Dollar And Yen Sell-Off Continues As Stocks Rally

Global equity markets continue to strengthen, following 115 pts gain in the Dow overnight. Recent news regarding fiscal cliff negotiation is perceived as constructive discussion between the two parties. In particular, the gaps of difference on tax threshold and revenue increase are getting narrower. The Republicans are said to be preparing for a so called "plan B" as a tactic to pressure president Obama to further soften up his stance.

The so-called plan B include extend low tax rates to Americans earning less than $1m per annum, comparing to Obama's latest proposed threshold of $400k. Nonetheless, a White House spokesman emphasized that Obama has already "demonstrated an obvious willingness to compromise and move more than halfway toward the Republicans." More news regarding the fiscal cliff would come out in the near-term and we'd pay close attention on whether there could be a final deal before Christmas.

In Europe, S&P raised Greece's credit rating back to B-, up from selective default, after the country has completed its bond buy-back program. Greece's rating was cut to selective default, down from CCC, earlier this month due to the program. S&P said that "the stable outlook balances our view of eurozone member states' determination to support Greece's eurozone membership and the Greek government's commitment to a fiscal and structural adjustment against the economic and political challenges of doing so." But it also warned that "even after the buyback, Greece's end-2012 net debt-to-GDP ratio of over 160 percent of GDP remains onerous."

In Italy, former prime minister Berlusconi said that "this rush to go to elections is creating unnecessary pressure" and suggest that the election could be delayed. Earlier this month, facing increased pressure from Berlusconi, Prime ministers Monti said he would resign and dissolve the government afte passing 2013 budget. That would trigger an early election within 45-70 days and such election could happen on February 17 or 24. However, the passage of the budget has somewhat been delayed and it's unlikely it would be approved before December 21.

On the data front, New Zealand current account deficit came in slightly widened than expected at NZD -4.418b in Q3. Australia Westpac leading indicator rose 0.1% mom in October. Japan trade deficit widened to JPY -0.87T in November, all industry index rose 0.2% mom in October. German IFO and UK BoE minutes would be the main focus in European session. New residential construction is the major feature in US.