Financial markets were a tad lower as the EU summit delivered no surprises to tackle the problems haunting the Eurozone. Wall Street dropped with DJIA and S&P 500 slipping -0.05% and -0.25% respectively. In the commodity sector, oil prices fell with the front-month contract for WTI crude oil dipping to a 3-day low of 98.43 before settling at 98.78, down -0.78%, while the equivalent Brent crude contract ending the day at 110.75, down -0.62%. Gold also declined for the first time in 4 days as the US dollar strengthened. The precious metal, however, continue hovering around the highest levels in 7 weeks.
The EU summit in Brussels, the 16th in 2 years, was again a disappointment to the market as policymakers failed to agree on concrete plans to contain the sovereign debt crisis in the 17-nation region. The 'fiscal compact' proposed by Germany was generally accepted by the members with only the UK and Czech Republic refusing to sign it. The pact, aiming to improve member nations' discipline in control the budgets, has been greatly applauded by the ECB. According to the ECB President Mario Draghi, 'it is the first step towards a fiscal union. It certainly will strengthen confidence in the euro area'. However, other issues including measures to handle Greece's deficits and to stimulate economic growth were not concluded. In the post-summit statement, policymakers acknowledged that cutting budget deficits was 'not in itself sufficient' and member nations 'have to modernize our economies and strengthen our competitiveness to secure sustainable growth'.
In addition to sovereign debt problems in the Eurozone, geopolitical tensions have been causing greatly volatility in commodity, especially oil, prices. In retaliation to the EU's oil embargo, Iran vowed to halt oil exports to some countries. However, a mixed signal was sent as the parliament has postponed a debate on the issue. Sanctions over Iran have not been agreed by all oil players. For instance, China and India refused to join the Western countries in cutting Iranian oil imports. Potential oil disruption in West has sent oil prices higher over the past few weeks. However, the situation eased as Saudi Arabia said that it could cover any shortfall in oil.
On the dataflow, Germany's unemployment probably fell -5K in January, following -22K drop a month ago. The jobless rate is expected to stay at 6.8%. Unemployment rate in the Eurozone might have risen to 10.4% in Decmeber from 10.3% in the month ago. In the US, Chicago PMI probably added +0.8 pointed to 63 in January while consumer confidence index gained +3.5 points to 68 during the month.