Reserve Bank of Australia senkt Zinsen auf Rekordtief

• Global equities had cause to celebrate last week after political tensions eased in Italy, US jobs data surprised to the upside, and as the European Central Bank (ECB) and Federal Reserve (Fed) maintained their accommodative monetary policies. European equities were supported by the ECB’s decision to lower its main interest rate by 25 basis points to a record low of 0.5%, with ECB President Mario Draghi promising the central bank stood "ready to act if needed". Italian bond yields fell below 4% for the first time since late 2010 after Prime Minister Enrico Letta’s ‘grand coalition’ won its first confidence vote. UK equities also had a positive week, helped by data that suggested UK manufacturing was recovering following a sombre first quarter. The Markit/CIPS Manufacturing Purchasing Managers' Index (PMI) rose to 49.8 in April (a reading above 50 indicates growth).
• In the US, the S&P 500 Index powered above the psychological 1,600 mark to a new record high despite some disappointments earlier in the week. US construction spending dropped 1.7% in March, the Institute for Supply Management’s manufacturing index slipped back from 51.3 to 50.7 in April and private sector employment figures (ADP) were below forecasts at 119,000 last month. But at the end of the week, non-farm payrolls trumped expectations, with 165,000 jobs created in April, and the unemployment rate fell to 7.5%. At its latest meeting the Fed provided further reassurance to the markets, stating it would "increase or reduce" the pace of its government bond purchases depending on the outlook for the job market and inflation.
  
  
• It was a subdued week for Asia, however, where markets were closed for Golden Week (Japan), and Labour Day (China). China’s official manufacturing PMI fell to 50.6 in April from 50.9 in March, led by a slump in new export orders – providing a bumpy week for industrial commodities.

Shaping the markets - this week

Reserve Bank of Australia cuts interest rates to record low; no rate cut expected by Bank of England

• It is a busy week for central banks with meetings for the Reserve Bank of Australia, National Bank of Poland, Norges Bank, Bank of Korea and the Bank of England. At the time of writing the Australian central bank has cut its benchmark rate by 0.25% to 2.75% in efforts to counter the effects of a slowing economy, in particular weaker growth in the mining industry.
• In the US, initial jobless claims are expected to rise slightly from 324k in April to 334k for the week ending 4 May. On Friday, the Monthly Budget Statement is released. Market analysts are predicting a surplus of $106.5bn compared to a surplus of $59bn in April last year. Revenues have been above expectations lately and the change in tax laws at the start of the year should also help to increase receipts relative to last year. In the eurozone, French industrial production is released on Tuesday. There may be a slight fall of 0.3% month-on-month (m-o-m) in March as business surveys remain poor and point to weak demand prospects. German industrial production is expected to drop 0.1% m-o-m on Wednesday in line with a decline in economic sentiment surveys. On Thursday, the latest Bank of England Monetary Policy Committee meeting is not expected to result in any change to the bank rate or a change to the current asset purchase programme. On the same day, March UK manufacturing is likely to have fallen from 0.8% to 0.3% m-o-m due to adverse weather. On Friday, Italian industrial production is expected to show a continued slowdown in March as the political crisis peaked, causing a delay to investment decisions.
• Elsewhere, Thursday may see an uptick in April Chinese consumer price inflation, from 2.1% to 2.3% year-on-year, driven by a gain in food prices.

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