An improving economic picture outweighed concerns about yesterday's Federal Reserve minutes, though the uncertainty around monetary policy is set to linger until September.

China's economic fate is one of the key themes driving sentiment this year, so the Markit/HSBC Flash China Manufacturing PMI released on Thursday was keenly awaited. The results were a boon to the market: the index increased to 50.1 from 47.7 the previous month, placing it back in positive territory.

In recent months, the Chinese government has stimulated the economy in an untypically subtle manner, and its efforts may be paying off. However, the long-term challenges remain, and it will take more than one month of positive data to stem concerns.

China's solid PMI was followed hours later by a better than expected Markit Flash Eurozone PMI. The index rose to 51.7 from 50.5 in July, the highest level for over two years. Germany's PMI rose to 53.4, a seven-month high, but France's index slipped to 47.9 from 49.1. The nascent optimism from surprisingly strong French second-quarter GDP figures earlier this month may have taken a knock from the PMI.

Nonetheless, the overall set of PMIs was encouraging, and the markets reacted accordingly. The Markit iTraxx Europe was 2.5bps tighter at 103.5bps, while the Markit CDX.NA.IG tightened 1.5bps to 82.5bps. The US index has underperformed its European counterpart in recent weeks, though the CDX is still ahead over the last three months.

Both indices have widened significantly over this period, and that is largely down to uncertainty around the Fed's policy direction. Yesterday's FOMC minutes were expected to provide some clues, but it is questionable whether we are any wiser after their release.

The initial interpretation was that they were less dovish than the previous month, with the minutes making clear that QE tapering is all but certain this year. But the timing was thrown into doubt by some FOMC members stressing patience, and the committee seemed unimpressed with the level of economic activity. They also discussed changing the terms of their forward guidance, in particular lowering the unemployment threshold.

The tone of the minutes suggests that tapering in September is no longer the certainty many thought it was, though the positive data since the meeting might strengthen their case.

There was little corporate news, but Sears continued the poor earnings season for US retailers with a disappointing set of results. The company's second-quarter loss was bigger than expected and same-store sales fell 1%. Sears CDS rose 2 points to 20 points upfront, their widest level since November 2012.

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