By Greg Peel

The Dow closed down 10 points or 0.1% while the S&P was flat at 1402 and the Nasdaq rose 0.3%.

US weekly new jobless claims fell by 6,000 last week to 361,000, which is good, although as I have oft suggested these numbers are volatile and must only be viewed in terms of underlying trend. The underlying trend is most evident each month when non-farm payroll numbers are released.

The US trade deficit for June surprised everyone with an 11% reduction, driven by ? hold the phone ? record high exports. Given the strong dollar, the evidence from reporting season, recession in Europe and a slowdown in China, this result left economists scratching their heads. But again (and Australia has the same experience) these numbers can jump around and economists believe the June numbers represent a blip which will correct in subsequent months.

No one's paying much attention anyway, given everyone's on holiday. And why not? Nothing will happen, it is presumed, until at least the end of the month. There's still some chatter out of Europe but all European parliaments are on their summer breaks, as is Congress, so there won't be any news of substance unless some financial disaster were to befall. With markets now in limbo it's hard to see what that might be.

So we wait. First cab off the rank of potential central bank action will come with the three-day Fed symposium at Jackson Hole beginning August 31. Here Bernanke has preempted his QE policies in each of the past two years. However the ECB will meet on September 6 and the official Fed statement is not due until September 13. The world is hinging on what the ECB will or won't do, so one presumes the Fed would like to know as well before adopting any aggressive policy changes. The poor old RBA has to meet on September 4 before all of it, which further lessens the chance of any rate change.

While Beijing is trying to stimulate China's domestic economy, no doubt an improvement in exports to Europe would be well received, and hence Beijing, too, would like to see action from Draghi. Yesterday's data dump showed Chinese industrial production growing in July by only 9.2% year on year, down from 9.5% in June and at the lowest pace since May 2009. Electricity generation managed only a 2.1% increase. These numbers suggest Beijing's rate cuts are yet to have any impact of note, and thus suggest further policy action may yet not prevent a September quarter GDP result lower than June's 7.6% growth.

This was not a particularly good data set for those hanging on for a second half bounce in China's economy.

There have been fears the US drought-led spike in food prices would spark a jump in Chinese inflation but that's certainly not the case just yet, with the CPI falling to 1.8% from 2.2% in June. This allows Beijing plenty of room to move but is another indicator of a sluggish economy. Retail sales edged up modestly to 12.2% yoy growth from 12.1% in June.

If improvement is not being generated by monetary policy, perhaps fiscal policy will prove the hero. Beijing approved no less than 1446 major state investment projects in the first half, and railway investment returned to growth for the first time since the beginning of 2011 with an 8% increase in July.

So with a Chinese recovery looking neither substantial nor immediate at this point, we're again back to the ECB. Traders in Europe are agonising over the will they/won't they question, and last night the euro slipped a little. The US dollar index is up 0.3% to 82.58, but the Aussie is steady at US$1.0581, having again tested 106 on yesterday's jobs numbers. Gold is up US$4.90 to US$1617.20/oz.

Moves in base metals were mixed and unsubstantial last night, but oil continues to push higher. Brent was up US$1.33 to US$113.47/bbl and West Texas rose US30c to US$93.65/bbl. While Syrian rebels hold Iranian "pilgrams" hostage, the energy markets are tense.

Meanwhile the quiet exodus from US bonds continued last night after the US Treasury's auction of 30-years met with tepid demand. The ten-year yield rose 5bps to 1.69%.

The SPI Overnight was up 3 points.

China will release its July trade balance today and the RBA will publish its quarterly Statement on Monetary Policy. On the earnings result front, Crown ((CWN)), Goodman Group ((GMG)) and Pharmaxis ((PXS)) are in the frame.

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