Market Update - 5 December 2012

• Low volumes and directionless trading for bond and equity markets as investors watch the ongoing Fiscal Cliff negotiations from the sidelines.

• A proposal was put forward by House Republicans yesterday which was swiftly rejected by President Obama as it included no tax hike on the wealthy, relying instead on cuts to health care and axing unspecified tax deductions. Meanwhile Obama gave his first interview since the election in response “We’re going to have to see the rates on the top 2 percent go up, and we’re not going to be able to get a deal without it.”

• USDMYR opened just a tad higher at 3.0460 with expected low volumes and range trading for today.

• The DOW is dead flat while treasury notes are back at the top of their recent range, down 1bp to 1.61%. Healthcare stocks outperforming as a defensive play and on hopes Obama will protect the sector through the budget talks.

• The Euro rose again overnight (+50pts to 1.3102) as optimism over Greece’ debt buyback and Spain’s banking bailout buoyed sentiment. The Eurostoxx added 0.33%, led by financials. Gold fell 1.2% and back through $1700 while oil shed 60c to $88.51. Also the Euroswiss hit its highest level since September at 1.2134 last.

• Hopes for the EU agreeing on a banking union this year were diminished overnight as Wolfgang Schauble warned again over German reluctance to allow its smaller banks to fall under the regulators watch. Ministers will meet again on the issue next week.

• The bank of Canada left rates at 1% and did not update its guidance.

• The only other data was the New York ISM which rose modestly to 52.5 from 45.9 while UK construction activity unexpectedly slowed in November to 49.3 from 50.9.