Trade the News Market Internals update at 12:00ET

***Economic data***

– (CA) Canada Q3 Labor Productivity Q/Q: +0.4% v -0.3%e
– (CA) Canada Oct Int’l Merchandise Trade: -C$0.9B v +C$0.7Be
 – (US) Oct Trade Balance -$43.5B v -$44.0Be
 – (MX) Mexico Oct Final Trade Balance: -$466M v -$466Mprelim
– (US) Dec Preliminary University of Michigan Confidence: 67.7 v 65.8e

– European indices are heading higher late in the euro session, helping start US trading off on a positive note. Leading US indices are up about 1% a piece. The EU leaders summit has unwound more or less as expected, with the 17 euro zone nations and nine of the ten non-euro zone nations agreeing to deep fiscal integration via a new treaty (rather than some sort of inter-governmental agreement). The UK stands isolated, refusing to play nice with its European colleagues on integration, with the competitive position of the UK’s financial industry being London’s chief concern. EU leaders agreed to meet again in March of 2012 to finalize the new treaty. It remains unknown whether the ECB will help backstop Europe in the interim, or what shape the ultimate treaty will take or even whether euro bonds will be part of the conversation. All in all, get ready for three more months of indecision, and as Finnish PM Katainen put it, this is the “beginning of the beginning of the end of the crisis.” Note also that some of this morning’s risk appetite is being prompted by unconfirmed reports that China might set up a $300B fund to reinvest its FX reserves in Europe and the US, most likely in real assets rather than sovereign bonds. As of yet no denial of the story has emerged from Beijing, and traders should be keenly aware that this story has a tendency to reemerge whenever markets are feeling a little blue (only to be denied yet again by the Chinese press). In other news, the preliminary University of Michigan consumer sentiment index moved out to its highest level since June, and agricultural futures sank lower on news in this morning’s USDA interim world demand forecasts that stockpiles of key grains would be above prior projections in the 2011/12 timeframe. The US 10-year yield is holding right at 2% again, ahead of next week where some focus will return to a bloated supply calendar for the US Treasury.

– The main analog chip maker slashed guidance in releases out yesterday evening and this morning. Semi industry major Texas Instruments cut its prior Q4 earnings outlook in half and trimmed its revenue guidance. Altera deepened its expected Q4 revenue decline. Lattice Semiconductor more than doubled the sequential decline in revenue it expects to see in Q4. All three companies cited broad-based declines in orders across a wide range of markets. Texas Industries indicated that demand for wireless chipsets is holding up, and also said that distributors’ inventories are at very low levels. Shares of TXI are up nearly 4% in early trading, while ALTR has come off its lows at the open to trade down a mere 1%. LSCC remains down 4%.

– A diverse range of other firms adjusted their full-year outlook or offered a first look at 2012. Shares of materials name DuPont are down almost 5% after it slightly reduced its FY11 outlook, citing destocking across polymers and certain industrial supply chains that has accelerated during the fourth quarter and some slowing demand growth. Toyota cut its FY11 net and operating profit guidance in half due to the impact of the Thailand floods and the strong JPY. Medical device maker Edwards Lifesciences offered relatively inline FY12 guidance. EW gained more than 2% before the open, although shares in the firm are back to unchanged mid morning. Engineering firm Harsco’s outlook was tilted to the downside, and also outlined some non-cash charges to be taken in Q4. Shares of HSC are flat on the day.

– The euro was off its prior New York morning highs as markets continued to digest developments out of the EU leaders’ summit. EUR/USD had gained rapidly to test above 1.3430 on the China funding reports, however skepticism crept in and the pair fell to around 1.3360. Just before the US open, there was a wave of official comments as the various Prime Ministers went into a working lunch. There has been a moderately positive tone out of the summit, and it appears that the issue of euro bonds might come up again at the planned March summit.

***Looking Ahead***

– (CO) Colombia Central Bank Monetary Policy meeting minutes
– 11:00 (US) Fed to purchase $2.25-2.75B in Notes