The market rally seems set to continue at least for the time being although it does seem to be more based on technical factors rather than fundamentals. The poor US Q1 GDP data did not upset the applecart and clearly the market is now betting on recovery during the second half and possibly even a strong recovery. I have been very sceptical and remain so in the face of poor economic data. Looking at the most recent data what is clear is that inventory run down during the last quarter and the final quarter of 2008 will provide a boost to economic activity as early as this quarter and the second half as companies increase stock levels. The real threat lies after that because as consumers continue to repair their own finances and pay down debt and increase savings it is difficult to see consumer demand holding up. Consequently I do not see a strong recovery coming and at best a subdued one with sub trend growth. We must not forget that next year will bring fiscal tightening as the government attempts to repair the public finances.

I am watching the retail sector with great interest and it will be interesting to see just how far valuations are going to be pushed. They certainly have momentum and as always with markets I think valuations are about to overshoot. Next is now double the value of its 2008 low and if the shares do continue to rally we will be looking to short. We have already seen disappointment this week with Home Retail's figures and I think as the year wears on valuations are going to start coming under pressure especially if they rally much further from current levels.

Better than expected US consumer confidence data helped the market to pare back some of the swine flu induced losses, but clearly markets remain worried over how events are going to develop over the coming days. If you look back to the SARS outbreak I suspect that ultimately this may prove to be an overreaction especially if the disease does respond to existing drugs which it seems to although even then if it does develop to Pandemic status the disruption to economic output let alone the social costs may still be very high indeed.

I have been watching GlaxoSmithkline start sliding back today having rallied on the Swine flu outbreak and the positive news that its drug Avodart does reduce the risk of prostate cancer. I think Glaxo may well become a good trading stock over the coming months and I will be looking to buy back in if they fall back to around the £10 level. I am still watching Vodafone and did buy another holding today with a view to taking a couple of pence out if we see a bounce back tomorrow.

Monday Briefing

The last week provided a good deal of economic data, and whilst it is clear that the rate of economic decline in the US, UK and Europe is starting to slow, most economic data suggests that an ongoing contraction in economic growth is still occurring. The first stab at Q1 GDP for the UK produced a terrible figure of -1.9% and with the possibility of a further hefty decline in Q2, it is going to be very difficult for any improvement in the second half to make a meaningful difference to the outcome for 2009. In fact several forecasts now suggest that GDP in the UK could decline by over 4% which leaves the Chancellor’s forecasts already looking optimistic. In our view any green shoots of recovery are yet to break the surface.

The IMF stated this week that global losses from the credit crisis could hit $4.1 trillion by the end of 2010 with banks expected to shoulder around 61% of the writedowns with insurers, pension funds and other non banks expected to assume the rest. They downgraded their forecast for the world economy to show a decline in GDP during 2009 of -1.3% (they were forecasting +0.5% in January) whilst their forecasts for the UK have become even more grim with a decline in GDP of -4.1% this year and -0.4% next year.

This week in the UK the RPI fell into negative territory for the first time since 1960 falling to -0.4% for March. The CPI fell to 2.9% from 3.2% driven down by lower food and energy costs, but contrary to many forecasts remains relatively high at this stage in the economic cycle especially if you compare it to the US (-0.4%) and Europe (+0.6%). The CPI is still expected to fall much further as energy prices continue to decline, but the risk of a period of deflation appears to be receding.

In Europe there was some positive news with an improvement in the German ZEW survey which rose to +13.0 in April from -3.5 the previous month. A positive number suggests that investors expect economic conditions to improve over the next six months rather than deteriorate. However, this is not the most reliable indicator and the German economy still looks on course to experience a significant decline in GDP during 2009 that will be considerably worse than the UK.

The Budget in the UK brought home the extent of the disastrous state of the public finances. The level of government borrowing is set to increase substantially according to the Chancellor’s figures and what is of real concern are his optimistic estimates of growth from 2011 onwards. The level of public borrowing and debt is likely to be substantially higher than forecast. This year the PSNB is expected to be £175bn with £173bn earmarked for next year. Both of these figures could easily exceed £200bn in reality. The real issues will undoubtedly be faced by the next Government and the outlook for public spending remains bleak if the ratio of debt to GDP is ever going to return to the original target set by Gordon Brown of 40% with a figure closer to 80% likely by 2013/14.

The CBI Industrial Trends survey this week showed an improvement, but the various constituents remain consistent with declining output in the manufacturing sector.
The week was rounded off with the announcement of a sharp drop in UK GDP during the first quarter of -1.9% against expectations of around -1.5%. With a further decline anticipated during Q2, the UK looks on course for a decline of 4% or more in GDP during 2009. Retail sales data for March was reasonable with a 0.3% increase in volumes.

In the US, existing home sales data published last week suggests that sales have stabilised albeit at relatively low levels and with the inventory of existing stock standing at levels consistent with falling prices it may still be several months before prices start to stabilise and recover. The durable goods orders for March fell less than expected with a 0.8% decline against expectations of a -1.5% fall. However the previous month’s rise of 3.4% was reduced to 2.1% which does demonstrate that this data can be subject to significant revisions.

This week in the US we get Conference Board consumer confidence data on Tuesday which is expected to show a modest improvement, but remain at a very depressed level. The first big data of the week comes on Wednesday with the first estimate of Q1 US GDP data. The consensus estimate is for a decline of -5.0%, but the probability of a worse figure remains significant. Also on Wednesday we get the results of the latest FOMC meeting when focus will again be on the accompanying statement given that interest rates will remain unchanged. On Friday look out for the Institute for Supply Management Manufacturing index which is expected to show a modest improvement to 38.3 from 36.3 in the previous month, but still substantially less than the key level of 50 which is consistent with expansion. In addition, with the announcement by GM last week of significant production cuts there is every chance this index may be back in decline over the coming months. The data for March factory orders due on Friday is expected to show a -0.5% decline.

During the week a lot of economic data will be published for various Euro-Zone countries, and we would high-light the German CPI data on Tuesday and the Euro-zone economic confidence data due on Wednesday. Given the particularly bad state of the German economy their retail sales figures for March due on Thursday will make interesting reading. We also get Euro-Zone CPI data for April and unemployment figures for March on Thursday. On Friday we get Halifax house price data for the UK during April. This index is notoriously volatile and is not the best means of judging house price movements.

This week we will be updating our research note on Tesco.

The much publicised outbreak of Swine flu over the weekend provided a boost to GlaxoSmithkline this morning and I closed my position out at £10.48 providing a good profit. There is no doubt that Glaxo's anti-viral drug, Relenza, could benefit if this does indeed become a pandemic, but I remain cautious given that a Pandemic would have huge implications for world economic recovery and the pharmaceutical sector would not escape. I suspect the outbreak will be contained, but I will be watching developments very carefully and I may well buy back into Glaxo if they move back towards the £10 level.

Existing home sales in the US were lower than expectations and reversed the gain in February. Nevertheless they are showing some signs of stability and whilst it is still months rather than weeks away we do seem to be getting closer to a position from which house prices in the US will start to recover and this will almost certainly be the first stage of any economic recovery.

Today I decided to take advantage of further weakness in the GlaxoSmithkline share price to take a long position. I do not expect it to recover quickly, but I do feel that a gradual recovery will come after the initial disappointment over the Q1 results starts to fade.

I will be keeping a close eye on Vodafone tomorrow which is again within striking range.

Very little to report today.Glaxo produced a slightly disappointing set of results which has resulted in the shares selling off and with the market likely to open weak tomorrow there may well be a trading opportunity.

A good day of trading in my cfd portfolio. I rarely trade a share on the day of a results announcement purely because analysts interpretation can vary significantly and it is very easy to get caught out if one of the big houses makes a strong recommendation after the usual analysts presentation on the day of the announcement. Consequently I tend to sit back and see how trading develops and what views come out. Today with the Tesco results it was a different matter as I follow the company closely and the results were clearly as good if not better than consensus expectations. I was fortunate in that during the first couple of minutes of trading the shares were yet to reflect the results and I dived in with a good long position which very quickly moved into a good profit. I sold the position mid morning and with the big sell-off during the afternoon the shares came back from their highs for the day providing a second trading opportunity and again I took a nice position size and closed out after the shares recovered again during the afternoon. Another stock that has provided lots of good trades during recent weeks is Vodafone and the shares were also hit early this afternoon and I took advantage of this and they recovered later in the day to give me another good profit.

Tomorrow I will be taking a close look at the Glaxo results due at midday.

Last week provided two good trades for me and on Friday I closed out my cfd positions in Vodafone and GlaxoSmithkline at good profits. This week I am again watching both companies although I feel there may be a better chance of trading GlaxoSmithkline given that their results on Wednesday may create some volatility. I will also be looking at the Tesco results tomorrow and I am hopeful that Tesco will start to provide some trading opportunities over the coming weeks. I picked out Reed Elsevier early last week on this blog as a potential trade and very much wish I had taken it as the shares shot up from a low of £4.60 to £5.10 over a couple of trading days after several brokers mentioned that they were looking undervalued.

I have copied below our usual Monday briefing and will post again tomorrow:-

The decline in US retail sales versus expectations of a modest rise during March demonstrated clearly that we are yet to find the firm foundation for economic recovery. The drop was partially due to a decline in the value of gasoline sales. However, sales also fell across all areas of discretionary spending which does suggest that a consumer led recovery is some way off and the consumer is more concerned with paying down debt and increasing savings than spending. US Producer Prices declined by 1.2% during March which was again caused primarily by the decline in gasoline prices, and we may see further deflationary pressures building over the coming months. We also had CPI data in the US last week which slipped into negative territory for the first time since 1955. The annual rate of CPI fell to -0.4% from 0.2% and most of the decline can be accounted for by the decline in energy prices compared to this time last year. With energy prices now appearing to have stabilised the impact in the future will be less and the CPI can be expected to return to positive territory during the coming months. Nevertheless with so much spare capacity in the US economy which will increase as unemployment rises there remains a real risk that deflation could rear its ugly head as we move into 2010. Industrial Production during March fell by 1.5% which was worse than consensus expectations. The manufacturing sector data for New York and Philadelphia both showed an improvement, but both remain at levels consistent with contraction rather than expansion. Business inventories declined 1.3% month on month during February and as production is cut we would anticipate inventories to continue declining which does not bode well for Q2 US GDP let alone the terrible GDP figure we can expect for Q1. Overall there was little to get excited about in terms of economic data from the US last week.

In the UK we did get the BRC retail sales data for the UK which showed a monthly decline for March of -1.2% a trend that is likely to continue given the rate at which unemployment is increasing and with consumers beginning to focus more on saving rather than spending.
This week brings us the UK Budget and what we know for sure is that the Chancellor will have to admit to a serious deterioration in the UK public finances. We will not speculate as to what will be included as this can be rather tedious, but a big revision down in growth estimates for 2009 is a certainty.

Not a huge amount on the agenda this week. On Monday we get Leading Indicator data for the US which is expected to show a modest decline during March. Tuesday brings us the UK CPI data with a slight fall expected in the annual rate from 1.6% to 1.5% whilst the RPI rate will almost certainly take the headline when it moves into negative territory with further downward pressure from lower mortgage rates and house prices. On Wednesday we get the Bank of England meeting minutes from the last meeting which are expected to show a unanimous 9-0 vote in favour of maintaining the base rate at 0.5%. Also on Wednesday we get unemployment data for the UK which is expected to show a further significant deterioration in the claimant count. The UK Budget statement is on Wednesday. On Thursday we get existing home sales data in the US which is expected to have remained around the annualised level of 4.7m units during March. The big data of the week comes with the US durable goods orders which are expected according to the consensus to have declined by 1.8% during March following a 3.5% rebound in February. The improvement during February was partially due to a boost in aircraft equipment orders that is now expected to reverse during March especially given depressed auto demand. On Friday we get the first estimate of Q1 GDP for the UK which is currently expected to show a quarter on quarter decline of around -1.5% which will be very close to the Q4 2008 decline of -1.6%.

A mixed bag of US economic data so far this week.Today the annual rate of CPI inflation dipped into negative territory from +0.2% to -0.4%. This is likely to worsen further due to the decline in energy prices before recovering and it is too early to predict whether damaging deflation is likely to take hold. The decline in industrial production of -1.5% month on month during March was worse than the consensus whilst the improvement in the Empire State manufacturing index provided a surprise move to -14.7 in April from -38.2. The improvement in the new orders aspect of this index certainly provides a glimmer of hope.

Within my cfd portfolio I bought some GlaxoSmithkline yesterday at below £10. The shares have taken a big hit with the move out of defensives into cyclicals and they do find a base around the £10 level.I am looking for a target price of between £10.30 and £10.40.

I have copied below our usual Monday briefing. For my cfd portfolio I have today taken a long position in Vodafone after the shares fell back below £1.20.

The post-G20 glow seems to be continuing and the rally in equity markets is increasingly being viewed by many brokers as sustainable although there are notable bears including SocGen, Morgan Stanley and Merrill Lynch. We are firmly in the bear camp and will remain there until we see real and sustained improvements in economic data which suggest a return to growth. Even if we were to believe that a return to growth is imminent, it will at best be sub-trend and is likely to remain that way for some time (possibly years) given the increasing levels of unemployment, over capacity in the economy and the level of debt which consumers are still carrying, and it is that fact that the market yet seems to appreciate. At present the market is very excited about economic data which has shown a moderate shift away from a plunging/catastrophic economic situation to one that is simply in decline. The G20 announcements will certainly help, and it is encouraging to see the hand of the IMF strengthened so that they can bail out some of the peripheral economies. However, as always we have to look to the US economy as our lead and when you have unemployment running at a monthly rate of loss of 650-700k plus ISM data for manufacturing and non manufacturing firmly in contraction and a housing market that is months away from recovery, the recent market rally looks to us to be very fragile. The UK is at least 12 months behind the US and arguably faces even greater problems. Nevertheless the market has chosen to use the shift from terrible economic data to just bad as a justification and perhaps sign that the green shoots are about to emerge. We urge caution and we feel that the recent and significant shift from defensives to cyclicals may well run out of steam.

The week kicks off on Tuesday with the US retail sales figure for March which the consensus is expecting to show an improvement of 0.3% month on month due to higher gasoline sales and an improvement in car sales. On Tuesday we also get the Producer Price Index for March which is expected to show a slight month on month improvement of 0.1% primarily due to higher oil prices. Also on Tuesday we get business inventory data which the consensus is expecting to show a decline of 1% during February. Destocking is likely to have a big impact on Q1 US GDP. The March CPI number for the US due on Wednesday is likely to have firmed by 0.2% month on month according to the consensus and this will in part be due to the modest recovery in the oil price although the decline in natural gas prices may well result in a lower figure. Also on Wednesday we get the Empire State Manufacturing Survey which is expected to show a figure of -34 compared to the previous month of -38. Any improvement on this figure may well be taken positively by the market given current sentiment. Look out for the publication of the beige book on Wednesday which will give a summary of economic conditions across the US. An important piece of data this week will be the Industrial Production data for March due on Thursday. The consensus is expecting a decline of 0.8% during March after a 1.4% fall in February although there is a good possibility this figure may well be worse than the February decline. Also on Thursday we get the housing starts data which bounced unexpectedly during February and a continuation of this trend is likely to be taken positively by the market. The Philadelphia Fed Survey for April is expected to show a slight improvement on last month, but will remain firmly in negative territory with a figure of around -35 expected. On Friday we get the University of Michigan consumer confidence data.

In the UK on Tuesday we get the RICS house price survey. This is based on surveyors opinions of the state of the market and at present there is little prospect of anything but a market continuing to decline. On Wednesday we get the BRC retail sales data for March. On Thursday we get Euro Zone data for the CPI during March and Industrial Production during February.
We also have a number of Fed officials speaking this week and with a lot of earnings results due in the US combined with plenty of economic data, we can expect a volatile week of trading.

The last two weeks have been rather volatile in my absence with the G20 clearly providing the market with yet more enthusiasm to rally although we have seen some consolidation during recent days. The debate over whether the recent strong rally is simply a bear market rally or a new bull phase seems to be raging in the press and amongst analysts. I for one believe it is simply a bear market rally which could easily run through to the second half before we see a reversal, but I believe we will see a reversal. The reason is that we are yet to see any consistent and real data to suggest that a recovery is only a few months away. Instead we have seen data that suggests the rate of deterioration has slowed which in my eyes does not warrant the assumption that a recovery is on the way. I believe that as we get into quarterly earnings, particularly in the US it will be clear that profits are under considerable pressure and the outlook remains very difficult for 2009. Earnings forecasts in my view still have some way to come back and this is yet to be priced into the market.

I have been looking at the retail sector with some interest and after such a strong run it begs the question as to whether valuations are starting to look full. I believe they are, but I suspect the sector will continue to retain relative strength until we move into the second half. Given the improvement in sentiment I have moved my own stance to using my preferred stocks of Next and M&S for both long and short positions. I do believe there is scope for the sector to sell off again as I do think the market expects the consumer to remain resilient with the extra spending power from interest rate cuts and the vat cut, but I suspect this will fade as the year progresses and consumers continue to tighten their belts and rebuild their battered balance sheets.

My cfd portfolio suffered the second stop loss this year with my Pearson short being stopped out following the significant rallies around the time of the G20 meeting. This does not change my view of the valuation which I believe is full and I will look to short Pearson again as and when conditions are right to do so. I have been watching the valuation of Reed Elsevier which looks undervalued compared to Pearson and there may well be a pairs trade to be had soon. My other cfd portfolio position of Vodafone performed well and a good profit was taken. I start next week with a clean sheet and again Vodafone looks like a suitable long position target.

I am starting to feel like a contrarian investor. After a a few pieces of only very modestly positive economic data a raft of big name brokers have come out with relatively strong statements that the market has bottomed and we are now on the path to recovery. It is incredible how quickly sentiment and indeed brokers can turn their views. I for one remain relatively pessimistic about the very short term especially given the speed at which markets have recovered from their recent lows (we are up around 20% across the main indices). What this tells me is that investors have again allowed sentiment and the crowd mentality to plough back into the market in anticipation of what can only be described as the expectation of a strong economic recovery later this year. I for one just do not buy into it. The switch from defensive stocks into cyclicals has almost been as aggressive as during the late 90s when everyone was selling anything that was blue chip and made a profit and had a secure dividend to buy an Internet stock. I think that whilst there is always good reason to pick up some of the cyclicals ahead of recovery which will probably come early next year, albeit a muted one, I think the recent financials and cyclical driven rally is too much too soon. To me it seems inevitable that a pull back will occur, as to when is another matter.

We are again moving into the period of big data with lots on the US agenda next week and if we are going to see a pull-back it will start next week. We have two lots of ISM data for manufacturing (Wednesday) and Non Manufacturing (Friday) plus the ADP employment data on Wednesday and the big Non Farm Payrolls on Friday. I do not believe either of the sets of ISM data will show any meaningful recovery and if you look at the weekly initial jobless claims figures for the US I think we could easily be on course for the biggest monthly job loss yet in this recession with a real possibility of over 700,000 jobs lost.

If you look at the recent data that the market has decided to get excited about, the housing data can be discounted at present because the level of inventory of unsold housing stock is so large at present that there is no way we will see any meaningful recovery in prices or the housing situation for several months at the very least. The improvement in durable goods orders was only after very significant downward revisions to the last two months leaving an even lower base from which at least some form of monthly recovery could be expected. There remains the possibility that the data will continue to show signs of improvement, but at this stage I remain very sceptical and the recent gains are at real risk of being quickly eroded if the data next week continues to paint a very grim picture.

My cfd portfolio still has my short in Pearson and the long position in Vodafone, but today the Unilever has been closed at a very modest loss as I believe there will be an opportunity to trade the stock at lower levels.

This is my last blog post due to a much needed holiday for two weeks and I will return on Thursday 9th April.

The market keeps finding more fuel to keep going and this afternoon that was provided by the US durable goods orders which showed an unexpected rise of 3.4% although it was somewhat tempered by the downward revisions for the previous two months with December revised to -4.6% from -1.5% whilst January was revised to -7.3% from -5.2%. One positive month after such significant declines does not make a recovery, but it does provide a glimmer of hope. Home data this week in the US has been reasonable positive, but again I go back to the glut of new and existing homes available and this overhang has to be reduced significantly before we see any meaningful recovery in the US housing market. However, no matter what something positive is good and it will be interesting to see if the market can maintain the momentum. Tomorrow we have the third estimate of US GDP for the fourth quarter which according to the consensus is expected to show a further decline to around -6.6% quarter on quarter from the last estimate of -6.2%. Any improvement on this figure could well be positive for the market given current sentiment.

In my cfd portfolio I still have my short position in Pearson although it is proving stubbornly resilient and may well end up being stopped out. My holdings of Unilever and Vodafone are progressing okay. Following the reassuring trading update on Daily Mail earlier in the week I have added this to my possible trades over the coming weeks.

I have been very busy the last few days so I have copied below our comments on the market that were produced today.

The market at the moment is being announcement driven. The news in the US whilst to be welcomed makes no difference to the current economic situation which remains dire and whilst some of the US housing data has shown some sign of better times it makes little difference at present given the levels of unsold housing stock which will prevent any recovery in prices for many months to come. The US market does not look cheap and in fact if earnings forecasts are as optimistic as many believe, including us, the US market is arguably looking expensive. We have seen time and again over the last 18 months how policy announcements have been able to drive the market with no sign of any improvement in the underlying economic situation. The US is now running out of ideas and announcements! If as we expect the economic data reasserts itself over the coming months the market will quickly give up the recent gains. The sectors likely to be hardest hit will be those that have rallied on the back of the recent news, namely the financials. For those of you wishing to adopt high risk/high return strategies this is one sector that again looks likely to provide shorting opportunities.

Our usual Monday briefing:-

The major news of last week was the unexpected announcement from the Federal Reserve of its intention to engage in significant quantitative easing in the form of buying back Treasury securities with £300bn earmarked for this exercise. The market took the news well, but realistically what impact this action will have remains an unknown.

The first major data for last week were the Industrial Production figures for the US which showed a decline of 1.4% during February. The figure actually looks worse than it was because around 0.7% of the decline was due to reduced utility output as a result of the unseasonably warm weather. One of the major drags on manufacturing production over the last few months has been declining car manufacturing output, but following the temporary shutdown of many plants over Christmas and the New Year production did start again and this helped to reduce the overall decline. Also in the US, the Empire State manufacturing index fell to a record low of -38.2 in March from -34.7 in the previous month. The new orders index was particularly bad falling to -44.8 from -30.5. At present there is little sign of an improvement in the manufacturing sector.

The National Association of House builders index in the US was unchanged in March at 9 which was in line with the consensus and is substantially below the key level of 50 which indicates improving conditions in the housing sector.

Eurozone inflation data showed an uptick in the CPI by 0.1% to 1.7% year on year during February. The ECB has been very much against a zero interest rate policy based on their assessment of economic conditions and assertion that deflation is not a risk. This figure certainly lends weight to that argument, but with the severe slowdown being felt across the Eurozone, especially in Germany, it is difficult to see inflation doing anything but weakening and a further cut in the Euro rate looks inevitable.

The US Producer Price Index came in with a 0.1% increase which provided some relief that deflationary pressures are primarily confined to food and energy. The slight increase was primarily due to an increase in gasoline prices which offset a fall in food prices. The core figure excluding energy and food rose by 0.2% month on month and was at 4.0% year on year.
The US housing starts provided a surprise last week with a 22% increase from 477,000 in January to 583,000 in February. This could well be a sign that the US housing market is at least stabilising, but with the existing inventory of over 13 months of supply it is difficult to see any improvement in prices coming through for several months to come.

The big news of the week came with the Federal Reserve announcement that they would buy $300bn in long dated Treasury bonds in an aggressive move to cut long term interest rates. This took the market completely by surprise and led to an immediate 50bps fall in 10-year US bond yields. The impact of this and their decision to more than double the exiting asset purchase program will increase the Fed’s balance sheet to something around one third of annual GDP. It is a complete unknown as to whether these measures will work and much depends on whether the banks will use the proceeds from selling their Treasury holdings to lend out more money. The market took the news well and rallied on the back of this especially the financials. Something similar happened in the 90s when the Bank of Japan announced significant quantitative easing measures and after a 20% rally in the Nikkei, a few months later the same index was lower than at the time of the announcement due to ongoing deterioration in the economic situation. It is at present a very difficult market to call and following a strong rally from the lows earlier in the year we do feel that despite this news the recent rally is nothing more than a bear market rally.
The minutes of the recent Bank of England MPC meeting suggest that quantitative easing will now be used as the main stimulus tool now that Bank rates have reached a level at which further cuts are unlikely to have any real impact. With an initial £75bn now earmarked for asset purchases we are again in a position of not knowing what impact this will have and there remains a real issue of whether this action will spur additional bank lending.

The UK unemployment data made for unpleasant reading with unemployment now over the 2m mark and the monthly claimant increase of 138,000 was significant. Many commentators expect unemployment to reach 3m by mid 2010 and possibly earlier.

This week in the US on Monday we get existing home sales data and on Tuesday there will be consumer confidence figures. On Wednesday we get the first of the big numbers of the week with durable goods orders with a decline of 2% expected for February following a 4.5% drop in January. On the same day we get new home sales data which are expected to post a similar figure to the January sales of 309,000 on an annualised basis. On Thursday we have the publication of the third estimate for fourth quarter US GDP. The second estimate resulted in a substantial revision down to -6.2% quarters on quarter and there is the potential for the figure to fall a little more with the third estimate. Also on Thursday we get the usual weekly initial jobless claims figures. Finally, on Friday we have the University of Michigan consumer sentiment index for March.

On Tuesday look out for the UK CPI data. A further decline in the year on year CPI rate is expected with the consensus looking for a decline to 2.6% from the previous monthly figure of 3.0%. The RPI index which includes mortgage rates could well make the headline as the year on year rate is likely to drop into negative territory. On Tuesday we also get PMI data for France, Germany and the Eurozone. On Wednesday we get the UK CBI Distributive Trades survey for March. On Thursday the retail sales data for the UK is expected to show a decline during the month of February of anywhere between -0.1% and -1.0%. The recent interest rate cuts may well have helped retail sales to hold up reasonable well during a very difficult period and this has certainly been reflected in retail sector valuations. We do not expect this trend to continue especially as savings rates increase, and any short term boost from additional spending power that has resulted from low interest rates is likely to be short lived. The February retail sales may well show some initial evidence of this. On Friday we get the final estimate for fourth quarter UK GDP which is widely expected to be unchanged at -1.5% quarter on quarter.
This week we will be reviewing the Daily Mail and General Trust trading statement scheduled for Monday morning and the Next full year results on Thursday.

Please note the next Key Economic Data Briefing will be sent on Monday 13th April.