EVEN if the longer-term trend is probably upwards - provided central bank money printing and " competitive devaluations" in the foreign exchange market do not lead to a full-blown currency war - there are signs that a correction may be on the short-term horizon. The indications are that Europe has re-emerged as a worry, penny stock gambling has risen to absurd levels, and Wall Street's technical indicators are not looking too encouraging.

Around this time last year, Europe's financial problems assumed central prominence in the shape of a bankrupt Greece this time, although a Greek exit from the eurozone isn't an issue, Europe is once again providing the main drag. Last Thursday's announcement of an unexpectedly large Q4 contraction - courtesy of weakness in Germany, Italy, Netherlands and France - sent markets on the continent sliding. This, despite the many monetary printing bailout exercises carried out over the past two to three years.

One such bailout programme was the European Central Bank's Outright Market Transactions (OMT), a bond-buying scheme aimed at lowering borrowing costs for the Italian and Spanish governments last September. When it was announced, the ECB was heavily praised for constructing a novel way of printing money and handing it out to the financial markets and so its announcement triggered a large-scale recovery in stocks. But has the OMT benefited Europe? Not really, says DBS in its daily report on Friday.

" With the OMT programme announced last summer, long- term yields have come down dramatically (some 200bps in Spain and Italy) and the hope was that Europe's problems would somehow fade into the woodwork," said the bank.

Source:BT