By Greg Peel

European stock markets had been on a tear since the EU summit produced a welcome result but the next step in the process is to see what further relief the ECB might be able to provide. The ECB meets tonight and a cash rate cut of 25 basis points to 0.75% is widely expected although some still favour 50bps. With the US markets closed for Independence Day, Europe took the opportunity to have a rest. All major indices were off slightly.

The eurozone is expected to post a negative GDP result for the June quarter with even Germany going backwards, confirming the entire zone's move back into recession. Last night saw the release of the zone's service sector PMI which showed a rise to 47.1 from 46.7 ? an improvement but still indicating contraction. Adding in Monday's manufacturing PMI provides a eurozone composite PMI for June of 46.4 ? up from 46.0 in May but, again, going backwards.

The Bank of England also meets tonight and while there will not be a change from the longstanding 0.5% cash rate, the BoE is expected to announce an increase in QE measures. Last night the UK services PMI came in at 51.3 for June, down from 53.3 and sliding towards possible contraction as well. The UK's manufacturing PMI remained in contraction in June.

Ahead of the European results we saw Australia post a June services PMI result of 48.8 ? still in contraction but quite a reasonable jump up from May's miserable 43.5. Signs, perhaps, that the RBA's 75bps of cuts are having an impact. China was also in the frame, with Beijing's official services (non-manufacturing) PMI released Tuesday having shown a jump to 56.7 from 55.2 but yesterday's HSBC independent equivalent showing a fall to 52.3 from 54.7.

Every month there are arguments about which PMI numbers ? Beijing's or HSBC's ? should be believed. Numbers out of Beijing are always pretty rubbery but in terms of PMIs, the criticism is the that official number is weighted too heavily towards large, state-owned companies. HSBC offsets this by surveying more small and medium companies but then is also criticised, this time for conducting too small a survey.

Whoever is closer to the mark it probably doesn't matter much at present given expectations are for more easing from Beijing as the Chinese economy clearly slows, and as a once-a-decade change of government approaches. We don't want the new top banana to inherit any but a strong economy now, do we.

Coming back to Australia, yesterday's May retail sales data showed a better than expected jump of 0.5% combined with a revision of the April move to plus 0.1% from minus 0.2%. Again, signs are that the RBA's encouragement is helping, although we must not forget we are now comparing numbers off a much lower base than a few years ago. It should also be noted that this monthly figure does not include offshore online sales while the quarterly GDP constituent numbers do.

The aforementioned expectation of an ECB rate cut saw the euro sliding somewhat last night in thin trading, sending the US dollar index up 0.5% to 82.18. That was about the only move of any note last night, with the Aussie steady at US$1.0277 and gold little changed at US$1615.20/oz. Base metals fell around a percent in London on the US dollar's rise and Brent crude lost US55c to US$100.13/bbl.

The SPI Overnight was "unch".

The US service PMI will be out tonight along with the ADP private sector unemployment number. Ahead of those results both the ECB and BoE will make policy announcements and ahead of those, Australia will post its May trade balance.

Rudi will not be appearing on Sky Business today as usual due to injury. I believe he fell off a Belgian beer glass.

All