RPT-GLOBAL MARKETS WEEKAHEAD-Jobs, inflation and Egypt

Sun Jan 30, 2011 1:45pm EST

* Risk rally continues

* Inflation, jobs tests ahead

* Egypt bubbles in background

(Repeats to additional subscribers, text unchanged)

By Jeremy Gaunt, European Investment Correspondent

LONDON, Jan 30 (Reuters) - Fundamentals and nasty surprises
are on investors minds heading into February, with big tests in
the coming week about jobs and inflation and increasing worries
over Egypt and its region.

The latter has already hit oil prices and has started to
rattle equities. U.S. crude oil futures ended more than 4
percent higher on Friday, on concerns the civil unrest in Egypt
could spread and threaten stability in the Middle East.

Overall, however, the first month of the year has been a
good one for investors willing to take on some risk.

Until Friday's sell off, global equities were gaining at a
rate that would have produced one of the best years in the past
four decades.

Assets such as short-term high-yielding bonds have also been
in favour, while supposedly safe-haven developed market
sovereign debt has suffered.

This is all based on a consensus that arose towards the end
of last year that leading developed economies -- the United
States, the euro zone and even Japan -- were likely to become
more dynamic.

It has prompted a significant shift by investors away from
potentially overbought emerging markets into developed ones.

But it is also dependent on underlying evidence the big
economies are improving and that consumers -- the ultimate
arbiters -- will see this and act accordingly by spending.

Friday's U.S. growth data will have added to the view of
slow but steady improvement.

The coming week will be more about the way improving growth
has filtered down to consumers. The big data release, as usual,
will be the U.S. jobs report on Friday, but the euro zone
employment picture will also be on view on Tuesday.

Employment growth tends to lag the wider recovery, but to
date it has been aenemic, prompting a degree of volatility.

Source: Reuters.Com