After a 5% drubbing, the Shanghai index bounced back 1.7% as the PBOC quelled concerns that monetary policy would change much. Good earnings reports in Japan also helped to lift spirits. European stocks rallied after the July Euro Zone economic confidence # rose almost 3 points from June and was 1 point more than estimated. Also, Germany’s July unemployment report was better than expected and UK home prices rose more than forecasted m/o/m in July. As a result of the above, the risk trade is back on, buy stocks and commodities and sell the US$ and Treasuries. The key test of the week for Treasuries will come this afternoon when we see the results of the 7 yr note auction as the maturity falls into the part of the yield curve where inflation expectations and government finances become a focus. Jobless claims are expected to total 575k and may be a clean # that isn’t impacted by the auto plant disruptions.