By Greg Peel

US markets were closed last night for the Labor Day holiday. The long weekend signals the end of the summer break and brokers are hopeful of a pick-up in volumes from here as traders return just in time for supposed central bank action.

Yesterday HSBC released its independent calculation of China's manufacturing PMI for August which showed a fall to 47.6 from 49.3 in July, indicating accelerated contraction. Over the weekend, Beijing had released its number which showed a fall into contraction at 49.2 from 50.1. While the Chinese slowdown appears to gather pace, hopes have been heightened for a monetary policy response. Beijing has nevertheless remained quite silent.

The official Chinese service sector PMI was also released yesterday and in contrast it showed an increase to 56.3 from 55.6 to mark an accelerated pace of expansion. It's not all bad.

It's not so great elsewhere, nevertheless, albeit all of Australia, the eurozone and the UK posted improvements in their manufacturing PMIs. Australia's rose to 43.1 from 41.2, which might be called "slightly less woeful", the eurozone saw a rise to 45.1 from 44.0, but still marked the thirteenth consecutive month of contraction, while the UK's result was a bit more promising, with a rise to 49.5 from 45.2 suggesting a possible turnaround is underway.

Australia's result came on a day that saw quite a raft of weak economic data, from falling job ads to falling house prices, falling corporate profits and weak inflation, as well as a manufacturing sector still going backwards. Take this one day of results in isolation and you'd be forgiven for expecting a rate cut today from the RBA. However, there is virtually no expectation of another cut at this stage as the central bank sits back to allow earlier cuts to work through the system, to learn the GDP result tomorrow, and to see whatever it is the ECB, Fed and PBoC might do between now and the October RBA meeting.

What will be worth a read is Glenn Stevens' accompanying statement. For many months potential risk in Europe has been offset by strength in China and strong commodity prices, cancelling out the need for a more aggressive easing program. With the Chinese slowdown now accelerating and iron ore prices, in particular, having been crunched the balance is not quite as even as it was.

Is Beijing waiting to see what Europe does? While the focus now is on building the Chinese domestic economy any stimulus in the eurozone and/or the US would provide indirect stimulus for China as well via improved export demand.

To that end, we can talk until we're blue in the face about what Mr Draghi might say on Thursday night, but at this stage we might as well just wait. In developments last night, the Spanish state of Andalusia cried bankruptcy as expected and approached Madrid for assistance. It seems unlikely Madrid would suggest Spain doesn't need a bail-out, but the government still wants to see the terms before making a request. A German newspaper report suggested Bundesbank chief Jens Wiedmann had considered resigning on the basis of his opposition to ECB bond purchases. If this is the case, it would imply the Bundesbank can't actually stop such purchases and presumably there are many in Europe who would thank Wiedmann for his sacrifice.

Whatever the perception, European stock markets were stronger last night despite the weak data, likely implying a US-style bad news is good news response as it strengthens the case for ECB action. London rose 0.8%, Germany 0.6% and France 1.2%.

Base metals saw a catch-up reaction to Bernanke's Jackson Hole speech in rising 1-2%, while the oil price keeps pushing higher, with Brent up US$1.04 last night to US$115.90/bbl and West Texas up US$1.85 to US$96.47/bbl.

With the US closed, the US dollar index was little moved at 81.19 and gold is similarly steady at US$1692.60/oz. The Aussie is nevertheless a deal weaker from yesterday, down 0.8% to 1.0245 on the combination of weak domestic and Chinese data.

The SPI Overnight is up 9 points or 0.2%.

At home we'll see June quarter trade data today ahead of tomorrow's GDP release. Tonight the US will catch up with its own manufacturing PMI.

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