Positive economic data helped boost equity markets last week, enabling the FTSE 100, Dow Jones and S&P 500 all posting new 30-month highs. Chip maker ARM Holdings pushed higher on speculation of a possible takeover as Microsoft announced it would be using ARM chips in its new operating system but banks pulled British equities back into the blue after US economic data came out much better than expected. HSBC led the gainers.

Rolls Royce and British Airways were also among the gainers after agreeing a $5bn deal with Trent engines for a new fleet of planes.

Retailers, however, took a tumble after clothes retailer Next reported it had lost an estimated £22m worth of sales as a result of bad weather in December. It did say that it expected to remain on target for its full-year profit guidance but cited an uncertain outlook for 2011. CD and DVD retailer HMV added to the negative mood among retailers by issuing a profits warning with sales falling 12.1% for the last 10 weeks. The company also announced it would be closing around 60 stores over the next 12 months in an attempt to stem the haemorrhaging of cash. Other retailers fell in sympathy with Primark's owner Associated British Foods, Kingfisher and Burberry all lower. Some US retailers helped sentiment with Costco reporting a 6% rise in sales for December, while Macy's saw a rise of 3.9%. However, overall US same-store sales undershot market expectations for December, coming in around 3.1%, against an expectation of 3.4%.

The slide in commodity prices weighed on sentiment in Europe as profit-taking on the gains of recent weeks saw commodity and resource stocks slip back.

Biggest fallers were mining stocks with Antofagasta, Randgold Resources and Anglo American all lower as a result of lower commodity prices and a stronger US dollar. Antofagasta slipped the most after Nomura downgraded the stock to "reduce" from "buy" and suggested the recent rally may have come far enough.

Commodities

Commodity prices took a bit of a hammering, with crude oil slipping below $88.50 per barrel despite key inventory data showing a much bigger than expected shortfall of 4.2 million barrels against an expectation of 1.4 million barrels before rallying back above $90 per barrel. The rebound came on the back of the surprisingly strong jobs figures which underlined an increasingly optimistic view of the US recovery. It has, however, started to slip back again after failing to overcome the $91 level on the rebound.

Inflation may well be exacerbated in the near term with the price of a loaf of bread set to increase as UK wheat prices hit record highs on Tuesday at £203.30 per tonne. The cost of UK wheat rose 90% in the past year which can be attributed to the drought in the Black Sea region of Russia and Ukraine as well as lower global production. This has in turn increased UK wheat sales overseas as the weaker pound is helping to undercut domestic suppliers.

Brenda Kelly, CMC Markets www.cmcmarkets.ie