PMI day starts with China divergence, Tankan hits 6yr high in Japan

• Chinese official PMI bounces back, HSBC version shows contraction

• Eurozone CPI falls to a new cyclical low

• Japanese industrial confidence survey likely a near-term high

• Yellen speech casts doubt on 6 months line

Asian data has started April off in mixed fashion as we lead off the real data barrage that this week has to offer. Two separate measures of Chinese manufacturing have shown differing courses for the "world's factory". The official measure from the Chinese statistics bureau showed a reading of 50.3 - slight growth but finishing a poor quarter on a mediocre improvement from the month previous. The HSBC measure, which focuses more on smaller to medium sized enterprises, was once again in contractionary territory. A reading of 48.0 is lower than that of February's 48.5 and gives us real concern about the true state of Chinese manufacturing, even with a sub-index of new export orders hitting the highest level since November of last year.

AUD has not moved too much overnight however, following the latest meeting by the Reserve Bank of Australia. Governor Stevens and the rest of the rate setting committee decided that rates should remain at 2.5 percent and, as has now been the custom from the world's central banks, emphasised that rates are likely to remain steady for a period. AUD has had a good run of late, helped by falling volatility and a desire for yield that has seen the carry trade re-emerge as a good place to be. Governor Stevens commented that the “the decline in the exchange rate from its highs a year ago will assist in achieving balanced growth in the economy, but less so than previously as a result of the rise over the past few months".

Japanese industrial confidence rose to the highest level since 2007 overnight but if there was a set of numbers that defined a brief pop higher and then a likely collapse it was these. The Tankan survey rose to 17 in Q1 - missing the expectations of 19 but beating Q4's reading of 16 - but the slowing of the world and domestic economies will hurt Japanese industrials hard.

With today being April 1st, it is the first day of trade for the nation's shops with the new sales tax increase. For those of us in Europe, a move to 8% from 5% seems paltry but consumer trends are so weak in Japan - last week we saw an unexpected dip in consumer spending through February - and recent inflation is running all over wage gains. We expect the Bank of Japan to get back into the QE boat at its June meeting as soon as they see the slowing that the tax levy and an overly strong yen is causing. JPY is relatively flat this morning.

A speech by Janet Yellen took the USD for a bit of a ride yesterday as she said that the economy needed "extraordinary support for some time" - a line that the market took as a row back of her hint at the latest FOMC press conference that rate rises could be seen 6 months after the end of tapering. Her speech focused on the slack in the labour market, something we think will be reduced following Friday's payrolls release.

Eurozone inflation was estimated this month at 0.5%, just a quarter of the target according to the release yesterday morning. The ECB is due to meet this Thursday and we will see one of two things. The more likely option is further dovish chatter from the Executive Council at Draghi's press conference on Thursday afternoon; we do not believe that the large negative reaction on the inflation front has been seen to increase the chances of some form of policy action from the European Central Bank. The euro initially slipped, and then rallied after the number as traders bet that the stubbornly high core number - inflation minus volatile energy and food components - remained at 0.8%, limiting their views of ECB policy reaction.

PMIs are not just due from China this morning with those from Europe and the UK punctuating the morning calendar. Italy's is due at 08.45, France at 08.50, Germany at 08.55, the Eurozone at 09.00 and UK at 09.30 - all times BST. For the first time in a while, all are expected to show growth with France looking for its highest reading since June 2011.

The US ISM is due at 15.00 and expected at a strong reading of 54.0. We'll happily take the over on this and look for a number of 54.5. Elsewhere we have Eurozone unemployment at 10.00 which is once again expected to hold at 12.0%.

Have a great day.