Overnight

The overnight action in Europe was largely positive, there were successful auctions of debt out of France and Spain and the yields on 10 year Italian BTPs broke below the red-zone of 7%, Spanish bonds  are close to breaking below 6%, this is good news for today and apparently brought on by yesterday's liquidity action although it has no effect on sovereign debt, only liquidity funding costs for EU banks.

There were rumors that this liquidity action was taken yesterday because a major EU bank was about to fail, this morning it seems that bank may have been Credit Agricole.

Overnight the big news was China's manufacturing base entering contraction with a sub 50 PMI print, probably explaining their lowering of Reserve Requirements for banks yesterday.

In the US this morning, Initial Jobless Claims jumped back above the 400,000 mark at 402k (consensus was 391k), the previous print was as always, revised higher from 393k to 396k.

ISM beat at 52.7 (consensus 51.8) however, mirroring the IJC above, the employment index fell from 53.5 to 51.8 which doesn't bode well for the Non-Farm Payrolls.