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WEEK IN FOCUS - 23/04/12-27/04/12

This week sees a shift of focus from macroeconomic commentary and the fixed income market back to data, as US GDP due on Friday is likely to be the prime flashpoint of the week across all markets. The data release is the first estimate for US growth in the first quarter, with analysts expecting a reading of 2.5%. Data throughout the first three months of the year has been supportive of this growth, with two non-farm payroll readings beating expectations and Q1 US earnings season being thoroughly positive so far. It should be noted that March's non-farm payrolls did fall below expectations with a far lower than expected reading, however, still a gain in jobs. Earnings season has also pleasantly surprised participants in the US with most major high-cap stocks beating street estimates on their EPS and sales figures. Some analysts have been quick to note that the significant numbers of beats on estimates may be down to low expectations rather than outperforming firms.

Almost as highly anticipated is the release of the FOMC's projections for the US economy and the federal funds rate. For the past few months US investors have been itching for any signs of an extension of the Fed's QE program, however, the release of the last set of minutes has shown that this may not be on the board members' minds unless the economic outlook deteriorates significantly. Fed members have been keen to emphasize that were any further QE to be put into action, the costs and benefits would be pored over at great length before any moves are made. In terms of the interest rate forecast; current commentary from Fed speakers places the first rate hike in late 2013 and this release is unlikely to diverge from recent speeches, so markets can remain with rates at record low levels for the medium-term future. Also garnering attention will be the FOMC rate decision for April, with all analysts currently expecting no changes, holding the base rate at 0.25%.

On the political front, yesterday saw the first round of the French Presidential elections with Socialist Candidate Hollande winning with the highest proportion of votes. As such, this week markets will be looking out for any promises or pledges made by candidates concerning France's increasingly nervous relationship with the EU and ECB, as the contenders look to shake up the ECB's responsibilities with respect to national affairs. Somewhat surprising the political establishment was the success of the far-right Marine Le Pen, signalling to the political elite that discontent is still a powerful force in European politics. Should the elections continue along this vein, one of the key political unions in Brussels, that of Sarkozy and German Chancellor Merkel, looks to be broken up, possibly disjointing the already diverse face of European politics.

On a related note, attitudes towards to the EU Fiscal Pact remain fraught as this weekend saw the collapse of the Dutch government, one of the original proponents for fiscal responsibility as an agreement failed to be made in the coalition government over imposed deficit targets, highlighting the challenges that face European leaders in the light of externally-imposed austerity measures. As such, participants will be awaiting any commentary from leaders regarding the fiscal pact, as the European Union appears less unified as the weeks go by.

Tech titan Apple is set to release its Q2 corporate earnings on Tuesday, with all shareholders awaiting the key sales figures following the release of their latest iPad model. Current estimates for Apple's EPS and sales stand at USD 9.95 and USD 36.63bln respectively and any divergence from these figures will have a significant impact on the NASDAQ-100 index and to a lesser extent the other American equity markets due to the firm's gargantuan market cap, swaying indices across all industries.

Another macroeconomic point of interest for the UK is release of the preliminary reading for Q1 GDP, with participants looking for a positive reading to dodge a double-dip recession in the UK. Data-wise, the UK's PMI readings have surprised to the upside, with Markit research commenting that the results indicate a positive level of growth for the first three months of the year. Should the figure fall away from estimates, most market reaction will be noted in the GBP currency which has witnessed strength over the last few weeks with strong data and a hawkish turn for the BoE's Arch-dove Posen providing support.