By Greg Peel

The Dow rose 104 points or 0.9% while the S&P gained 1.3% to 1254 and the Nasdaq rocketed 2.4%.

And the magic numbers are...drum roll please...one trillion, one hundred billion and 60%. According to German magazine Der Spiegel, sourcing German opposition parliamentarians who had just had a briefing with Angela Merkel, the plan is to leverage the EFSF up to E1trn, provide E100bn for European bank recapitalisation, and to force holders of Greek bonds to take a 60% haircut on face value.

If accurate, the first numbers are a little disappointing for the market, given the market's range of expectations have been E1-2trn and E100-200bn respectively. In the latter case, analysts feel at least E200trn is needed. But on the other hand, a 50-60% range of haircut expectation means that number should be well received. If you're gonna fix it, fix it proper.

If markets were disappointed by these as yet unconfirmed "leaks", it was not apparent. The German and French stock markets were up 1.5% last night and Wall Street up 1.3%. The feeling is perhaps that the package is just enough. And besides, while all the European wrangling has been going on, the rest of the world has been looking just a bit better by itself.

The Asian session got a big kick yesterday in an already positive move on the release of HSBC's "flash" estimate of China's October manufacturing PMI. The rise to 51.1 from 49.9 in September represents the first rise since March and the first expansionary reading in four. Global markets would probably have been satisfied with a number that didn't fall much further, given the debate is as to whether China's economic landing will be "soft" or "hard". On this PMI alone, one might suggest China just skipped off the tarmac.

The same could not be said for Europe. Last night's estimate of October's eurozone composite PMI (manufacturing and services combined) came in at 47.2 ? down from 49.1 in September and below expectations of 48.8. Each day it becomes clearer that Europe will head back into recession. But still European markets were up last night, for the simple reason that a recession in Europe has already been discounted as inevitable collateral damage from bail-outs and austerity measures.

The question is to how much Europe will impact on the rest on the world going forward. Europe is China's biggest export customer, but Chinese manufacturing has improved this month with China's domestic economy a likely driver. And last night Caterpillar posted a sensational earnings report.

Heavy equipment maker Caterpillar (Dow) is considered another bellwether for the state of the global economy, heavily leveraged, as it is, to the global mining and agricultural industries. Emerging market demand drove Cat to a record quarter of sales, and the company's order backlog is also at a record. Looking ahead, Cat management expects another strong emerging market performance in 2012, and also expects low interest rate environments in the developed world to support modest growth. Cat shares closed up 5%.

Also a bellwether is parcel delivery service FedEx, which last night forecast a record pre-Christmas period of deliveries based on its recent partnership deal with the US Post to offer cheaper parcels. FedEx announced it was intending to hire 20,000 seasonal workers this year, up from 17,000 last year.

The economic data point in the US last night was the Chicago Fed national activity index. This zero-neutral measure rose to minus 0.22 this month from minus 0.59 in September ? still negative, but heading in the right direction.

Moving on to other markets, what effect might we expect the Chinese PMI bounce to have on beaten-down commodities? Positive? Look out.

Copper leapt 7% on the LME last night. Tin was up 4%, aluminium and zinc up 4% (aluminium never moves 4%), lead 5% and nickel 7%. West Texas crude jumped US$4.08 to US$91.48/bbl, breaching resistance at 90 and closing the gap on Brent, which rose US$1.89 to US$111.45/bbl.

Commodity price moves were assisted by a 0.2% fall in the US dollar index to 76.10 which in turn was affected by a stronger euro. The Aussie understandably added another 1.2 cents to US$1.0475. Even gold was in on the act, rising US$14.20 to US$1654.30/oz.

The US ten-year bond yield is now up at 2.24%, and last night the VIX volatility index slipped to 29. It's the second time in a couple of weeks the VIX has fallen below the 30 "fear" point, and the rule of thumb is that a market cannot really rally unless the VIX is in the twenties or lower.

But we've already risen over 10% from the lows. Most of that has been short-covering, and the VIX has remained stubbornly above 30 most of the time suggesting the market has still been hedging its bets. As we move towards Wednesday's anticipated announcement however, markets are starting to look like they're really on a bit of a sugar high. The question now is, assuming Europe delivers, which way do we go after the announcement is made?

The possibility of "sell the fact" grows stronger every session. Of course a badly received announcement would see a huge sell-off, a delay would see a pretty scary correction one assumes, and then maybe even good news will inspire profit-taking. Sounds a bit lose-lose really. But we should not be surprised by some more immediate volatility until the dust can settle and then, maybe, we're looking more positive than negative finally.

The SPI Overnight was up 32 points or 0.8%.

Yesterday it was revealed Australia's producer price index rose by 0.6% in the September quarter ? down from the 0.8% gain in the June quarter and below expectations of 0.8% this quarter. The data proved supportive for both sides of the monetary policy argument, with the Cup Day cut school latching on to the weaker result and the "on hold" school equally suggesting rising inflation means no move yet. At the end of the day, the PPI does not dictate the more important CPI which is due on Wednesday, given retail profit margins connect the two.

And before we get to Wednesday, RBA deputy governor Ric Battelino will speak today and every time Ric opens his mouth his audience is left thinking a rate cut is miles away. Will his tune have changed?