(Photo: Reuters)
(Photo: Reuters)

With equity investors feeling so comfortable, it is going to take something unexpected to cause anything worse than modest falls, perhaps in Europe.

Further gains are also quite possible - perhaps in the Japan, UK and US.

Of course, the longer this mood persists, the sharper any correction but May is still set fair.


Investors in safer bonds, however, will have another fidgety week in the absence of any significant bad news, while those in the higher yielders will be the ones to relax.

Gold bugs and those trying to get out of it in profit are likely to have another wretched week but the general air of confidence could stabilise oil and other raw materials prices.

As expected, the sun is also shining anew on the dollar as it attracts at least three disparate groups of investors:

- Those who are nervous of a rude interruption to the current optimistic mood

- Those who remain optimistic and think the US offers the most attractive opportunities

- Those who do not fancy any of the yen, euro, pound or Aussie dollar.

That leaves contrarians and emerging market buffs, some of the latter are carry traders funding themselves in dollars and probably ready to reverse engines at the first sign of trouble.


The Finance Ministers of the Economic and Monetary Union (EMU) member countries meet on Monday and there seems to be a pact to avoid quarrelling in public but at the cost of not resolving much.

The hand-outs to Cyprus and Greece are due to approved without asking awkward questions and on that basis Slovenia may not make the official agenda.

There is also a meeting between the President of the Council of Ministers (currently Ireland's Prime Minister Kenny), European Union (EU) Commission President Barroso and European Parliament President Schulz to try to negotiate a new budget deal.

Is that the sound of cans being kicked, I hear?

The EU has become a hot topic in the UK and it is likely that Parliament will vote on Wednesday a motion of regret that the Queen's Speech made no mention of the referendum proposed by David Cameron as leader of the Tory Party.

The politics of this are fascinating: the Tories, including junior members of the government, are allowed a free vote while Cabinet Ministers are to abstain as there is no Coalition agreement. Labour (facing a sizeable rebellion) and the Lib Dems will oppose.

The motion is likely to fail but 'names will be taken'.

Meanwhile, Dave is off to the US on much more important business: to try to speed up the Transatlantic Trade and Investment Pact, which both he and President Barack Obama have espoused and he would like to be in place before the referendum in 2017.

For the record, this is a very good idea but is at risk of opposition from Democrat protectionists in the US and, inevitably, France.

The IMF is in town to carry out the UK's annual check-up for the G20. The hype about a clash with Mr Osborne is really rather phony. It is an internal debate inside the IMF, which the Keynesians appear to be winning, that is driving the story and it suits the Chancellor to be portrayed as prudently standing firm.

All the while, of course, he is pursuing flexible policies on tax, infrastructure investment and supply side stimulatory initiatives. Blah, blah!


After a quiet week, a raft of US data is due on the Consumer, Housing and Industry sectors.

None of it should be bad but even if some of it disappoints, investors are likely to continue to take comfort that kindly Uncle Ben will look after them.

The official bad news on first quarter GDP in Europe cannot be delayed any longer, although everyone knows that it will spell out recession. The notable exception will, of course, be Germany but only just, as it experienced negative growth of -0.6% in the previous quarter.

Also of interest will be the ZEW survey of Economic Sentiment in Germany, which fell sharply last month on 'Eurogloom' but there has since been some better news from the Bundesrepublik.

In the UK, another month of stable or better Unemployment numbers is likely to add to the growing confidence in the recovery.

The question is whether in his final Quarterly Inflation Report (he has been there from the beginning) Sir Mervyn King will present 'Goldilocks' forecasts of higher growth and lower inflation.

It would be out of character for him to get sentimental but, of course, it is not just up to him and so could well happen.

Alastair Winter is the Chief Economist at Daniel Stewart & Co.