Despite a disappointing conclusion to last week's EU summit meeting and the deferral till June of the decisions needed for 'economic governance' and crisis resolution procedures, at least one important area of policy seems to be decided. As the chart shows, yields on 2-year Bunds have now climbed to levels not seen since June 2009. That was when yields were on the way down. Now they are on the way up. The Bund market is convinced of the intention by the ECB to raise interest rates at its April 7 meeting and we think it will.

David Fuller's view The post 2008 crash and credit crunch period of near zero short-term interest rates is slowly and inevitably ending in the countries most adversely affected. Central banks in economies with stronger GDP growth rates have been raising short-term interest rates over the last year in a policy of normalisation and also in response to rising inflation pressures.

Nevertheless, real interest rates remain negative (below the current rate of CPI inflation in nearly all of these countries. The notable exception is Japan where mind deflationary problems remain a concern, not least following the recent earthquake, tsunami and Fukushima reactor problems.

For these reasons Japan has more than sufficient cause for its own quantitative easing, which I believe has already commenced. If so, it is effectively "QE3", as Eoin described it recently, helping to fuel equity prices along with the Fed's QE2 which does not expire until June.

Negative real interest rates, the Fed's QE2 and the probability of Japan's own QE are tailwinds behind the latest strength in stock markets. More Asian equity indices are approaching last year's highs following their mean reversions towards medium-term trends approximated by their rising 200-day moving averages. You can see this with Thailand, Indonesia, Malaysia and South Korea. Wall Street is also very firm but likely to encounter some further resistance as the S&P approaches its February high because the US market has experienced less mean reversion towards its MA in recent months.