WTI crude oil for December delivery jumped to 91.88, the highest level in more than 2 months, before settling at 91.27, up +4.43% as driven by the bullish market sentiment. Investors remained thrilled on anticipation that EU leaders will announce substantial and durable solution for the sovereign debt crisis. While the outcome will be announced on October 26, we believe this factor has fully been priced in. As far as macroeconomic data is concerned, although it has taken a backseat in recent days, preliminary PMI showed that China's manufacturing sector expanded for the first time in 4 months. The BOC will meet for rate decision today but we do not expect any change in the monetary stance.

Recent strength in financial markets has been mainly driven by the EU summit. We believe the market has already factored in a Greek debt haircut of 50%, leverage of the EFSF to above 1 trillion euro and recapitalization of banks of around 100B euro. Another announcement that is short of expectation will probably trigger profit-taking.

In the US, the government announced a mortgage plan to boost the housing market. According to the Federal Housing Finance Agency, the Home Affordable Refinance Program (HARP), introduced in 2009 with the aim of providing lowers interest rates for homeowners, will now accept application from borrower whose mortgages were higher than 125% of the property values. Moreover, refinancing fees are waived so as to facilitate mortgage refinancing. Indeed, the policy will only offer modest help to the housing market. While 1M people are expected to benefit from the program in the coming 2 years, they constitute less than 10% of the total number of borrowers.

The data compiled by HSBC showed that China's manufacturing activities returned to the expansionary territory after 4 months of contraction. The preliminary PMI rebounded to 51.1 in October from 49.9, signaling improvement in the business environment. This further alleviated concerns about a hard landing in the country's economy.

The BOC is widely expected to hold its policy rate at 1% in October for a 13th consecutive month. The jump in headline inflation in September has probably prevented the central bank to lower interest rates but it would definitely not trigger a rate hike. We expect the central bank to deliver a statement that warns of downside risks in domestic and global economic outlook.