Daily Market Report 05/03/2013

Fears over the euro zone resurfaced yesterday ahead of crucial data this week forecasted to show that the region shrank and with talk that Italy may be heading towards a new election.

An aide to Pier Luigi Bersani of the Democratic Party has suggested that another election may take place later this year new electoral laws were passed. Data from Spain also showed that unemployment rose again in February with approximately 60,000 losing jobs. Focus will be on the euro zone this week ahead of the ECB interest rate decision and monetary policy statement, where investors will be looking to take cues for any signal that Mario Draghi may change the economic outlook for the euro zone.

Despite disappointing construction figures from the UK, investors focused on data from the British Retail Consortium which showed that retail sales grew more than anticipated to 2.7% in the UK pushing the pound higher against both the euro and the US dollar.

However, a word of caution should be noted. Whilst sterling has risen off the recent lows against the euro and the US dollar, this would not indicate a change from the current downtrend. The Bank of England interest rate decision and asset purchase facility will be in focus this Thursday, especially after the recent minutes meeting where three members of the monetary policy committee voted to increase the asset purchase program, a move that could put pressure on the pound.

Encouraging services data from France, Germany, Italy and the euro zone have all give the euro support this morning as has the better than expected retail sales figures from the euro zone.  Better than expected services figures from the UK given support for the pound.

Key Announcements:

15.00pm – USD – ISM Non-Manufacturing PMI (Feb): Expected to fall to 55.