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US markets finished the week very much on the back foot. Disappointing earnings from P&G (PG), Allstate (ALL) & Caterpillar (CAT) trailed analysts' estimates while the entrails of the GDP report revealed that consumer spending was down a massive 9%. No wonder exports from Germany, China and Japan are falling off a cliff.

Today’s Market Moving Stories

• Overnight the big winner was mining stock Rio Tinto (RTP) whose shares soared on news that it had held talks with the Aluminum Corp. of China over possible assets sales. A cash injection would of course ease fears of a rights issue which has been hanging over the stock.
• Taking their lead from Wall Street, banking stocks were weak on the Nikkei with Mitsubishi UFJ (MTU) off 4.5% where electronics group Hitachi (HIT) took a 14% dump after warning on a big full year loss & worries over the strength of the yen. Note: Toyota (TM) looks set to cut for the 3rd time its global sales forecast for 2009.
• In related developments, Japanese press reports are “crying out” for official government intervention to weaken the yen to stave off the worst recession since 1945
• In the UK, PM Brown has said that he won’t intervene to support the friendless pound sterling while Moody’s rating agency downgraded the credit rating of Barclays (BCS) 2 notches to Aa3.
• The first day of the new trading month has been marked by heavy snow falls (which has disrupted travel & made for light early trading) and a wildcat strike at Sellafield. A winter of discontent beckons!
• European stocks making the running today include GlaxoSmithKine (GSK) who are set to axe 6k workers due to greater generic drug competition and Italy’s Telefonica who are said to be in talks with Rupert Murdoch’s News Corp. (NWS) about a possible move into the domestic market. Mmm, methinks the charmless dwarf Silvio Berlusconi might have something to say about such a move.
• The ECB is said to be drawing up guidelines for domestic EU governments who are considering venturing down the “bad bank” route. No doubt JC Trichet will be quizzed about this at Thursday’s press conference when they are widely expected to stand pat on interest rates, before of course being forced by events to cut again in March (yawn).
• Ryanair (RYAAY) is up this morning despite posting a Eur 102m Q3 loss. Crucially they stated that Q4 won’t be as bad as initially feared. Cash balances look strong & they look to have their hedging strategy back in line!
• CPL’s Interim results were ahead of analysts' estimates, leaving the stock attractively priced at current levels according to brokers.
• The confusion around the Obama “big bang” plan that will combine a bank clean up with measures to reduce home foreclosures and kick start credit markets seems to be stalling . The problem with the bad bank idea is that it is cash for trash (i.e. the taxpayer gets hosed again). Republican Senators are also said to be looking for big changes.
• It’s worth noting the price performance of GOLD in non dollar terms. Recall that the main demand for physical gold (yes, people want the bars) is out of India, Russia and Germany NOT the US. There are far better gauges of the gold panic.

Latest On The Never-Ending Saga of Irish Banks Recapitalization
Media reports suggest that the endgame is near and the Irish government is close to finalising a bank recapitalisation plan, involving a €7-8bn capital injection into AIB (AIB) / Bank of Ireland and the establishment of an insurance scheme to underwrite the banks against potential losses on loans.

The speculated capital injection is ahead of the government’s earlier modest proposals to invest €2bn in preference shares apiece, with a commitment to support a further €1bn Tier 1 issuance each, although the government had recently confirmed the availability of up to €10bn for the purpose. Reports suggest the insurance scheme will be directed primarily at development lending. The banks will reportedly take some write-down on the loans, with the Sunday Times suggesting that the state scheme will underwrite a €24bn exposure. AIB’s Irish development loan book is around €16.6bn, and BoI’s is €7.3bn. While this is encouraging given the recent collapse in demand for credit, kick-starting the supply of Irish credit is a prerequisite to emerging from our economic predicament.

Regarding the timeline on this, the formal announcement may come later than the original Tuesday target as the Government seeks to coordinate it with details of the national pay agreement. Overall, the impact of the re-cap announcement on the current equity is still unclear. However, a bigger level of re-cap in preference shares and the launch of an insurance scheme, against a backdrop of agreed public sector wage cuts, will lift a huge level of uncertainty toward the Irish banking sector and the economy.

Equities Today
Earnings today from Mattel (MAT) (revenue estimate: $6.16bn), Humana (HUM) (revenue estimate: $28.78bn) and Aflac (AFL) (revenue estimate: $17.34bn)

Data Today
3pm GMT see US Manufacturing and Construction Spending figures out from the US.

And Finally
The sketch may be almost 40 years old but history does repeat itself.