Portugal fiscal woes in focus after constitutional court ruling. In the eurozone this week, investors will be closely eyeing Portugal, following the constitutional court ruling on Friday that rejected some of the planned austerity measures. As a result, the Portuguese government must now find new ways to cover the EUR 1.3bn shortfall in this year's budget. Most importantly, the full implementation of austerity measures is a precondition for Portugal to keep its EUR78bn international bailout programme on track. If no new measures are taken, this year's budget deficit could be around 6.3% of GDP instead of the 5.5% agreed earlier. Therefore, lenders might withhold the next EUR 2bn installment of bailout until a new budget plan is presented.
US companies to begin reporting first-quarter results. The first-quarter earnings season will kick-off with Alcoa, largest aluminium producer in the U.S., releasing its results on Monday afternoon. On Friday investors will be closely watching earnings reports from J.P. Morgan Chase, U.S. biggest bank and Wells Fargo, no. 4 U.S. bank by assets. Analysts have been cutting profit forecasts for the last several months, which lowered the bar for companies and might make it easier for them to report better-than-expected earnings.
Fed minutes and policymakers speeches closely eyed. On Wednesday the Fed will release minutes of its March meeting, eyed by investors looking for possible insight into the bank’s views on interest rates and possible scaling back of the QE program. Also on the agenda this week are speeches from different Fed officials, including that from Chairman Ben Bernanke on Monday. Importantly, the poor jobs report released last Friday, which showed significantly lower than expected increase in payrolls in March and an outflow of workers from the labor force, dents arguments from Fed’s hawks and lifts pressure of the Fed on quick exiting from easy-money policies.