If you are a believer in the recovery it was your day yesterday as markets pointed to a lightening of the economic mood with a synchronicity that has not been evident for a fair while.

The Dow Jones topped 10,000 for the first time in a year as bullish earnings reports from Intel and JP Morgan and an increased oil price saw speculators flood into ‘long’ or buy positions of risky assets. The dollar lost ground as it was sold to buy into the rally whilst commodity currencies gorged on newly pledged money.

Data from the UK backed up this rally as unemployment, normally one of the last indicators to turn positive, showed a less than expected rise in the amount of people claiming job benefits. The market was unwilling to bid pound higher however as it swooned after promising rallies against the USD, JPY and EUR. This could be as a result of former MPC member David Blanchflower’s comments that this is merely the ‘lull before the storm’. “It’s early days in the sense that the figures relate to August, so students have just finished college and are deciding what to do”, he said. “It’s a classic seasonal variation. It’s hard to believe that this is over.”

In the press a damning report by the European Commission on the long-term prospects for Britain’s public finances warns that Britain is at “high risk” of running unsustainable debts – implying that the nation will be unable to service its debts and that only default or high inflation can relieve the burden.

The Commission’s 2009 Sustainability Report says that Britain will suffer a “sustainability gap” of 12.4% of GDP – meaning tax rises or spending cuts amounting to close to GBP 200bln a year. However, the Telegraph reports that the Treasury has lashed out at the European Commission in highly charged language after it suggested that Britain risks a debt compound spiral that could push public borrowing to levels never seen in a modern democracy.

Data today includes that European CPI alongside US inflation and manufacturing figures from the New York and Philadelphia areas.

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