\n\tBy Greg Peel<\/p>\n
\n\tThe first estimate of US March quarter GDP was released on Friday and it disappointed, dropping to a growth rate of 2.2% from 3.0% in the December quarter. Economists had expected 2.5-2.7% depending on which poll one chooses. There was a silver lining, however, in the fact the consumer spending element of the measure grew by 2.9% from 2.1% in December. Defense spending fell, but so did business spending.<\/p>\n
\n\tEither way it was a result for all comers, given a good result is a good result and a bad result means more chance of QE3<\/span>, which is good. The result would have had to be very bad to be bad, one assumes, but it is largely consistent with Ben Bernanke's current view of the US economy.<\/p>\n \n\tIn the meantime, US quarterly earnings reports continue to roll in and continue to surprise to the upside on a net basis. As of Friday, 275 of the S&P 500 stocks have reported and 72% have beaten expectations compared to a long-term average “beat” rate of 62%. Michigan University's fortnightly measure of consumer sentiment also surprised on Friday, rising to 76.4 from 76.2 a month earlier when a reading of 75.7 was expected.<\/p>\n \n\tThere was also good news from Europe on Friday, mostly in the form of the market's reaction to ratings agency Moody's downgrade of Spanish debt by two notches to BBB+ from A. A year ago stock markets would have sold off heavily in panic on such news but traders have and investors have come to realise<\/span> in the interim, albeit rather tardily, that ratings agencies are behind the curve and not in front of it. Spanish bond yields have already pushed up towards 6% and the ratings downgrade merely reflects that fact. No need to sell the market twice.<\/p>\n \n\tWhile Spain was being downgraded, Italy held an auction of E6bn<\/span> worth various maturities and found decent demand. The yield the Italian government had to pay on the ten-years was 5.84%, up from 5.24% a month ago, but European markets generally took comfort from the success of the auction and stocks crept higher. Europe is not without its near term risk factors nevertheless, with the French elections to be completed and the Greek election fast approaching.<\/p>\n \n\tThe US stock markets were happy to push higher on Friday, although when the Dow reached the previous post-GFC<\/span> high it marked in March, it met with selling. The Dow was up 62 points at its peak but retreated to close the day up 23 points or 0.2%. The S&P 500 also rose 0.2% and at 1403 held above the psychological “big figure”, while the Nasdaq<\/span> jumped 0.6% with a “blow out” result from Amazon sending that company's shares up a whopping 16%.<\/p>\n \n\tOver in Japan, further quantitative easing measures were announced by the central bank on Friday but not to the extent the market had been hoping for. The Bank of Japan increased the size of its asset purchase program by Y5<\/span> trillion to Y70<\/span> trillion when hopes were for a jump up to Y100<\/span> trillion. The US dollar index duly dropped in response, by 0.3% to 78.71. Gold rose US$6.40 to US$1662.80\/oz and the Aussie is up 0.7% to US$1.0470.<\/p>\n \n\tBase metals were mixed on smallish moves on Friday with copper rising 1%, while the oils were quiet and sit at US$119.83 and US$104.93\/bbl<\/span> respectively.<\/p>\n \n\tAn enthusiastic SPI<\/span> Overnight rose 28 points or 0.6%.<\/p>\n \n\tThis week will be an important one globally on the economic data front with the release of the monthly PMIs<\/span> and of the latest US jobs numbers. Tomorrow is the first of the month which means all the manufacturing PMIs<\/span> including those of Australia and China, although the May Day holiday in Europe means the eurozone's<\/span> numbers will run a day behind this month. The service sector PMIs<\/span> are released on Wednesday except for the eurozone's<\/span> which will appear on Thursday.<\/p>\n \n\tThe US will also see monthly personal income and spending tonight, followed by construction spending and vehicle sales tomorrow. Wednesday sees the ADP private sector jobs number along with factory orders, before Thursday brings chain store sales and Friday the non-farm payrolls result.<\/p>\n \n\tThe ECB<\/span> will make a monetary policy announcement on Thursday after a month which has seen Spanish and Italian bond yields rising once more to uncomfortable levels. Some soothing words from Mario Draghi<\/span> would be well received. <\/p>\n \n\tThere should also be some soothing words tomorrow from Glenn Stevens, as the market scours the RBA's<\/span> May statement for clues of a further rate cut in June, assuming one cut is in the bag. Australia's economic week otherwise features the two PMIs<\/span> as noted as well as private sector credit, new home sales and the TD Securities inflation gauge<\/span> all out today.<\/p>\n \n\tThe resource sector quarterly production reports will continue to flow this week and Mirvac<\/span> ((MGR<\/span>)) will provide a trading update tomorrow, while the highlight of this week will be the first of the big bank earnings reports. ANZ<\/span> Bank ((ANZ<\/span>)) will release its interim on Thursday and Westpac ((WBC)) will follow suit on Friday. The question all Australia will be asking is what will the banks do with a 25bps<\/span> cut from the RBA<\/span>? The two result releases this week provide an opportunity to find out, if not before.<\/p>\n \n\tRudi will appear on Sky Business at noon on Thursday and later on the day on Switzer TV (7-8pm<\/span>). On Friday Your Editor will be guest on BRR<\/span> Media's Friday Afternoon Round Table (3-3.30pm).<\/p>\n