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Thursday's Market Note: Death of Europe Economy Overstated

Whispers about the death of the European economy appear to have been overstated. This morning, Markit's Eurozone Flash Services Purchasing Managers' Index, increased more than expected in June. It was the first increase in three months. Both manufacturing and services enjoyed gains, though manufacturing continues to lead the upturn, with output showing the third-strongest rise since October 2006. Services posted the second-strongest expansion since August 2007.

The report helped European stocks gain ground, while Asian stocks were mixed after Federal Reserve Chairman Ben Bernanke's semi-annual testimony before the Senate Finance Committee.

In his policy update, the Fed chief Bernanke said that the "economic outlook remains unusually uncertain." While he tried to assure lawmakers that the central bank remains prepared to act and will remain flexible, Bernanke did not say how, leaving investors doubtful that additional economic stimulus would be forthcoming. Without such a boost, some fear that the economy will sputter and potentially fall back into contraction--or the so-called "double-dip".

Stocks sank after Fed Chairman Ben Bernanke's testimony on Capitol Hill. The Dow fell 109 points to 10,120; the NASDAQ lost 1.6 percent to 2187; and the S&P 500 dropped 1.3 percent to 1069.

With a good night's sleep, investors are rethinking their reaction to Bernanke's comments. The Fed still has plenty of ammunition to stimulate the economy and Helicopter Ben is just the guy to do it. (This is a reference to Bernanke's famous 2002 speech when he said that to fight deflation, "the U.S. government has a technology, called a printing press (or today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at no cost." He was referring to a statement made by economist Milton Friedman about using a "helicopter drop" of money into the economy to fight deflation.)

U.S. stock futures are pointing higher in the premarket.