UK growth is still reliant on government spending according to the latest GDP figures from the ONS. While the overall Q1 figure has been finalised at 0.3% the proportional contribution from government spending increased from 1.1% to 1.5%. This will come as a blow to the coalition, as would another piece of news released later in the day, and given the poor trade balance figures on Friday show that an export driven recovery is increasingly far off.

The UK current account deficit widened to £9.6 billion in the first quarter, bigger than forecasts for £4.7 billion and after a revised 521 million surplus the previous quarter; another indication of a weaker UK economy

The other piece of bad news came from the ratings agency, S&P. While they maintained their AAA outlook for the UK, they kept their outlook at negative. This means that they still anticipate a downgrade of our sovereign debt in the future. S&P said that its “medium-term economic forecasts for the UK are less optimistic than the assumptions underlying the Budget” while “there is still a material risk that the UK’s net general Government debt burden may approach a level incompatible with the ‘AAA’ rating.” The government will try and say that this is justification for the budget cuts as another year of Labour would have undoubtedly led to a downgrade. Even so, this will come as a blow to the Chancellor and saw sterling and other UK assets slip towards the close of play.

US earnings season started off in good fashion with Alcoa, the aluminium miner, reporting an EPS of 0.13 vs 0.11 exp. While not a tear away figure it has meant that stock market futures are in the green this morning and the general risk attitude has improved.

The euro has not been able to strengthen much over the past 24hrs even by news that the Chinese government bought up to EUR400mn of Spanish debt last week. This is obviously a major confidence boost for the beleaguered eurozone.

The UK is back in focus today with CPI and RPI data. The Bank of England have been vocal in their belief that CPI should be moderating lower as we move through the second half of the year and this month is the first in which the consensus view seems to agree. CPI is expected at 0.0% MoM and 3.4% YoY. I am expecting a figure below 0.0% however and I think sterling could be in for a rough morning.

Other key pieces of sata today include German ZEW Economic sentiment (10.00) which is likely to be slightly  weaker than previous readings and US trade balance at 13.30.