Despite a jittery start to the week, risk appetite returned to the markets following Japan's declaration that it would be joining China in buying eurozone bonds, easing sovereign debt concerns in the short term. The Portuguese bond auction went off better than expected with rates coming in some way under 7%. Successful Spanish and Italian bond auctions, albeit at higher yields, also boosted the banks, with Barclays and HSBC leading the sector higher, the latter boosted by a broker upgrade from Citigroup.
The Irish banks also led the Iseq on a week-long rally on the back of renewed investor confidence.
Disappointing Christmas sales figures from Tesco and Marks & Spencer had a negative effect on the retail sector as a whole while broker downgrades hit the tobacco sector as Merrill Lynch downgraded British American Tobacco to neutral.
Both the Bank of England and ECB offered no surprises, both keeping respective interest rates on hold despite recent evidence of upward pressure on inflation on the back of surging energy prices.
US markets made new two-and-a-half year highs as the S&P looks to test the 1,300 level on the back of bond auctions and optimism about the forthcoming US earnings season.
Oil giant Chevron reported it expected slightly higher output and earnings in the fourth quarter compared to the third, driven mainly by higher crude prices.
Apple shares were also in the news after having its price target upgraded by RBC and Barclays while Starbucks price target was also raised by UBS.
US retailers also boosted sentiment with Sears and Tiffany both projecting better-than-expected fourth-quarter earnings.
Larger-than-expected weekly jobless claims – coming in 445,000 against consensus opinion of 402,000 – knocked the market back a little towards the end of the week.
Commodity prices continue to remain firm as crude oil prices continue to rise with Brent Crude hitting $98, while US crude continues to push higher towards $92 with inventory data for US prices showing a shortfall due to the closure of the Alaskan pipeline over the past week.
The price differential of over $6 between Brent and WTI is at its highest level since May last year, and this may come back onto line very quickly over the next week, which suggests we could see further gains in WTI towards $100.
Grain prices have pushed higher with corn and wheat surging after the US Department of Agriculture cut its estimate of the 2010 corn harvest causing corn prices to hit 30-month highs.
Copper prices have rebounded from recent lows while gold and silver have also rallied, with gold recovering above the $1,380 level before slipping back.
Brenda Kelly and Michael Hewson, CMC Markets www.cmcmarkets.ie