30.03.12 Friday Morning

It has been a relatively uneventful week although we saw an equity rally on Monday, triggered by comments by Federal Reserve Chairman Ben Bernanke, that implied further monetary easing could be back on the table if the economy failed to continue its recent growth. The rally ran out of steam after Bernanke's concerns about the level of unemployment began to dampen the optimism around possible further stimulus.

Although the jobless rate has improved over the past few months there are many who believe the state of the jobs market is still fragile and a long way off from the strength we saw prior to the credit crunch.

Fears of Europe's debt contagion have subsided somewhat for the time being underscored by Italian Prime Minister Mario Monti saying how the euro's troubles are almost over. This may be considered by some as quite a premature statement given Spain's finances coming under the spotlight again. Spain was a high priority matter when EU leaders met this week to work out how to increase the size of the rescue fund to prevent any further deterioration in the eurozone due to increasing borrowing costs.

German Chancellor Angela Merkel has succumbed to calls by EU leaders to boost the firepower of the EFSF and ESM which have been viewed as a big positive. The ECB's unlimited 3 year loans have provided good support for the financial system and any subsequent increase in size to the firewall should instil enough confidence in the market to end the crisis, although not without the highly indebted sovereigns staying firmly on track to their austerity programmes. The possibility of a hard landing for China's economy continues to be a drag on recent gains and investors will be eagerly anticipating manufacturing data scheduled over the weekend for further insight to the pace of the country's slowdown in activity.

Equity news that has attracted some interest includes BP selling North Sea assets in a £250m deal to pay for the spill in the Gulf of Mexico. BG Group are getting closer to implementing a liquefied natural gas export plant across the coastline of East Africa where they have discovered more gas than initially estimated. French firm GDF Suez has put a bid in for International Power at £3.90 a share on Thursday which was a 6.6p premium to Wednesday's closing share price which has led to speculation they may need to bid higher before a deal is agreed.

Some earnings releases for the week comprise a 28% rise in pre-tax profit for building supplier Wolseley, miner Petropavlovsk reported a doubling of revenue for 2011 driven by surging gold prices although the share price movement hasn't reflected the impressive figures and copper miner Kazakhmys posted a 2% increase in pre-tax profits however net profit plunged 36% after an impairment charge of $472m for closure of its petroleum divisions.

Highlights in the economic schedule next week are the UK's manufacturing PMI and the eurozone's jobless rate on Monday morning followed by the US ISM Manufacturing PMI in the afternoon. The Federal Open Market Committee are due to release its minutes from its latest meeting on Tuesday, we have an eventful day on Wednesday with German Factory Orders, eurozone Retail Sales, eurozone's interest rate announcement and across the Atlantic we have the ADP Non-Farm Employment change and ISM Non-Manufacturing PMI. The Bank of England give an interest rate announcement on Thursday and we also have US jobless claims and finally on Friday we have the all important US Non-Farms.

See our Economic Diary here.