New York, January 30, 2012
By John Stephenson

The market has had a great start to 2012 with Europe and its problems off the front page of the world's nespapers at least for now. Traders have sent the market higher, despite halting talks with private lenders of Greek debt on the "haircuts" they should accept and warnings from the head of the International Monetary Fund (IMF). Last week, Christine Lagarde, the head of the IMF, warned that Europe needs to do more to promote growth before the crisis spreads to the world economy.

Portugal is the latest euro zone country to become a warning falg for investors as it looks likely that it will need a second bailout. The current plan was for Portugal to tap the international debt market sometime in 2013, but increasingly that possibility is looking highly unlikely. The country's 10-year government bond carries a nosebleed yield of 15% and that is rising as the economy is headed toward a free fall. This has only increased the speculation that Portugal will need a second bailout from the European Union, making a mockery out of the euro zone leaders' assurance that a second Greek bailout was a special case.

But that hasn't spooked traders this year, with a decent slew of earnings and job numbers helping to propel the benchmark S&P500 stock index to a rally of 4.67% this year. This string performance for equities contrasts with what is an increasingly gloomy macroeconomic backdrop globally.

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