By Greg Peel

Greetings and Happy New Year. Great summer, huh? Forty degrees one day, twenty the next and not much in between. Probably my fault: I took my break a little later this year as opposed to last year when I enjoyed the coldest December (in Sydney at least) in 50 years. Either my childhood memories of persistent long, comfortably hot summer days punctuated by occasional warm rain are rose-tinted, or there's something funny going on. Anyway, I hope everyone's had a relaxing holiday period.

Back to the real world. It was Martin Luther King Day in the US last night, providing a fitting holiday upon which to inaugurate America's first black president for a second term. It seems almost bizarre that Obama should be sworn in only now given the eternity that was the fiscal cliff circus leading up to and beyond New Year ? supposedly in the president's "lame duck" period. The latest news on that front from Friday is that the Republicans are prepared to push out the US debt ceiling deadline for three months to allow the Democrats to work on an acceptable policy of spending cuts to balance the earlier tax agreement. Yes, as much as we hate them, the words "can" and "kick" just won't go away.

We can perhaps be grateful that the Republicans are attempting to avoid the 2011 debt ceiling farce, which ultimately lead to a US downgrade, by allowing time for negotiation. However, it does not escape attention that this latest extension is simply another extension of the extension made back in 2011. The can will be almost 18 months down the road by the time a decision is made ? unless we see another extension.

Friday's offer from the Republicans was supposedly enough to provide a positive tone for European stock markets overnight. Despite no lead from Wall Street, German and French markets rose 0.6% and London 0.8%. Europe will, of course, hang over the global markets yet again in 2013 like an ominous cloud, but there is a pervading feeling that the promised ECB safety net can at least ensure the avoidance of disaster. Cyprus ? which is really just a Greek Island ? will probably be bailed, but that will cost relative pocket change, while Spain continues in its zombie mode of not quite dead but definitely not alive. Indeed, the buzzword for Europe in 2013 will be "growth". Where will it come from?

I signed off last year noting that oft ignored Japan will be the economy to watch in 2013. Outside of the tsunami and its consequences, global financial markets rarely pay much attention to Japan despite the size of its economy given its seemingly perennial state of coma. However, the latest prime minister in the Japanese revolving door is hellbent on a shifting from a policy stance that has held sway for two decades.

To do so, Abe will need to either bring the Bank of Japan onside or wait until the pending change of governor before installing a like-minded ally. Meanwhile, today sees the outcome of the latest BoJ policy meeting and the world is expecting big changes. The world is waiting for Japan to fire up the printing presses like there's no tomorrow. It's tit-for-tat stuff of course, with Bernanke's QE3 a clear incentive, but many an analyst is confident the building avalanche of central bank-sponsored cheap money across the globe at worst provides a safety net and at best provides an incentive for global growth in 2013. Japan's contribution may just swing the balance. Pity about the Aussie dollar.

The Aussie is currently stagnant at US$1.0517, with the US dollar index similarly unmoved at 80.04. Gold is US$5.40 stronger at US$1690.10/oz.

Base metals were unmeaningfully weaker in London, although we did see a slight bounce in iron ore ? up US80c to US$145.90/t ? to perhaps avert fears of the rollercoaster having headed over the peak. The oils are little changed, with Brent at US$111.77/bbl and the new March delivery front month West Texas at US$96.04/bbl.

The SPI Overnight was down 3 points.

It should be noted that MLK Day has provided a breather in the middle of the latest US reporting season, which seems to have been quite a timid affair so far, while next month Australia's six-month reporting season will be front and centre in market featuring prices well in excess of earnings-based valuation for the most part. Maybe a shake-out would not be such a bad thing.

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