 contracts to 15 078 while that for gasoline rose +4 701 contracts to 55 214. Net short for natural gas futures fell -4024 contracts to 166 488.

Speculators were bullish on precious metals. Net length for gold futures surged +4 918 contracts to 159 711 while that for silver climbed +536 contracts to 12 630. For PGMs, net length for platinum added +478 contracts to 20 746 while that for palladium increased +694 contracts to 6 369.

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