overnight

Asian stock markets rose this morning, following yesterday's gains in US and European markets. This suggests that some calm is returning to the markets as investors become increasingly confident that SVB's problems will not extend to other banks. That said, the monetary authorities are likely to remain cautious about raising interest rates further for now. In China, retail sales rose 3.5 percent from a year earlier, but industrial production grew less than expected, showing mixed signs of post-restraint growth.

The day ahead

British Finance Minister Jeremy Hunt will give an update on the budget for the next financial year and beyond today. The good news is that government borrowing has improved compared with the first outline of his plan in November, and this year's full-year deficit could shave around £30bn off the OBR's forecasts. This gives the chancellor leeway to provide some further support to households and businesses. Earlier this morning, the Treasury confirmed that the EPG for a typical household will remain at £2,500 in April (rather than rising to £3,000), while reports suggest fuel duty could also be frozen.

However, the chancellor is likely to be cautious about making other major changes to policy, despite calls for higher spending and tax cuts, as it is unclear to what extent the recent fiscal improvement will be sustained. A key factor in judging this will be updated economic growth forecasts. Growth forecasts for 2023 are likely to be revised upwards, but a reassessment of the OBR's productivity forecasts is likely to lead to a further decline in GDP growth forecasts.

As a result, a focus is expected to be placed on improving the supply side of the economy, including measures to boost Labour force participation in areas such as pension reform and childcare. The report also suggests that measures are being considered to increase investment spending, which is critical to driving productivity growth. Finally, there may be some limited spending increases, including on defence, and the chancellor may offer some support for raising public sector wage awards.

Today's update on U.S. retail sales for February is likely to show growth significantly slower than in January. That was largely due to a partial reversal of last month's surge in car sales. On a more positive note, the value of core sales is expected to remain firm and appears to be running at a faster pace than in the fourth quarter. Also in the US, February producer prices will provide further evidence of inflationary pressures following yesterday's CPI results. Eurozone industrial production is expected to fall 0.1% in January.

marketplace

Global bond yields rose yesterday as market sentiment calmed. Still, yields in many markets remain well below where they were in the first half of last week. In currency markets, the pound fell slightly against the dollar and more sharply against the euro, which was broadly stronger.