Fighting Inflation, European Debt Restructuring and Banks
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- European Central Bank kept rates unchanged and expressed concern about the commodity-driven inflationary pressure. They face the dilemma that raising rates too fast might impact economic growth. But price stability is paramount and Trichet said that a rate increase is possible in April.
This has helped the Euro to reach a 4 month high vs the U.S. Dollar.

-A rise in commodities is having and will have a stronger impact than previously forecasted in both the more vulnerable Emerging markers and developed ones.

The Geopolitical situation in the Middle East will be crucial in forecasting the inflationary implications.

- A bailout of Portugal seems likely and this might impact investors confidence on Europe. Much depends on the outcomes of the upcoming summits.

- Possible Sovereign Debt Restructuring for Ireland and Greece might impact European banks stability and investor sentiment toward other countries like Spain. Recent decline in Spanish borrowing costs is a positive signal.

- EBA Stress tests will be more rigorous and might produce some surprising results depending on how and if sovereign debt default or restructuring will be part of the scenarios. Swiss FINMA will not release its stress tests;

- With the new Basel III requirements, limitations on bonuses and extra taxes (like the British levy tax) European banks competitiveness is in question. Opportunistic investors might see, within a penalized sector, some buying opportunities.

More coordination, a common strategy and faster action in Europe is needed - the upcoming summit should hopefully find a common agenda to tackle these very important issues.

I recommend exposure to Equities (including U.S. in the light of the jobless claims being the lowest since 2008) with some preference to defensive sectors like pharmaceuticals, consumer staples and inflation hedges like Gold and Broad Commodity Indexes.