British markets slipped back after the fourth-quarter GDP figure stunned analysts with a surprise contraction of 0.5%. Though some of this decline could be attributed to the bad weather, there is a concern that forthcoming austerity measures will weigh on banks as well as retail stocks, and bring with them the possibility of stagflation in the economy there. Amongst the larger fallers were Lloyds Banking Group, Next and Marks & Spencer.

India's action in hiking rates prompted speculation that China would likely follow suit and affected the resource stocks. Standard & Poor's decision to downgrade Japan's debt rating to AA- was shrugged off following the Fed's decision to leave monetary policy unchanged.

Vodafone was also up to near one-year highs on speculation that it could be selling its stake in French mobile provider SFR as well as on talk that Verizon could well look at resuming its dividend by year end.

At the other end of the index, BP pulled back after being downgraded to "hold" from "buy" by Société Generale.

The state of the union address by President Obama where he signalled that he would endeavour to cut corporate tax rates in an effort to stimulate business assisted in pushing the markets back towards the upper end of their recent ranges.

US economic data was mixed with weekly jobless figures that tipped significantly to the downside, coming in at 454,000 against an expectation of 405,000.

Despite this, and slightly higher inflation pressures, the Dow pushed above the important 12,000 level for the first time since June 2008 helped by positive US new home sales for December, rising 17.5% to an eight-month high, against an expectation of a 3.5% rise.

As would be expected with its emerging market exposure, Caterpillar earnings at $1.47 a share beat expectations of $1.27 a share. Proctor and Gamble ($1.10), and AT&T ($0.54), also topped market expectations coming in at $1.13 a share and $0.55 a share respectively.

With a host of earnings figures still due, the Dow Jones could retrace above the 12,000 level but it is possible that valuations are becoming stretched at these levels given how poor some of the current economic data is.

Commodities

West Texas crude prices traded with a lower bias after comments from the Saudi oil minister that suggested oil prices would remain around broadly similar levels to the last 12 months. Brent crude, on the other hand, has remained remarkably resilient with the spread between the two contracts widening to its widest levels since early 2009. The re-opened Alaskan pipeline has also contributed to rising stockpiles.

On the other hand, after already rising by 100% over the last six months, cotton prices continue to soar, as supplies continue to get stretched after damage to crops by the recent flooding in both Pakistan and more recently Australia.

Gold futures fell to a three-month low pressured by the rising dollar and the diminishing of sovereign concerns but was trading above its weekly lows.

Brenda Kelly & Michael Hewson, CMC Markets www.cmcmarkets.ie