The situation in Cyprus continues to remain as fluid as ever but for now markets are reacting fairly calmly to the shifting sands of rhetoric and speculation coming from the various meetings and talks. There has been some chatter surrounding the formation of a Plan B which has been doing the rounds with speculation about some tweaking of the deposit levy, as well as possible Russian involvement in a package as well. As with all speculation and hear say it is always better to act on the confirmation as opposed to idle chatter. While yesterday’s UK budget had some good and some not so good, in reality it does little to change the overall trajectory of the UK economy and the problems facing it. Whether what the Chancellor has done is enough to preserve the UK’s triple “A” rating with Fitch and Standard and Poor’s, remains to be seen after both said they would review the rating in light of yesterday’s measures. Given the downgrades to the forecasts on borrowing and growth one would suspect that we could well see at least one of them, if not both, follow Moody’s lead in the coming days or weeks. The Chancellor also announced the intention to bring about changes to the Bank of England’s mandate, with some semblance of forward guidance, which could well be introduced by the time of the September meeting and announced in the August inflation report. Today’s latest February borrowing numbers are set to confirm that the Chancellor is likely to miss his borrowing target for this fiscal year, a fact that was acknowledged in yesterday’s budget forecasts, while the growth target was also downgraded from 1.2% to 0.6%. After the surplus posted in January the public sector borrowing for February is set to show a deficit of £8.2bn. It isn’t all bad news though where it is expected to see a bounce back in retail sales numbers for February after the disappointing January numbers. A rise of 0.6% is expected and would cancel out the decline seen in January. It would also see the annualised number return to positive territory. While things are certainly difficult in the UK, they are even worse in Europe, with the notable exception of Germany where the economy continues to show signs of improvement. With all the noise surrounding Cyprus and its situation it is easy to forget that Europe’s economy is sliding quite sharply even if Germany continues to hold its own. The latest services and manufacturing March PMI data for Germany are expected to show marginal improvements to 55 and 50.5 respectively. That really is where the good news ends, however as the equivalent French data continues to disappoint, even though some improvement is expected. Both manufacturing and services PMI data are expected to show a small improvement on both measures to 44.2 and 44 respectively. The broader Eurozone measures are also expected to improve as well with both the manufacturing and services indicators both ticking up to 48.2. In the US Fed Chairman Bernanke reaffirmed the Fed’s commitment to continues its stimulus program until there was a sustained improvement in economic data. He did say that the Fed was open to decreasing or increasing the amount of stimulus if circumstances warranted. Today’s economic data includes weekly jobless claims which are expected edge up from 332k to 340k, while the March Philadelphia Fed Index is expected to improve from last months disappointing -12.5 to -2.5. Under a mixed backdrop for the retail sector both Next and Ted Baker report this morning with the latter hoping to follow luxury goods peer Burberry’s lead in beating city forecasts. Next, although upgraded to ‘overweight’ by HSBC has lost ground in recent weeks after Debenhams’ profit warning, they have however constantly impressed the city over the past 2 years and the market will be hoping for more of the same. London mining was recently rated as one of Credit Suisse’s top picks for resource stocks and it looked like traders have taken head of this with the stock trading up over 3% yesterday before this morning’s market update. With Goldman Sachs having downgraded a number of mining stocks earlier in the week and ENRC down to almost 300p after its preliminary results those traders will be hoping London Mining can buck the negative trend for the sector. Sticking with a resource related equity, investors in Lamprell will be hoping that the worst is behind them having issued 5 profits warnings last year and coming under investigation by the FSA. Last week it announced that a settlement had been reached and with the stock having doubled since its lows the market will be hoping for no more surprises from this morning’s update. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person