Initially stocks and commodities were little changed while Treasuries rose in the U.S., but stocks have since started to slip. The S&P 500 was down -0.21% as of 11:35 EST after government data showed personal incomes and spending trailed economist estimates last month while investors continue to weigh developments in government budget talks. In Europe, equities are little changed after Germany approved Greece’s latest rescue package and data was released indicating euro-area unemployment rose to the highest level on record. Most sovereign debt yields to German bunds in the area are moderately tighter, while the euro is up +0.216% versus the greenback.

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Details of today’s GDP revision are worse than the weaker-than-expected overall result with particular warnings signs coming from weak personal consumption which is unlikely to absorb the near doubling of the inventory growth estimate. Personal consumption growth was revised down to 1.4% QoQ from 1.9%, the lowest since 2Q 2011 and near the levels observed at the start of three prior recessions. Inventories rose $61.3B versus the initial estimate of $34.1B.

Despite the mostly poor economic data points out today, sentiment is modestly higher around the world. As of 9:50 EST, the S&P 500 is up +0.54% while the 10yr Treasury yield is down just slightly to 1.627%. The dollar is weakening versus most of its peers, with the euro up +0.355% versus the greenback. The Euro Stoxx 50 is up +1.17% on strong volume, led higher by Italian and Spanish equity rallies. Sovereign debt spreads to German bunds are contracting this morning, while the 10yr bund itself is up +1.5bps to 1.382%.

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Sentiment is mostly lower around the globe this morning on stalled U.S. fiscal cliff talks and doubt surrounding the Greece agreement that was announced yesterday which is pushing German bunds down significantly, with 5s to the long-end of the curve down more than -5bps. In Europe, spreads to the bund are moderately to significantly higher. Upon equity markets opening in New York, the Euro Stoxx 50 is down -0.61%, led lower by Spain’s IBEX 35 down -1.1%, while the 10yr German bund is down -7.7bps to 1.362%. The euro is down -0.394% versus the dollar, while Markit Economics’ iTraxx Europe CDS index is up +4.06bps to 127.61bps.

The dollar is strengthening versus its peers while equities are tumbling, with the Dow down -0.42% upon open. Investors are waiting for politicians in Washington to get their act together and come up with a resolution to the fiscal cliff before they leave for the holidays on Dec. 21. If no deal is made by then, $600+B dollars in spending cuts will automatically be triggered on January 2. Treasury yields are tumbling in response, with the 10yr down -3.2bps to 1.605%.

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