Markets Look to Merkel-Sarkozy Meeting to Gauge Sentiment; German GDP to be Released Today

Risk sentiment was down slightly but relatively stable in the Asian session as markets wait for the headlines that will be created from the Sarkozy-Merkel meeting that will be held today in Europe. An article in the Wall Street Journal suggested that France and Germany are considering the implementation of Eurobonds as a means for creating a fiscal union with more cohesion. There is some downside risk after the meeting as political obstacles could halt potential agreements. In China, newspapers have suggested that there is an increased possibility we will see more flexibility in the Yuan exchange rate and while this does not imply a strong appreciation in the near future, it does create an environment that will allow for a wider trading band. In the US session, the Atlanta Fed President (Lockhart, who next year will be a voting FOMC member) released a statement downplaying the possibility of a third round of quantitative easing, but did suggest that additional governmental asset purchases could still be seen. Today, macro data will come in the form of German GDP and this figure has more potential to move markets than usual. A weaker print will most likely weigh on risk appetite and send regional equities back into the red. In the US, industrial production data will be released and markets will be watchful for any comments made by the Swiss National Bank. Read the full post at

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