Daily Market Update – December 17, 2012

Top News Highlights

• The first real movement in the "fiscal cliff" talks began on Dec 16, with Republican House Speaker John Boehner edging slightly closer to President Barack Obama's key demands as they try to avert the steep tax hikes and spending cuts set to take effect unless Congress intervenes by Dec 31. But Boehner's new positions, were still far from those held by Obama. And the two sides have yet to make headway on tough issues such as entitlements, with the Republicans wanting far more than Democrats are likely to tolerate in cuts to Medicaid and Medicare. Sources confirmed that Boehner proposed extending low tax rates for everyone who has earned less than $1M, and rates would rise for wages above that. Obama wants that threshold set at $250,000. Boehner also has increased to $1T his figure for total revenue, vs. Obama's figure of $1.4T. The White House has not accepted the Boehner proposals

Economic Highlights

• Industrial production in the U.S. increased by much more than anticipated in the month of Nov, according to a report released by the Federal Reserve, with the increase reflecting a recovery in production for industries that were negatively affected by Hurricane Sandy. The report said industrial production surged up by 1.1% in Nov after falling by a downwardly revised 0.7% in Oct. Economists had expected production to increase by 0.3% vs. 0.4% drop originally reported for the previous month
• The European Union leaders have agreed on a roadmap for the completion of the Economic and Monetary Union, besides a deal for closer banking sector union. "This process will begin with the completion, strengthening and implementation of the new enhanced economic governance, as well as the adoption of the Single Supervisory Mechanism and of the new rules on recovery and resolution and on deposit guarantees," the European Council said in a statement after the conclusion of the two-day EU summit
• China said it will seek a higher "quality and efficiency" of growth next year, signaling new leaders may accept a reduced pace of expansion in exchange for a more sustainable model. There was no mention of seeking "relatively fast" growth, a policy in place since 2006, in a report by the state-run Xinhua News Agency after the annual central economic work conference in Beijing. Leaders vowed to target "sustained and healthy development" as they maintain a "prudent" monetary policy and "proactive" fiscal stance, Xinhua said

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