The global market reaction to the S&P credit downgrades of many European countries, while fully expected on Friday, proves yet again that the rating agencies are just playing catch up to what many widely anticipated. With respect to France specifically, 5 yr CDS is tighter to the most narrow since early Dec, notwithstanding the downgrade. Yields are moving lower again in Italy and Spain. Spain sold 12 and 17 month bills at yields about half those seen in Dec. The EFSF also sold 6 month bills after getting downgraded yesterday as expected. With it being a crucial week in Greece, their 1 yr yield is rising to a new high of 410%. All 3 main measures of interbank lending levels are tighter again. The Jan German ZEW investor confidence in their economy 6 mo’s out gained sharply, rising to -21.6 from -53.8 and well above estimates of -49.4. Current conditions rose a more modest 1.6 pts but a decline was expected. UK CPI fell to a 9 month low falling to 4.2% from 4.8%, an encouraging direction but still extremely elevated relative to where interest rates are. China’s Q4 GDP rose 8.9% y/o/y, the slowest pace since Q2 ’09 but slightly more than expected. Dec IP and Retail Sales were also above expectations and the Shanghai index rose a sharp 4.2%. Copper is following, rallying to the highest level since late Oct. The Aussie$ is also bouncing to the best level since Nov in response.