“Will You Love Me In December As You Do In May” -James Walker

Markets Up As European Leaders Agree To New Treaty

The markets closed higher Friday as the European Union moved to establish a new treaty that aims to more closely integrate the finances of member countries.  The S&P/TSX composite index gained 82.95 points to 12,034.75 after most members of the European Union signed on to a deal to ensure there is no repeat of the current European debt crisis. Britain was the lone holdout, arguing the treaty wasn’t in its best interest.  The Canadian dollar reversed early weakness and rose 0.4 of a cent to 98.19 cents US.  U.S. markets surged as the Dow industrials gained 186.56 points to 12,184.26.  The new eurozone treaty calls for participating governments to have balanced budgets, which is calculated as a structural deficit no greater than 0.5% of gross domestic product and will require constitution amendments to include such a requirement. An unspecified “automatic correction mechanism” would punish countries which break the rules. In addition, countries that run deficits larger than 3% would face sanctions.

Analysts said while the treaty proposal didn’t meet everyone’s expectations, it certainly represented progress. “We have been far enough down this road to realize that one meeting isn’t going to solve everything,” said Colin Cieszynski, market analyst at CMC Markets Canada. “At least this time around, they seem to have gotten to the point where they have taken it fairly seriously, they have brought in real measures that have to be taken care of and it looks like they’re trying to accelerate the ratification process.” Meanwhile, many think that a solution to the debt crisis can only come if the European Central Bank takes a more active role, possibly by buying up more government debt in the markets. It currently buys bonds in the markets, but only reluctantly and in small quantities.

-The TSX closed at 12035, down 40 points or -0.33% over the past week. YTD the TSX is down -10.47%.

-The DOW closed at 12184, up 165 points or +1.37% over the past week. YTD the DOW is up 5.24%.

The S&P closed at 1255, up 11 points or +0.88% over the past week. YTD the S&P is down -0.16%.

-Gold closed at 1717, down 29.00 points or -1.66% over the past week. YTD gold is up 20.91%.

-Oil closed at 99.41, down 1.72 points or -1.70% over the past week. YTD oil is up 9.01%.

The CAD/USD closed at 0.982, up 0.001 points or +0.10% over the past week. YTD the CAD/USD is down -2.32%.

Souces: Bloomberg, Investment Executive