\n\tBy Greg Peel<\/p>\n
\n\tThe Dow fell 98 points or 0.7% while the S&P lost 0.8% to 1435 and the Nasdaq<\/span> dropped 0.3%.<\/p>\n \n\tJust when Wall Street felt Washington was moving closer to a compromise, last night the gap appeared to widen further. Or perhaps the thought of compromise was just an illusion.<\/p>\n \n\tBoehner intends to put his “Plan B” cliff solution to the House this week. Plan B involves tax hikes for incomes over US$1m<\/span>. Obama has shifted his threshold up in an attempt at compromise to US$400k<\/span> from US$250k<\/span>. Plan B includes increases to 20% for capital gains and dividends for those earning over US$1m<\/span>, leaving the current 15% for those earning under US$1m<\/span>. We have not heard anything publicly from the Democrats on these particular taxes, but Cliff has them rising to as much as 23.8% and 43.4% respectively for all.<\/p>\n \n\tBy putting Plan B as a bill to the House, Boehner appears to be snubbing the president and suggesting to Americans that the Republicans actually are running the country, despite losing the election. Plan B has Democrat senate leader Harry Reid spitting fire and Democrat house leader Nancy Pelosi looking incredulous. There may, however, be a plan behind the Plan.<\/p>\n \n\tThe Republicans know that the bill will be rejected in the Democrat-led Senate and can also be, and will be, vetoed by the president. The Republicans also know that the bill will not even garner full support from all Republican reps because many are vehemently opposed to any form of tax increase. It is this latter point which comes into play. If Boehner puts up the bill and it goes no further, he can tell his reps that at least he tried. This might just be a precursor to actually moving towards concession.<\/p>\n \n\tOr America may go over the cliff. Or the mound, or the slope, or whatever it likes to be called now given not all the bad things will happen on Day One.<\/p>\n \n\tTedious? Yes. Market-moving? Unfortunately. After consecutive 100 point up-days we've had a 100 point down-day following accelerated selling towards the close. All on politics.<\/p>\n \n\tThere was also some mixed US data last night. The bad news is that housing starts fell by 3% in November from October, taking the gloss off the apparent rebound in US housing. The good news is, however, that building permits – the step before starts – rose by 3.6% to levels not seen since July 2008, and that Sandy impacted on the starts figure.<\/p>\n \n\tMeanwhile across the pond, Germany's IFO<\/span> business confidence index has risen for a second month by more than expected, to 102.4 from November's 101.4. The positive business reading follows an even more surprisingly positive ZEW<\/span> investor confidence reading earlier in the month. Everyone else is wondering what depressing turmoil Europe has in store for us in 2013, yet the Germans seem to be having a fine time of it.<\/p>\n \n\tThe result is that the euro has been quietly sneaking up while no one much has been watching to return to levels not seen since April. The euro has also shot up against the yen, as have all currencies, hence the US dollar index was down only 0.1% last night to 79.26. The Aussie, however, took a rare 0.5% dive to US$1.0490.<\/p>\n \n\tDespite dropping previously on signs a cliff compromise might be reached, gold did not bounce back last night with Wall Street's fall. It is US$3.10 lower at US$1669.10\/oz. Base metals are just not getting carried away in either direction, hence last night moved modestly in both directions.<\/p>\n \n\tSpot iron ore cares little about the macro, as it's up another US$3.30 to US$135.50\/t.<\/p>\n \n\tAn unexpected (aren't they always?) decline in US inventories helped the oils higher last night, with Brent up US$1.52 to US$110.36\/bbl<\/span> and West Texas up US$1.49 to US$89.42\/bbl<\/span>.<\/p>\n \n\tThe December SPI<\/span> contract expires today, and overnight it fell one point. The March contract, which will be the new front month tomorrow, actually rose two points, but we can't read anything into rollover time.<\/p>\n \n\tOn that note, today sees not only the futures expiry but the expiry of all stock and index options and futures options as well. Such events can often cause a lot of market-unrelated argy-bargy<\/span> as we head to the close.<\/p>\n \n\tThere's quite a raft of US economic data out tonight as we start cramming things in before Christmas. On the subject of Christmas, it appears that Cliff will be an unwanted guest at the table in his paper crown. Even New Year's is looking ambitious, resolution-wise.<\/p>\n \n\tUnderneath it all, however, Wall Street seems to be more confident than fearful.<\/p>\n \n\tAll overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX<\/span> and more available in the FNArena<\/span> Cockpit. Click here<\/a>. (Subscribers can access prices in the Cockpit.)<\/em><\/p>\n \n\tAll paying members at FNArena<\/span> are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts in the Cockpit and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.<\/em><\/p>\n