Asian stock markets were higher overnight, buoyed by a rise on Wall Street and yesterday’s better than expected US weekly jobless report. The jump in risk sentiment helped the euro versus the dollar. News that several European governments imposed bans on short-selling, seeking to rein in volatility, may have added support. However, the gains in stocks were mild when looked at in the context of the extreme volatility of the past week and sentiment is likely to remain fragile on concerns about Europe’s debt crisis, as well as the weak US economy. This morning’s release of disappointing French Q2 GDP figure (growth was flat versus a +0.3% expectation) is also likely to weigh.

The US economy will be very much the focus of attention this afternoon, with July’s retail sales report due for release. Supported by relatively strong auto sales, headline sales are forecast to rise by 0.5%, with core up 0.2%, though this is unlikely to be sufficiently strong to ease concerns about the outlook for the US consumer. The preliminary Michigan sentiment survey for August is also due today and will be watched for the latest in terms of consumer confidence.

The dollar and euro posted their biggest ever one day gains against the Swiss franc yesterday, jumping as much as 6% on talk that the central bank was considering pegging the franc to the euro in an attempt to halt its rise. The CHF recouped some of its losses overnight and is likely to stay supported as long as worries about the global slowdown and debt problem in the US and Europe persist. Sterling, meanwhile, remains on the back foot, undermined by weak UK fundamentals that are likely to keep it under pressure versus the USD as well as the CHF and yen. Versus the euro it is off recent highs but downside pressure should be limited.