Markets Lift on Positive Signs in Europe

European stocks, Italian bonds and market sentiment in general are rebounding into the black after signs that Italy is speeding up the passage of its austerity bill, together with a decent Italian BTP auction and containment from the European Central Bank.

The Italian 10-year generic yield is currently at 6.92%. Sentiment is also improving amid fresh talk of an unscheduled ECB meeting today to authorize unlimited bond purchases. As a result, European bank shares are marginally higher, up 0.3%, though the long-term concerns remain as Germany's CDU party is exploring ways for countries to exit the eurozone without leaving the European Union.

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U.S. S&P futures indicate a positive open, up over 1%. Beyond Europe, Australia's employment report was better than expected confirming a slight tightening of the labor market, despite the recent deterioration in other macro data. Employment rose 10,100 in October and the September's number was revised up by 2,100. Full-time employment bounced 20,000 in October, continuing the 13,700 increase in September. Part-time jobs reversed 9,900 after an 8,800 rise in September, while the unemployment rate dropped to 5.2% in October from 5.3% in September. What's more, the participation rate was steady at 65.6% in October. Follow TheStreet on Twitter and become a fan on Facebook.The data on the whole confirmed a slight tightening of the labor market, despite the recent deterioration in other macro data. As a result, we continue to believe that the 150 basis points of cuts priced into the Reserve Bank of Australia policy is too aggressive and in turn is unlikely to materialize. Nevertheless, we still expect the RBA to cut by another 25 basis points in the months ahead and therefore would be cautious of the AUD/USD in the near term, especially in the current volatile environment for risky assets and commodity prices. A relief rally is likely to meet resistance between 1.020-1.037.The bank of Indonesia surprised markets by cutting 50 basis points in today's meeting. Expectations were for a 25 basis-point cut or for no change. The move was attributed to lower inflation pressure, but curiously, the central bank also stated that it expects 2011 GDP to come in at a robust 6.5% year-over-year.

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