Amid all the talk of an emerging markets "crisis", credit spreads in the western world took a breather on Wednesday as participants awaited crucial economic data in the US.

The non-farm payrolls report on Friday is without a doubt the key event of the week. But there was plenty of forward-looking economic data to digest today, in particular the ISM non-manufacturing index. The manufacturing survey earlier this week was a major disappointment, so the services index was under more scrutiny than usual.

As it turned out, the news was nothing like as dramatic. The index rose to 54.0 in January from 53.0 the previous month, beating the consensus estimate of 53.7. One explanation of the divergence between manufacturing and services is that the latter sector is less affected by severe weather.

The underlying reasons may only become clear in later months, and the reaction in the credit markets was naturally subdued. The Markit CDX.NA.IG tightened slightly after the announcement, but was soon trading around its opening level of 73bps. The Markit iTraxx Europe rallied 1.5bps to 81bps, well within its recent trading range of 80-85bps. Financials outperformed, with the Markit iTraxx Senior Financials index tightening by 3.5bps to 98bps.

Compression between the two European indices has stalled since the latest bout of EM turmoil flared up, and calmer conditions will need to prevail if the trend is to resume.

Markit's Services PMI surveys released earlier today were a mixed bag and had little impact on spreads. Germany and Spain were worse than expected, but this was offset by France and Italy exceeding the flash estimates.

In the absence of any unforeseen EM turmoil, tomorrow should be dominated by the ECB's monthly rate setting decision and press conference. The impending jobs report will also have a bearing on sentiment and activity.

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