It is a big positive morning for the risk trade. China started the ball rolling with their reserve requirement cut. The Addition of liquidity to the global money markets by the central banks is a short-term plus, reducing some of the stresses in the interbank funding markets (though it is a sign of how serious the global fiscal problems are…). The icing on the cake is the big uptick in the ADP employment report suggesting a strong employment report from the US on Friday.
None of the actions this morning take the pressure off Italy as a sovereign or any of the other players on the European scene. With the market prepared for the worst in EUR/USD and European bond markets, a relief rally is underway. How durable that will be is very questionable.
Short-covering rallies are the nastiest, no doubt. Keep an eye on European bank share prices to get a sense of if this rally is losing its legs. They are up about 5% today.