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European markets had been struggling to make headway today despite encouraging Q1 GDP data from the economic core of Europe. Germany's surprise 0.5% rise appeared to have stemmed some of the downward pressure in equity markets over the past few days; however it does highlight how big the divergences are between the stronger core and the struggling periphery. The rise in German GDP also reinforces how difficult it will be for economies like Italy, which contracted more than expected at 0.8%, and Greece which showed an annualised Q1 contraction of 6.2% to make the necessary structural adjustments when locked into the same currency.

Sector movers have been somewhat of a mixed bag given the differences between the North and South of Europe, with telecommunications the better performers, while utilities which outperformed yesterday are the biggest losers. BT Group (BT.A LN) has helped drive gains in the telecoms sector after being on the receiving end of a couple of broker upgrades from Espirito Santo and Alphavalue. Also on the plus side security firm G4S (GFS LN) is sharply higher after profits for Q1 came in as expected helped by emerging markets growth, while the Olympics this year should also provide a significant boost.

In the brokers crosshairs International Airlines Group (IAG LN) slid back after being downgraded by JP Morgan on the back of a deteriorating Spanish outlook and poor performance at BMI.

U.S. markets were initially set to take their cues from the slightly more resilient tone in Europe by opening higher, however the confirmation that new elections were set to take place in Greece saw these gains evaporate and markets opened lower, but losses have been tempered by better than expected US economic data.

Economic data proved to be somewhat of a mixed bag with retail sales for April disappointing slightly, coming in at 0.1%, down from 0.8% in March. With CPI coming in flat, due to falling in energy prices, it was left to Empire Manufacturing to post the positive surprise, hitting its highest levels since May last year, coming in at 17.09, up from 6.56, and continuing to show that the U.S. economy while a little slow continues to show little rays of light.

In earnings news, Home Depot saw a rise in Q1 profits of 27.5% helped largely by the milder winter weather. Markets appeared unimpressed however as the company guidance fell short of analyst expectations. Investment bank JP Morgan also remains in the spotlight in the wake of last week's trading loss as CEO Jamie Dimon comes under pressure over his role in the saga.

The Euro has once again made new four month lows after the news that fresh Greek elections are now set to take place in mid-June. While this should not really have been a surprise, markets have reacted badly with Spanish and Italian bond yields spiking higher.

The U.S. dollar has busted through its previous 4 month highs, against a basket of currencies as capital flows out of Europe into the world's largest reserve currency.

Strangely given the amount of risk off selling the Australian and Canadian dollar have resisted the downward pressure outperforming with the Aussie rebounding from the support at 0.9950 which represents the 61.8% retracement of the entire up move from the October lows at 0.9395 and the highs this year at 1.0860. The USDCAD is struggling to get above the 200 day MA at 1.0050.

The Pound has struggled against the resurgent dollar despite a slightly lower trade deficit for March and slightly better showing on the export front. Tomorrow's Bank of England inflation report could well give future direction to the next move on monetary policy especially if as expected inflation expectations remain sticky.

Crude oil prices have proved rather more resilient in the face of concerns coming out of Europe holding above their lows yesterday, pulling higher on the better than expected German growth numbers and U.S. Empire manufacturing, but finding the upside momentum tempered by concerns about a Greek exit.

Copper prices have proved much less resilient despite the surprise rise in German growth, treading water near four month lows.

Gold prices have been choppy pulled higher on the one hand about speculation about a third LTRO, but dragged lower as the U.S. dollar has retained its resilient tone.

Equity markets have had a more stable foundation today after the decline of recent days as investors await new developments from Europe, particularly in Greece and Spain. The lack of any new news flow has prompted some buying in some heavily oversold stocks, as former Greek finance minister Venizelos takes his turn to try and form a government.

Slightly weaker than expected economic data out of China and Europe has served to limit the upside as growth concerns continue to weigh. A sharp drop in Chinese imports has raised concerns about a slower pace of growth in that country as markets await further economic data early tomorrow morning with the release of inflation and industrial production data.

The biggest gainers have been in the technology sector with ARM Holdings (ARM LN) jumping sharply after recent losses on the back of some positive broker comment. UK banks have also performed better today with Lloyds (LLOY LN) and Barclays (BARC LN) near the top of the leader board.

On the company updates, BT Group (BT.A LN) has slid back after full year revenue slid 4%, however pre-tax profit rose 17%. Also lower was consumer goods giant Reckitt Benckiser (RB. LN) after one of its largest shareholders offloaded a third of its holding.

Mining stocks have also done fairly well given the disappointing China data; however the rebound needs to be put in the context of some the declines of the past few days.

U.S. markets opened higher this morning after a disappointing session yesterday, higher on the back of a more positive session in Europe. Economic data proved to somewhat uninspiring with weekly jobless claims coming in broadly as expected, slightly lower at 367k.

The U.S. trade deficit ballooned to $51.8bn, with imports rising sharply. In earnings news Cisco Systems has slid lower after the technology giant lowered its outlook for Q4. Rebounding European financials has seen US banks bounce back.

The biggest gainer today has been the Australian Dollar after unemployment figures in the country, showed a sharp decline from 5.2% to 4.9% and diminishing the possibility of another rate cut in the short term from the RBA.

The Pound has also gained after the Bank of England resisted the temptation to embark on further easing measures, despite recent disappointing economic data. It seems likely that next week’s inflation report could well give markets some clues as to when and if the Bank could embark on further easing measures.

The Euro has also had a slightly firmer tone as Spanish bond yields have eased.

Copper prices bounced off long term support at $3.63, after China’s trade balance showed a much bigger surplus than expected. Looking behind the numbers though and the picture is slightly more worrisome, with a sharp drop in imports. Expectations are for inflation numbers due on Friday to drop back while industrial production for April is expected to improve.

Crude oil prices have had a slightly firmer tone today; however Brent prices are still struggling to get above the 200 day MA.

U.S. prices managed to close above the 200 day average yesterday, thus keeping the risk of further downside limited.

Gold prices have bounced back near to the $1,600 level as the recent move into U.S. dollars has shown signs of slipping back

European markets had initially been trading positively for most of the day with investors looking past concerns about sovereign finances after Spain and France managed to sell bonds, albeit at higher yields. In the afternoon session sentiment started to sour a little after U.S. April service sector activity came in below expectations, posting its biggest drop in 12 months.

Nothing of consequence came of this afternoon’s ECB rate meeting and press conference, despite speculation that the ECB might give some clues as to further easing of monetary policy. Some of the focus today has also been on company announcements with the main gainers in the UK being from the healthcare and telecoms sector. Best performer has been medical devices firm Smith and Nephew (SN. LN) after the company reported better than expected profits in the first quarter of 2012.

On the downside, both Antofagasta (ANTO LN) and Randgold Resources (RRS LN) have slid back with Randgold getting sold, despite posting a 126% rise in annual profits. Investors chose to focus instead on the drop in quarterly revenues caused by the coup in Mali and issues at its Ivory Coast mining operation. Antofagasta also cited production problems for its disappointing trading update.

U.S. markets opened more or less on the flat line, despite weekly jobless claims coming in much better than expected at 365k, down from a revised 392k the previous week. Of greater concern was the disappointing non-manufacturing ISM number for April which came in below expectations of 55.3, at 53.5, down from 56 in March.

Stocks in focus include Target which reported same store sales below estimates, rising 1.1% below the consensus of 2.8%. Visa is also in focus after reporting better than expected results after the bell, coming in at $1.60c a share on improved revenue of $2.58bn as U.S. consumers used their credit cards a little more. GM also boasted an increase in Q1 earnings of $0.93c a share, well above expectations of $0.85c a share.

The worst performing currency today has been the New Zealand dollar after the jobless rate jumped sharply in the first quarter to 6.7%, from 6.3%, raising expectations that the RBNZ could ease monetary policy in the coming weeks. The Australian dollar wasn’t too far behind as markets fret about a slowdown in China after services PMI came in slightly weaker than expected.

The Pound has weakened a little after services PMI for April weakened more than expected to 53.3, from 55.3 in March. Despite this the figure remains in expansion territory in marked contrast to the equivalent European measures.

The Euro was initially weaker but post the ECB press conference, when it became apparent that the ECB wasn’t about to loosen the monetary policy brakes any further, it pulled back higher.

Oil prices turned sharply lower in the afternoon session after disappointing U.S. Non-Manufacturing ISM data for April came in short of expectations, while the lack of any policy change from the ECB combined with an “uncertain outlook” saw traders push markets lower. With inventories at relatively high levels it would seem that traders appear ready to test the downside.

Copper prices continued their losses from yesterday as uncertainty about the economic outlook in Europe combined with a reluctance by the ECB to loosen monetary policy saw the red metal fall. Gold and silver prices also felt the backdraft of the no change in policy, dropping sharply, with silver looking to drop below the psychologically important $30 mark

Yesterday’s decision by a majority of the Dutch parliament to come to an agreement on a budget for 2013 that meets EU budget conditions it would appear had removed a near term pressure point in the Eurozone debt crisis, even though the political uncertainty of the setting of a date for the election still needs to be agreed upon. This relief proved to be short-lived, due to events later in the evening, elsewhere with respect to Europe, and another sovereign downgrade.
 
It was always going to be too good to last and so it was proved as after weeks of silence from the ratings agencies Standard & Poors broke cover and downgraded Spain’s credit rating two notches to BBB+ with a negative outlook, citing significant risk to economic growth and budgetary performance with the likelihood that the Spanish government will need to provide further support to the banking sector.
 
While not entirely unexpected this move by S&P is sure to underpin Spanish 10 year bond yields once more which had already started to edge back above the 5.8% level yesterday. The problems facing Spain are expected to be highlighted further later this morning with the latest unemployment data expected to show an increase to 23.8%.from 22.85%.
 
The timing of the downgrade is not great for Italy either, given that they are looking to get away about €6.25bn of 5 and 10 year BTP’s this morning, and their bond yields had begun to edge lower in the past three days.
 
It wasn’t too much of a surprise to see the Bank of Japan expand its asset purchase scheme by 10trn yen to 40trn yen this morning; however the decision to reduce its credit lending program by 5trn yen could well negate some of the effect of the increase in the asset purchase scheme. The yen is broadly unchanged after some disappointing industrial production data while inflation remains well short of the 1% target, suggesting further easing in the coming months will be quite likely.
 
In the UK the pound appears to have shrugged off the disappointment of this weeks Q1 GDP numbers with markets preferring to focus on the more positive data seen throughout the first quarter, hitting two year highs against a basket of currencies. This weeks improvement in Nationwide consumer confidence also suggests that things may not be as bad as the ONS numbers suggest however Gfk consumer confidence for April has muddied the waters in this respect somewhat by not following in the footsteps of the Nationwide numbers earlier this week. The Gfk numbers have actually got worse dropping from -30 to -31 suggesting a rather confused picture for the UK economy.
 
After the events of the FOMC meeting earlier this week and the rising levels in weekly jobless claims yesterday which provoked some disappointment, attention now turns to the U.S. economy and the level of Q1 GDP growth there. Expectations are for a slight reduction from the Q4 figure of 3% to 2.5%, though if it comes in above that markets are likely to be fairly happy, and the speculation about further QE is likely to recede once more, at least until the next bit of bad data. Irrespective of the number any further QE if it were to happen, wouldn’t happen before June, given that is when the next Fed meeting is due to take place.
 
EURUSD – the range trading within the triangular consolidation continues as the single currency edges beyond the 55 day MA towards the trend line resistance at 1.3300 from the March highs. While there is lower line support on the triangle at 1.3040, there is also trend line support from the 1.3000 April lows at 1.3165. The break of the larger triangle remains the primary pattern and could well signal a 500 point move. To open up the lows this year at 1.2630 we need to see a concerted break below 1.2975. Only above 1.3400 targets the 200 day MA at 1.3495.
 
GBPUSD – the pound continues to edge higher dragging itself above the 1.6170/80 resistance level and keeping the prospect of further gains towards 1.6400, to make it 9 successive up days in a row. There is some resistance around the 1.6250/60 area, but momentum is now starting to look a touch overbought. Only a move below 1.6050 retargets the long term trend line support at 1.5900 from the January lows at 1.5235 which continues to act as support on the downside.
 
EURGBP – while below the resistance at the 0.8220 area the onus remains towards the downside and a move towards the 2010 lows at 0.8065 as the next target. Only above 0.8220 would retarget the larger resistance at 0.8280 as well as trend line resistance at 0.8300 from the February highs at 0.8505.
 
USDJPY – yesterday’s dip to the 80.65 cloud support keeps the upside momentum intact. This is where the weekly cloud support now lies and we need to close the week above this level for the upward momentum to remain intact. The yen continues to find support just above the 80.70 level which keeps the upward momentum. A weekly close below 80.70 argues for further losses towards 79.20. The U.S. dollar does need to break back beyond the two weeks highs at 81.85/90 to retarget 83.30.

The positive bias lent by Apple's blow out numbers overnight has had the edge taken off it somewhat, by disappointing UK GDP figures as well as the worst fall in U.S. durable goods orders since 2009. Despite this, downside has been somewhat limited by expectations surrounding the latest FOMC rate decision, due out after European markets close.

The technology sector has led gainers in the UK market with chipmaker ARM Holdings (ARM LN) bouncing back from yesterday's large losses on the back of the blow out Apple numbers as well as some upward broker revisions. Financials and mining stocks have also helped underpin the UK market helped in no small part by the largely positive bias across equity markets ahead of this afternoon's Fed meeting.

On the downside, the more defensive sectors have slid sharply with health care and utilities stocks lagging behind. Amongst the bigger decliners were Centrica (CNA LN) and Reed Elsevier (REL LN) due to losing their dividend attractions. GlaxoSmithKline (GSK LN) is also trading lower after net profits dropped 13% to £1.3bn in the first quarter, though this is slightly misleading given that last year's Q1 profits were boosted by a disposal.

U.S. markets opened higher this morning shaking off a sharp drop of 4.2% in durable goods orders for March, the biggest drop since 2009. Investors chose to focus on a number of positive earnings reports from Boeing and Caterpillar, as well as Apple's record numbers from last night. Boeing announced Q1 earnings of $1.22c a share, well above last year's figure of $0.78c a share and well above analyst expectations. Caterpillar also announced a rise in Q1 profits of 29% at $2.37c a share above expectations of $2.13c.

Apple shares surged in early trading after a 93% rise in earnings in Q1, driven by iPhone sales of 35.1m. Coca Cola is also in focus after announcing a 2 for one stock split.

Attention will now shift to this evenings FOMC press conference and particular focus is likely to be on the rate forecasts of the individual Fed members and those in particular who favour rate hikes before 2014, in light of some of the hawkish comments from individual members. Investors will also look for clues as to any actions after "operation twist" expires in June.

The Pound has been the laggard today after this morning's disappointing Q1 GDP number showed that the UK economy returned to recession. The data was a surprise given the recent independent data that suggested that the first quarter had bounced back strongly. Markets appear to be reacting to the data on the basis that there are likely to be some significant revisions in the coming weeks and this has limited the downside somewhat.

The commodity currencies have been the main outperformers today with the Canadian and Australian dollar making some good gains after spending most of the week slipping back. The Canadian dollar in particular is susceptible to increasing risk appetite and the good earnings reports out of the U.S. are certainly helping the loonie in this respect.

The Euro has stayed broadly side-lined though it has had a slightly more positive bias on the back of a reduction in peripheral bond yields, as well as gaining some ground against sterling after UK GDP disappointed.

Crude oil prices have remained unaffected by the more positive tone in equity markets today with upside being tempered by the disappointing U.S. durable goods orders out of the U.S. ahead of the latest Fed meeting. News that Iran is considering a Russian proposal on halting its nuclear expansion has also helped keep a lid on prices. Weekly inventories came out slightly above expectations at a rise of 4m barrels.

Copper prices on the other hand have reacted to the weaker U.S. dollar pushing back towards its 200 day MA and a firmer tone in equity markets.

The weaker U.S. dollar and the Fed meeting has kept gold prices side-lined today.

Yesterday’s sharp sell off in equity markets across Europe has seen uncertainty once more again return to the forefront of investors thoughts as political factors in Europe once again make for an uncertain outlook. The collapse of the Dutch government over austerity budget disagreements has stoked fears that one of the few remaining European triple “A” countries could not only lose its prized rating, but also see any future co-ordinated response undermined by local political difficulties. This fear was reinforced late last night by ratings agency Moody’s who said that the collapse of the government should be considered “credit negative”.
 
Bond markets will put this new political backdrop to the test this morning when the Dutch look to sell a 2037 bond and a short dated bond. While the two issues look likely to get away, the yield on the issuance could well be higher, given the sharp rise in yields seen yesterday. Yields shot up not only on Dutch bonds but on Spanish, Italian and French 10 year bonds as well.
 
In the UK the pound hit its highest levels since mid 2009 as it continues to enjoy somewhat of a haven status from the turmoil in Europe. This could well be put to the test this morning with the publication of the last set of borrowing figures for 2011, with expectations that the March figure could well increase to £14.2bn, an increase on February’s £12.9bn. while it remains likely that the Chancellor will likely meet his fiscal targets for 2011 it will be tomorrow’s first look at Q1 GDP data that could well be key to any further sterling gains.
 
In the U.S. concerns about the U.S. recovery continue to make investors nervous especially with respect to the prospects of further QE, however the current state of the data, such as it is, isn’t likely to prompt the Fed to act in the near term. A key barometer of investor sentiment for April is likely to give some indications as to confidence about the U.S. economy with consumer confidence set to slip slightly from 70.2 to 69.5. New home sales for March aren’t likely to offer much comfort, though they are expected to rise 2.2%, reversing the 1.6% decline seen in February.
 
EURUSD – the lack of any follow through above 1.3200 prompted a drop back towards 1.3100 as the single currency continued to remain stuck in the broader triangular consolidation. The 55 day MA once more becomes resistance just above 1.3200, while trend line resistance at 1.3310 remains intact upside remains limited. With lower line support at 1.3040, a break of this triangle could well signal a 500 point move. To open up the lows this year at 1.2630 we need to see a concerted break below 1.2975. Only above 1.3400 targets the 200 day MA at 1.3525.
 
GBPUSD – the failure yesterday to break through the 1.6170 resistance level and November highs of last year remains a key barrier. Yesterday’s hanging man daily candle could provoke a deeper sell-off and delay any move towards 1.6400. Last week’s close above the 200 week MA for the first time since August 2008 points towards further gains along with the 50/200 daily MA golden cross over which also improves the odds of a move higher. Only a move below 1.6050 retargets the long term trend line support at 1.5870 from the January lows at 1.5235 which continues to act as support on the downside.
 
EURGBP – we continue to make new 19 month lows and this keeps the onus on the downside and a move towards the 2010 lows at 0.8065 as the next target. Any rallies should now find some semblance of resistance at the 0.8220 area, while behind that at 0.8280. While below the 0.8280 level the risk remains for further losses towards the 2010 lows at 0.8065. A move back above 0.8280 opens up risk for a move to 0.8310 trend line resistance from the February highs at 0.8505.
 
USDJPY – upside momentum remains intact after last weeks close above the cloud support now at the 80.70 level. Yesterday’s dip to the 80.70 level still keeps the upward momentum intact and while above this level on a weekly closing basis the outlook remains constructive for the U.S. dollar despite the low last week around the 80.30 level. A weekly close below 80.70 argues for further losses towards 79.20. The U.S. dollar does need to break back beyond the two weeks highs at 81.85/90 to retarget 83.30.

European markets look set to end the week on an upbeat note with better than expected German and UK economic data reinforcing a positive week for both German and UK equity markets.

It's been a rather different story elsewhere in Europe this week with the Spanish market hitting three year lows this morning, while the Italian market touched its lowest levels this year.

The best performing UK sectors have been split between defensive and cyclical sectors with health care and mining stocks both doing well. Amongst the best performing stocks has been Lloyds Banking Group (LLOY LN) after a positive broker reiteration. Joining it near the top of the index is hedge fund Man Group (EMG LN) paring some of this week's rather large losses on the back of position adjustment at the end of the week.

Defensive utility stocks are also over performing after under-performing yesterday with Severn Trent (SVT LN) and United Utilities (UU. LN) both doing well.

On the downside, technology stocks have slid back led by chip maker ARM Holdings (ARM LN) after a less than positive assessment from Jeffries. Pump maker Weir Group (WEIR LN) has also slid back towards six month lows on fears that low gas prices could see a fall-off in demand for its valves and pumps.

U.S. markets opened higher today helped in no small part by some fairly good earnings numbers, as well as the positive bias carried over by European markets this morning. Microsoft announced stronger Q3 revenues last night while General Electric reported Q1 operating earnings of $0.34c a share above expectations of $0.33c.

The technology sector continued last night’s positive theme with Honeywell announcing Q1 earnings of $1.04c a share well above expectations of $0.99c and also upgraded their forecasts for the year. Today's rally looks like capping off a fairly positive week ahead of next week's eagerly anticipated FOMC rate meeting, where there is some expectation that the Fed could give clues to further easing measures, given that there will be a press conference scheduled for after the meeting.

The U.S. dollar has had a pretty poor day today with only the Japanese yen performing worse.

Amongst the better performers, apart from the Scandinavian countries has been the pound which has had a great week, one of its best weeks in a month which was capped off by this morning's surprisingly good retail sales numbers for March, which showed a 1.8% rise month on month, well above expectations of 0.5%. Some cynics out there have suggested that this was a result of the panic buying of fuel at the end of the quarter, but even if you strip that out, sales were still up 1.5%, driven by sales of clothing and footwear, and the unusually warm weather. The surprisingly upbeat numbers have raised expectations of a much more positive Q1 GDP report next week.

The Euro has also had a fairly good day, helped by the better than expected German IFO numbers, however any upside is likely to be tempered by continued rising Spanish bond yields, after they once again hit 6% on the ten year measure today.

The Swiss franc continues to trade close to its peg against the euro and the lack of any movement here suggests that it can only be a matter of time before the market decides to test the resolve of the Swiss National Bank.

A broadly positive day on equity markets as well as a weaker U.S. dollar usually equates to a positive day on oil prices and that has certainly been the case today. The increase in German business confidence and strong rebound in UK retail sales has definitely helped sentiment today at the end of a negative week for Brent prices, though WTI prices look set to finish the week in the green.

Copper prices have also bounced back today as speculation about possible Chinese easing measures as well as a rebound in the Chinese stock market. This rebound does need to be set in the context of the three month lows seen earlier this week, given the worries about growth from some of the European economies.

Gold and silver prices have traded pretty quietly today with gold prices continuing to hold above key trend line support at $1,625 from the 2008 lows at $680.