European leaders Merkel and Sarkozy pushed for stronger financial and economic convergence in their press release yesterday. As largely expected they pledged for euro members to prepare annualised budgets on harmonised economic outlooks, for common corporation tax rates by 2013. Importantly they looked for an obligation to have balanced budgets within each country, making it a legal requirement with clear boundaries  and strict supervision.

While the market saw this as largely positive what wasn’t made progress on was the common euro bond, as both Leaders felt this should be something done at the end of a process of harmonisation rather than acted upon now. Questions also remain about how much firepower the EFSF truly has at its current level of 440bn euros as they refused to look to increase it. General consensus that this isn’t large enough to enact a bailout of one of the larger troubled countries of Italy or Spain.

Lastly, they once again relived the discussion tax on financial transactions that was first proposed in 2010, sending US equities spiralling in late trading.

Meanwhile from the Euro zone, early morning figures had revealed German GDP disappointed, with only a 0.1% growth vs. 0.5% for Q2. EU wide GDP was also out not long after, also disappointing but not to the same extent with figures showing  0.2% growth compared to 0.3% consensus

News from the US saw ratings agency Fitch upholding the AAA status of the US, while industrial production figures also arrived at better than expected.

UK inflation figures were much as expected yesterday, and while we didn’t see much movement in the pound as a result we did see Mervyn King once again get out the pen and pad to explain why inflation missed the bank’s target.

Today see BOE minutes out today, we will be looking to see if there was any change in the voting pattern of the members following their last meeting

Latest exchange rates at time of writing