By Carlos Guillen

Equity investors are increasing their concern about Europe's inability to reach a concrete solution with respect to the Greek debt fix. But adding to the concern is that China is not opening the monetary flood gates just yet; something many investors were already counting on, and had given equity markets momentum a few weeks ago. As a result, the three major equity market indexes are in the red with the Dow Jones Industrial Average down over half a percent.

Earlier today, data from the European Commission in Brussels revealed that euro-zone January confidence in the economic outlook improved for the first time since February 2011, but was less than forecasted. While there have been efforts to solve a two-year-old financial crisis and to revive growth in the region, confidence failed to meet expectations. The commission's index of executive and consumer sentiment in the 17-nation euro-zone rose to 93.4 from a revised 92.8 in December, but missed the Street's estimate of 93.8.

Adding to the discouraging news flow coming out of the euro-zone was that Spain's GDP contracted by 0.4 percent during the fourth quarter and that the nation would not be able to meet its 2012 GDP growth target of 2.3 percent. These revelations are currently increasing doubts that Spain will be able to cut its budget deficit from around 8 percent of GDP in 2011 to 4.4 percent by the end of this year as promised.

Of course, at the heart of the euro-zone's problems is the Greek debt. Late last week Germany angered Greeks when it proposed that a European commissar take control of Greek public finances to ensure it meets fiscal targets. Greek Finance Minister Evangelos Venizelos said that to make his country choose between national dignity and financial assistance ignored the lessons of history. Today's EU summit will likely be forced to touch this issue, but a solution will be unlikely. Until there is a deal between Greece and its private bondholders, EU leaders cannot move forward with a second €130 billion rescue program for Athens, which they originally agreed to at a summit last October.

Moving to Asia, China was not willing to use its fire power to boost liquidity in the region, as the Nation held off on a reduction in bank reserve requirements, one that was expected by many on the Street, suggesting a great reluctance to easy money to the economy. China's major challenge at the moment is to steer its economy through a property market slowdown and the weakest export growth since 2009 without re-inflating asset bubbles or driving up consumer prices. So far the Chinese central bank has left benchmark interest rates unchanged for the past six months while making a single cut to reserve requirements, the first since 2008, that became effective in December.
At the moment, while the Dow remains in negative territory, it is slowly climbing its way up, and hopefully this will not be the beginning of a down turn for equities.

Manufacturing on Track
By David Urani

The Dallas Fed put out its monthly manufacturing index this morning, and while it's not much of a market mover I liked the trends. General activity was up to a reading of 15.3 for January after falling to -0.3 in December. The headline number was the highest the index has been since February of last year. There was a marked improvement in new orders, which were up to 9.5 after sinking into negative territory for the previous two months, and shipments showed a similar reversal.

The Dallas result follows up on strong results from two other previously reported Fed surveys from Philadelphia and New York. Taken together, one can see the general uptrend as activity rose from the depths of August, and continues to push higher. Of course, the big number comes Wednesday when the ISM puts out its national manufacturing index, and the consensus as of now is for a modest gain. Given the regional readings out so far you'd have to say so far so good.