Dawn of a year of trading dangerously

Fri Dec 30, 2011 10:02am EST
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By Mike Peacock

LONDON (Reuters) - Out with the old year, in with the new and for investors uncertainty is likely to be the only certainty once more.

The euro zone debt crisis is far from resolved, turmoil in the Arab world has shifted to Syria and Iran has threatened to stop the flow of oil from the Gulf if sanctions are imposed due to its nuclear ambitions.

2011 was a dire year for equities outside the United States with world stocks poised to drop by around eight percent and emerging markets faring far worse.

Crude oil has been among the best performers with a roughly 10 percent increase and gold has matched it as a loss of confidence in the euro zone accelerated a flight to bullion.

So where next? The answer to that question depends on whether you believe policymakers in Europe, Asia and America will muddle through or whether a new cataclysm is imminent.

While the global economy remains shaky, central banks will maintain ultra-low interest rates, a potential fillip for stocks as bond yields languish in countries viewed as safe havens.

Globally, inflation should subside though the path of oil prices is hard to discern given the tumult in the Middle East and Gulf.

Signs of a modest U.S. revival and China's ability to gently massage down economic growth in order to prevent inflation taking off will be key for the markets but the euro zone remains the great imponderable. Italy alone faces frightening debt refinancing hurdles in the first four months of the year.   Continued...