16 January 2012 at 8:27 GMT
Global markets had a good week where MSCI World rose 1.3 percent but finished on a sour note with the S&P downgrade of nine Eurozone countries. The cyclicals outperformed last week, with strong performance from metals and minerals and manufacturing. Inside Europe there were large discrepancies. European stocks rallied after successful bond auctions in both Italy and Spain from the immediate effect of the European Central Bank’s massive liquidity injection. Italian and Spanish shares rose 2.9 percent and 1.2 percent respectively while the Athens index, for the second week in a row, underperformed significantly. Short selling on Italian banks expires Monday which should create selling pressure. Macro data has been better than expected for long positions and disappointments are more likely going forward. We are in the middle of the US earnings season and Alcoa began on a weak note but rose during the week. JP Morgan, the first bank to report in the earnings seasons, matched expectations on most items but badly missed on revenues sending other financial shares down on Friday. Look out for earnings from other financials this week, like Wells Fargo, Citi, Goldman and BofA. IT related Microsoft and Google are on the radar as well, but financials will set the tone for the week along with the French bond auction on Monday.
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