Daily Market Report 09/04/2013

Sterling erased a lot of its recent gains yesterday as investors saw little reason to invest in the pound so aggressively, given the continued dismal performance of the economy and the continued threat of another recession.  First quarter GDP figures are due for release at the end of the month and it looks like pound has very little reason to trade higher until confirmation is made whether the UK is in a triple dip recession or not.

The only notable data yesterday from the UK was the RICS House-Price Index which rose in March as the outlook improved. Chancellor of the Exchequer George Osborne has pledged help for people unable to afford a home as the property-market recovery struggles to take hold, adding to aid from the Funding for Lending Scheme.

In the euro zone, German industrial production figures came in at a mixed picture, showing moderate but slow growth in February as figures climbed 0.5% in the second month of 2013, overturning most of January’s 0.6% drop.

Investor sentiment across the euro zone fell, according to the Sentix index as the Cyprus bailout threatened to inflame the crisis in the region. The monthly measure of investor confidence in the region dropped to -17.3, which is its lowest reading since last November. A big drop on March's -10.6 is not a good sign of growth.

From the US, Federal Reserve Chairman Ben Bernanke said on Monday that the US economy still has far to go to recover to an acceptable state of health.

“Today the economy is significantly stronger than it was four years ago, although conditions are clearly still far from where we would all like them to be,” he said.

This statement comes as economists and investors seek signs on whether the US central bank is ready to tighten up its easy-money policy aimed at holding long-term interest rates down. Since December the Fed has stuck to its ultra-low rates and its $85 billion per month quantitative easing bond purchase program despite economic indicators that led many to believe the economy is picking up speed. Bernanke has consistently tied tightening monetary policy to a substantial improvement in unemployment.

We have had some disappointing trade balance figures from both France and Germany this morning with a fall in both imports and exports in February, signifying that the recession in the euro zone hit hard during winter.

The only notable data to focus on today will be trade balance, industrial production and manufacturing production figures all from the UK as well as the UK GDP estimate for the three months leading up to March by the National Institute of Economic and Social Research.

Key Announcements:

9.30am – GBP – Goods Trade Balance (Feb): The deficit is expected to increase to £8.500bn.

9.30am – GBP – Industrial Production (Mar): Expected to improve to -2.7%.

9.30am – GBP – Manufacturing Prodcution (Feb): Expected to improve to -1.4%.

15.00pm – GBP – NIESR GDP Estimate (3m) (Mar): Previous estimate was at 0.1% contraction.