It appears that a thaw in Eurozone austerity policies may emanate from the new Italian government under Prime Minister Enrico Letta this week as he takes his stimulus initiative road show to Berlin, Brussels and Paris, reflecting conditions laid down by the newly-formed coalition between the Letta’s dominant Democratic Party and the People of Liberty Party represented by Angelino Alfano on behalf of Signore Berlusconi. Proposing a new variation on the three-card trick, Mr Letta will be discussing plans which remove an imminent housing tax and a rise in value added tax agreed by the previous government. A potential difficulty with this approach is that, while the agreement to keep faith with Eurozone fiscal guidelines is to be honoured according to the new government, it is not clear how the implied shortfall of around €6 billion of revenue will be met.

Against the odds, it looks as if the Houdini of Italian politics is escaping from potential exile yet again and certain members of the European Union politerati must be choking on their 1992 Chateau Angelus Saint-Emilion Grand Cru. Silvio ‘imagine you’re on a camping weekend instead of forced out of your home by an earthquake’ Berlusconi is working his way back into the epicentre of Italian government following his support for the reappointment as President of Giorgio Napolitano earlier this week.

This morning’s release by the Office for National Statistics of the U.K.’s GDP data for Q1 2013 has revealed growth of 0.3% against survey estimates of around 0.1% growth after a decline of 0.3% in the previous quarter. The decline in Q4 2012, taken together with a negative number for this latest quarter, had threatened to show the U.K. economy in a ‘triple-dip’ recession – the third recession since the start of the current Financial Crisis 2008. Although the figure is subject to subsequent revision, plus 0.3% provides a slightly larger margin of error than 0.1% would have done. (Not that we’re clutching at straws, you understand!). Year-on-year, the rate of growth has emerged at 0.6% compared with expectations of 0.4%.

Bombs in the White House or an imminent cut in interest rates by the European Central Bank – which is the more plausible scenario ? Analyse and discuss. Restrict your answer to one side of A4 paper.

‘All over the shop’ is an expression that seems to sum up yesterday’s performance of the S&P 500 Index, with the implied subtext that, perhaps, the market is not quite sure which way to jump. A firmer opening tone quickly gave way to disappointment with the results from the industrial machinery group, Caterpillar, as it missed forecasts.

After last week’s wobble in sentiment that left ‘western’ markets between 1.5% (FTSE 100) and 3.7% (Xetra Dax) lower, the new week has opened with a firmer tone alongside some recovery in the price for Gold ($ 1,420 per troy ounce) while the declines in prices for Copper ($6,990 per metric ton) and Oil ($87.8 per barrel) appear to have slowed for now. The rate of economic growth in China was the big question last week and this week the focus shifts to the United Kingdom and the United States.

The comments emerged late for some, if any, editions of the Financial Times this morning but they were picked up by the London free paper, CityAM, with the headline ‘Carney: UK is a Crisis Economy’ – not the sort of reminder most City workers need as they wind down into the end of a tricky week for markets in general. According to this and some other reports, he sees the United Kingdom as part of a pack of crisis economies which includes the Eurozone and Japan.

Eliciting themes from the markets to comment on has proved more challenging than usual this morning. Even a casual observer would probably recognise that there are many cross-currents at play which make identifying a future direction for markets difficult. A sharp sell-off in any investment vehicle usually merits closer examination for specific reasons and any broader implications. The recent drop in the price of Gold which, for some of its disciples has almost mythic status, can be rationalised in many ways.

When markets are especially in short term mode as they have been for many months, reacting to the latest media reports without apparently any regard for the longer view, it is reassuring if influential economists can be relied on for evidence of consistent statistical method even if their conclusion diverge (which, inevitably, they do). There is news this morning of a challenge on the methods of Rogoff and Reinhart of Harvard University by a research group at the University of Massachusetts concerning work on the impact of high public debt as a proportion of an economy’s output on economic growth. This serves to muddy the waters for government policies such a rapid introduction of austerity measures as in the United Kingdom. Undoubtedly, this is a debate to be followed although any shift in the intellectual basis for current policies seem unlikely to come any time soon.

The S&P 500 Index has been bouncing along in relatively overbought territory since late-January but over the intervening period had still put on around 6% in value by the time it hit the recent new high of 1,593 last week. Last night’s 2.3% index drop not only pared that gain to 3% but created a break down through the uptrend line in place since the turn of the year. Consequently, we are seeing at the very least a change in pace of upward momentum and possibly the start of a more significant adjustment lower. Sentiment seems to have soured exceptionally quickly. Certainly, yesterday’s news was not the best for the markets to absorb – quite apart from the tragic events in Boston – disappointment with signs of below-estimate economic growth out of China and a sharp sell-off in the price of gold.

Apart from the disappointment that China only grew by 7.7% year-on-year in the first quarter of 2013 that has prompted declines in Asian and European equity markets this morning, what catches the eye are the pronounced falls since last Thursday in the prices for Gold and Silver. Over the past five days, Gold has dropped 7% to $1,450 per troy ounce while Silver has fallen by just over 11% to $24.54 p.t.o.. Since recent peaks in early-October 2012, both metals have declined with Gold down 19% and Silver 21% lower. Since their all-time peaks, Gold ($1,900 p.t.o. 5th September 2011) and Silver ($48.4 p.t.o. 28th April 2011), their respective declines to date are 24% (Gold) and 50% (Silver).

After the phase of uncertainty in many equity markets since mid-March (with the pronounced exception of Tokyo) a more positive tone is emerging this morning following the release of trade data in China for March. Gains in Europe are of the order of 1.5% after year-on-year growth in Chinese imports at 14.1% exceeded expectations of 6.0% and Italy successfully sold €11 billion worth of Treasury Bills at auction at rates below previous levels. There is a sense in markets that the strong boost to liquidity by Japan is helping to stimulate demand for assets elsewhere.

While ‘Whatever it takes’ in Japanese is a phrase that may be on the tip of many people’s tongues it is surely forward in the mind of Haruhiko Kuroda, the new governor of the Bank of Japan, just as when European Central Bank President uttered the sentiment in his July 2012 speech as he attempted to establish a beachhead for Euro stability and ultimate recovery. The prospect of supertanker-sized tranches of Yen injections into the monetary system have taken the currency down by more than 20% since mid-September 2012 from the Yen 77 level to a four-year low at around Yen 99 now while the Nikkei 225 Index has gained by 55% since mid-October 2012 on the prospect of rallying exports.