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Overnight markets began with a decidedly risk-on tone piggy-backing on the positive data surprises to Chinese and U.S. manufacturing data yesterday. That tone continued with the release of Eurozone Q2 GDP, which showed a slightly stronger expansion of 1.9% on an annualized basis against the consensus of 1.7%. The ECB held its interest rate policy meeting as well but it was no surprise that they kept rates the same at 1.0%. ECB President Trichet's accompanying statement indicated that they will extend unlimited loan offerings into 2011 and there was no signal of any change in rates.

After a strong equity rally in Asia, European bourses are nearing their close very close to flat and U.S. stocks are just barely in the black. Part of the reason for the pullback in risk-seeking seems to be the just released data in the U.S. of jobless claims, pending home sales and factory orders. Initial jobless claims came in just under the consensus at 472k vs. 475k. This is the second consecutive drop and continuing claims also dropped for a second week in a row and are at an 8-week low. These numbers are still at levels that remain much too high to instill any type of confidence in the labor market but a drop is a drop. The focus is still on the nonfarm payrolls report to be released tomorrow with expectations set at -100k with an unemployment rate at 9.6%. Tomorrow's release has markets pretty hesitant and appears to be why equities have a subdued tone. Pending home sales rose by 5.2% in July, much higher than the consensus of -1.0%. Though this was a positive surprise, remember that we're still at pretty dismal levels and it will take a lot of these surprises to dig us out of the hole we're in. Factory orders came in at 0.1% just under expectations of 0.2%.

Gold is trading higher at $1,252 and oil is essentially flat on the day at $73.90. 2-yr U.S. Treasury yields are flat but 10-yr yields are up 5 bps as funds flow into riskier assets. Thanks and have a great day.