With US news taking a day off between yesterday’s manufacturing PMI numbers and tomorrow’s ADP payrolls, focus has been on European developments this morning. The last major data points for the Eurozone ahead of Thursday’s meeting are out and send a mixed picture. Inflation came in below expectations further stoking deflation fears. Employment numbers, however, came in better than expected with Spain reducing unemployment by over 100,000 jobs for the second month in a row, while both Italian and Eurozone unemployment rates were high but not as bad as feared. Traders today have focused more on the employment than the inflation results sending European indices lower and EUR (along with the pegged CHF and DKK) higher this morning on the feeling that these results take some of the pressure off the ECB to act. While the central bank may still cut interest rates, perhaps even into negative territory, the potential for a massive US, UK or Japan style new QE program appears increasingly unlikely. It’s important for traders to remember that the ECB has just completed a stealth taper of its own. Between September of 2012 and March of 2014, weekly LTRO repayments cut the ECB’s balance sheet from €3.1 trillion to €2.1 trillion. This is likely the main cause of the drag on inflation in Europe lately which is why the central bank may focus more on employment. With the ECB balance sheet levelling off in the last two months, the stealth taper appears to be over which may enable inflation to rebound on its own going forward. US indices are dropping back today in a normal trading correction after the Dow and S&P both finished at record high closes yesterday. The broader Russell 2000 slipped yesterday suggesting small caps were not confirming the gains made in big caps. Corporate News AT&T raised its 2014 revenue growth guidance to 5% from 4% Hudson’s Bay Company adjusted EPS ($0.15) vs street $0.00, sales $1.85B vs street $1.81B Economic News Economic reports released overnight and this morning include: Australia interest rate 2.50% no change as expected India interest rate 8.00% no change as expected, cut the statutory liquidity ratio of commercial banks to 22.5% from 23% an easing move Poland interest rate 2.50% no change as expected China HSBC manufacturing PMI 49.4 vs street 49.7 China official non-manufacturing PMI 55.5 vs previous 54.8 Australia retail sales 0.2% vs street 0.3% UK house prices 11.1% vs street 10.9% UK construction PMI 60.0 vs street 61.0 Eurozone unemployment rate 11.7% vs street 11.8% Eurozone consumer prices 0.5% vs street 0.6% and previous 0.7% Eurozone core inflation 0.7% vs street 0.8% and previous 1.0% Spain unemployment (112K) as expected Norway unemployment rate 2.7% vs street 2.6% and previous 2.8% Italy unemployment rate 12.6% vs street 12.8% Economic reports due later today include: 9:30 am EDT Singapore PMI street 51.3 9:30 am EDT Singapore electronics sector street 50.8 10:00 am EDT US factory orders street 0.5% vs previous 1.1%