The improvement in risk appetite came through the G20 summit and also survived the extremely weak US labour market data on Friday. There is likely to be natural mini-cycle as the period of savage inventory adjustment fades which will provide some relief while aggressive global policy action will have a positive impact. There are still very high economic stresses with the labour-market and commercial property sectors at risk of triggering renewed deterioration. There is liable to be a tough battle between pessimism and optimism in the near term. Risk appetite can hold firm for now, but it will be increasingly difficult for confidence to improve further. From these levels, the better strategy looks to be sell the Euro, Sterling and Australian dollars on rallies.

The US employment data was very close to market expectations with non-farm payrolls declining by a further 663,000 in March after a 651,000 drop the previous month. Job losses have exceeded 600,000 in each of the past 5 months while the total employment decline since the beginning of the recession is now over 5 million.

Unemployment rose to 8.5% from 8.1% and there was also a further decline in the average workweek which will cause serious concern over the underlying economic conditions, especially as personal income will tend to decline. The US ISM index for the non-manufacturing sector also declined to 40.8 from 41.6 the previous month.

It is the case that credit spreads have improved slightly over the past week. There have, however, also been worrying statistics on the data. The Baltic Dry index for shipping costs, for example, has fallen consistently over the past month with 18 consecutive daily falls. Mortgage delinquency rates have increased while there has also been increased stresses in corporate debt markets.