05.04.13 Friday Morning

European markets were trading lower as investors geared up towards today’s critical US non-farm payrolls. Traders were of the view that if we saw a figure that fell short of expectations, it would go some way to support the idea that the Fed will not halt or end QE anytime soon as the unemployment rate remains stubbornly high.
 

In fact, the figure came out at an astounding 88,000 (190,000 expected) showing a slow in job gains with a slump in the size of the labour force pushing the jobless rate to a four year low. This is a strong indication that the recent positivity surrounding the U.S. may have been ill conceived with hiring still showing signs of weakness.
 

After the long Easter weekend, issues surrounding Cyprus still remained at the forefront of investors’ thoughts. Cyprus' stock market reopened after a two-week closure, the CSE General Index slumped 2.6%. Meanwhile, Cyprus has been given an extra year by its international creditors, or until 2017, to meet its budget targets.
 

We have had both the ECB and BoE central bank meetings this week with committee members from both parties receiving calls to boost QE and adjust interest rates further.
 

The Bank of England decided against pumping fresh money into the stagnant economy concluding that we are not in such a dire situation to warrant an imminent release of more QE into the system. Interest rates remained at a record-low 0.5 percent.
 

Further stimulus may still be on the way however, after George Osborne decided to give the banks stronger backing to ignore the series of one-off factors that have kept inflation above target for most of the time since the financial crisis.
 

The remit also paves the way for a broader review of the Bank of England's monetary policy when Mark Carney, who currently heads Canada's central bank, succeeds Bank Governor Mervyn King in July.
 

The ECB on the other hand was under intense pressure to act given the recent political uncertainties in Italy and the bailout for Cyprus. That, together with run of poor euro zone economic data, leaves some arguing that a rate cut was required. 
 

European Central Bank President Mario Draghi claims that he is ready to act to boost the recession-hit euro economy. Claims that he is prepared for an interest rate cut as early as next month have surfaced.

However, the general feeling that emerged from the conference was that it would be prudent to hold fire. Over the course of the next few weeks, the ECB will closely monitor economic and monetary developments, and will assess the impact on the outlook for price stability.

Next Week’s Significant Economic Events (U.S. & UK):

Tuesday –

• Manufacturing Production – UK

Wednesday –

• FOMC Meetings Minute – U.S.

Thursday –

• Unemployment Claims – U.S.

Friday –

• Core Retail Sales – U.S.
• PPI – U.S.
• Retail Sales – U.S.
• Prelim UoM Consumer Statement
• Fed Chairman Ben Bernanke Speaks

Next Week’s Significant UK Earnings:

• Thursday – Evraz preliminary 2012 earnings release