During April, markets have displayed a far more cautious tone to that seen through most of the first quarter. FX markets were earlier than most to adopt this tone, with high-beta currencies turning at the start of March, much earlier than most equity markets. As we enter the last full week of April, this approach seems set to continue. The first round of voting in the French presidential election campaign has strengthened the view that Sarkozy is unlikely to see a second terms and markets are slightly nervous regarding his likely successor, Francois Hollande. The US Federal Reserve also meets this week, but all the signs are that it is unlikely to satisfy those hoping for a fresh round of quantitative easing, despite the ongoing underlying weakness of the economy. Furthermore, the latest PMI data from China (HSBC manufacturing series) increased to 49.1 (from 48.3), keeping alive concerns about the extent of the slowdown currently being seen in China. Finally, the latest producer price inflation data in Australia appear to have further cemented the case for a fresh rate cut next month. Cautious pessimism is likely to remain the theme as we head into month end.