Another positive finish and a record close for the S&P500 in US markets last night has seen investors set aside concerns about Fed tapering and become more comfortable with the idea that, despite a poor payrolls number last week, the US economy looks set to continue to show resilience, helped by a more positive backdrop at home and in Europe, despite some concerns expressed last week that weather related problems were behind last week's payrolls miss. Even if the weather was a factor, and this doesn't seem likely, you would have thought that there would be some other evidence to support that belief, but thus far every piece of economic data from various surveys doesn't support that conclusion, while the January Empire Manufacturing survey yesterday blew away market expectations on every measure, despite the recent unseasonably cold polar weather. If the weather were to affect anything you would expect to see some evidence of that in these and other January numbers. We've also seen ADP for December come in positive, along with ISM and PMI surveys, and steady weekly jobless claims numbers, while last nights "Beige Book" survey appears to point to a continued recovery in economic activity, with eight of the twelve Fed districts reporting an increase in hiring, which does seem to suggest that that last week's payroll number could well have been an outlier, and as such could be subject to a revision higher next month, when the January payrolls gets released. Even allowing for optimism about the US recovery there are still weak spots as this week's retail sales numbers seemed to suggest given that over the last three months they have been trending lower with rises of 0.5%, 0.4% and 0.2% respectively, from the months October to December. Heading into Christmas you would expect that trend to be in the other direction if consumers were feeling confident and the economy was recovering steadily? If today's Philadelphia Fed for January comes in similarly positive to the Empire number, along with positive jobless claims number, the likelihood of a further taper at the end of this month is expected to increase, particularly if concerns about deflation continue to subside. Expectations for Philadelphia Fed are for 8.6 while jobless claims are expected to fall to 328k. Today's US CPI numbers are expected to show an increase in prices for December mimicking yesterday's positive PPI numbers. Including food and energy a rise to 1.5% is expected from 1.2% in November. Back in Europe the debate continues to rage about whether or not the European economy such as it is, could be in danger of deflation, with pressure continuing to build on the ECB to adopt further measures to ease credit conditions. There is no doubt that prices are falling in some parts of the euro area, but that is an unavoidable side-effect of internal devaluation and adjustments as countries undergo structural reform programs. Given that unit labour costs in France and Italy are still rising relative to Germany we could well see more deflation, irrespective of what measures the ECB takes, particularly if structural rebalancing continues to take place. Last week's comments from ECB President Draghi have been construed by a number of people that the ECB is leaning in the direction of adopting QE, after he stated that the ECB was considering measures within what is allowable by the EU treaties. Given that outright QE is forbidden by the treaty I'm not sure how anyone can arrive at that particular conclusion, unless the treaties are changed, which doesn't seem likely. ECB officials have been consistent in their insistence that there is no deflation problem in Europe and it will be hoped that the latest German CPI number confirms that prognosis with expectations that December will come in at 1.2%, while final Eurozone CPI for December will come in at 0.8%. Given last night's record highs in the US, European markets are expected to open slightly higher this morning. CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.