Optimism about the continuing nature of China’s recovery helped push both the S&P500 and the Dow Jones to close at record highs yesterday as investors shrugged off the latest Fed minutes as being outdated in light of last week’s sharp slowdown in US jobs growth. The latest US budget presented by President Obama, barely flickered on the markets radar despite the President announcing a series of spending reductions and tax rises. Despite these fresh record highs in the US, Europe’s markets look set to open rather mixed this morning as investors digest the latest Australian unemployment data, which showed a surprise rise from 5.4% to 5.6%. Not only that but the participation rate fell as well to 65.1%, suggesting that we could well be starting to see a worrying softening in the Australian economy, and raising once again the prospect of a future rate cut, as the rising dollar starts to once again hurt competitiveness. Even downbeat comments from IMF chief Christine Lagarde that the world economy is operating at three different speeds with the Eurozone at the bottom of the pile did nothing to dispel enthusiasm in equity markets yesterday. She said that the problems in Europe remained with the banks that had too many bad loans on their books with the result that monetary policy was “spinning its wheels”, as affordable credit failed to get through to firms that need it. She urged the swift restructuring and recapitalisation of the problem banks. Her pleas are unfortunately likely to fall on deaf ears as EU leaders currently show no appetite at all for a swift resolution to the question of the malfunctioning monetary transmission mechanism, and to take the car analogy further the worry is that as the wheels continue to spin, the clutch will burn out, and the European economy will roll backwards ever more rapidly. Yesterday’s industrial production data for February from Italy and Spain continues to point to a contracting economy, while this week’s German trade data suggests a slowdown maybe starting there too. Today’s release of the latest German CPI numbers is likely to reinforce calls for an ECB rate cut with March inflation set to remain at 1.8%, well below the ECB’s 2% target. There was a sliver of positive news for Cyprus when ratings agency Standard and Poors raised its rating outlook to stable from negative, saying it believed that the country would stay in the Eurozone, however it stated that the economy could contract by an eye watering 20% by 2015. If that constitutes a stable outlook I would hate to see a negative one. On top of that the beleaguered country will have to sell €400m of its gold reserves to help fund its bailout. Italy also announced it would be hiking its debt targets to 130% of GDP but will be able to get its budget deficit to 2.9% of GDP under the EU’s 3% limit, which might give it some leeway to boost growth in an economy which is currently contracting at 1.3%. In the US markets will be looking for an improvement in the latest weekly jobless claims numbers after last week’s surprise jump to 385k, with the hope that the number was simply an Easter blip with an expectation of a fall back to 360k In company news the retail woes of Marks and Spencer could well continue today with the release of its latest Q4 trading statement with the recent cold weather likely to hit clothing sales in March which is normally when the spring/summer ranges start to hit the shelves. Womenswear has been a problem area and markets will be looking for evidence of an improvement there, though expectations remain for a fall of 4.5% in general merchandise with food expected to continue cushion some of the blow. Books and stationery retailer WH Smith is also set to announce its half year interim 2013 earnings report with expectations of a profit of around £70m. Investment manager Ashmore Group is also releasing its Q3 interim management statement and given the recent rise in equity markets it is likely to be funds under management that will be of particular interest. Soap and toiletries manufacturer PZ Cussons is also set to release an interim management statement this morning. In overseas news Japanese car maker Honda has announced a mass product recall due to possible problems with airbags. 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.