Equities were firmly on the defensive last week, with all the major international stock indices trading in the red. The negative sentiment set in after Wednesday’s ADP Non Farm Employment figures fell by 693,000 between November and December, which was way ahead of consensus estimates. Friday’s NFP figures were down -524,000 which was in line with the estimates, but this was only because estimates had been slashed following the ADP figures.

Adding to the gloom, major US blue chip companies, Intel and Time Warner both posted earnings that fell below analysts’ estimates. Wal-Mart also surprised by lowering its fourth quarter outlook. Analysts are concerned that if the world’s largest retailer had its figures set too high, then there is the real risk that earnings estimates are still too high across the board, going into earnings season. In short, the fear is that the bad news hasn’t yet been priced in, a scenario which is hardly going to be a positive catalyst for the next few months.

On the currency markets, it was a rare strong week for the pound. Sterling raced further away from parity against the Euro, and is pushing towards the $1.5000 level against the US dollar. Traders repositioned themselves after the bank of England cut by ‘just’ 50 base points, while at the same time speculation grew that the ECB will have to ease their relatively tight monetary policy soon. Traders now doubt that the Euro zone will be as strong as many thought this year. The British and American economies are still on the sick list, but now it is becoming apparent that struggling European nations such as Italy, Spain, Ireland and Greece could force the ECB to cut rates. The coming week is relatively quiet, starting off with Bernanke speaking on Tuesday. US retail sales come on Wednesday, with PPI and unemployment claims to follow on Thursday.