As expected, Monday evenings Eurogroup meeting was inconclusive, with ministers agreeing merely to finalise the Cypriot bailout at a further session in the second half of the month. Most notably, despite a Cypriot concession to allow an independent audit of its implementation of anti-money laundering regulations, significant uncertainties over the financing of the support package remain, with possible contributions from the private sector (depositors and/or bondholders) and Russia still seemingly on the table. There was also no agreement to extend the repayment schedule on the EUs loans to Ireland and Portugal, although, once again, ministers will come back to that issue at a future meeting. We remain confident that some further relief for those countries in such a way might well prove forthcoming in order to smooth their graduation from their respective EU/IMF programmes.



Data-wise, like in Japan, the focus in Europe today will be on the final readings of Februarys services and composite PMIs. These are expected to confirm a slight deterioration in conditions in February, with the euro area headline index having declined 1.3pts on the month to 47.3 in the preliminary estimate. Similarly, in the UK, following the dire contractionary readings for the manufacturing and construction sectors, the services PMI is expected to have weakened on the month, although fingers crossed this one should still point to expansion. A very weak reading, however, could prove to be the straw that breaks the camels back and persuades the majority on the MPC to give the green light to further QE this week, even though the BRCs latest survey published overnight suggested that retailers had a more successful February, with like-for-like sales up 2.7%Y/Y, the strongest since April 2011. (In addition, Januarys euro area retail sales figures are expected to post a modest increase on the month, albeit still remain down almost 3% compared with a year earlier.)