We have positive looking data out of Europe and China and benign looking inflation readings on the home front, but that will likely do little to cheer investors who are looking for progress on the ‘Fiscal Cliff’ situation. Negotiations between the White House and Congress are reportedly ongoing, but both sides appear to be sticking to their respective positions.

The market has been quite sanguine thus far about this key unresolved question in hopes that a deal will eventually come through, but it would be perfectly justified in getting nervous as the deadline gets closer.

Beyond the U.S. shores, we have more positive data about China’s manufacturing sector, with the preliminary HSBC PMI survey for December rising to 50.9 from the prior month’s 50.5 reading (readings about ‘50’ indicate expansion). This follows the strong industrial production growth in November, when output rose a better-than-expected 10.1% from the same period last year.

Other recent data points, such as electricity output, also corroborate this trend, indicating that the Chinese economy may have already started to recover. Many now expect the Chinese economy to expand at a rate higher than 8% in the fourth quarter, which will follow the 7.4% growth pace in the third quarter, which was the lowest growth rate since the first quarter of 2009. The improving outlook for China should perk up commodity and basic materials stocks.

The preliminary December PMI data out of Europe this morning is also showing a modest improvement in the region’s business activities. The composite index tracking the region’s factor and service sectors improved in December, though it still remained under 50 (readings under 50 show contraction). Importantly the national measure for Germany moved up 50.5 from November’s 49.2 level, indicating that trends are improving in the region’s largest economy.

This data would be consistent with another negative GDP print for the Euro-zone in the December quarter, the third straight quarter of GDP contraction. But it does raise hopes that if the data continues to improve, we may see the region move back into modestly positive territory at some stage in 2013. Thursday’s announcement of an agreement on unified bank regulation is also a net positive for the region’s long-term outlook.

In corporate news, we have a positive earnings report from Adobe Systems (ADBE), and PPG Industries (PPG) is increasing its exposure to the improving U.S. housing market by acquiring rival AkzoNobel’s North American paint business for $1.05 billion.