The situation in Ukraine remains highly volatile, and growth appears to be flagging in China. Such a scenario would once have triggered risk aversion in the eurozone's periphery, as well as in emerging markets.

But the weakest sovereign credits in Western Europe have stood firm. CDS in Spain and Italy are trading at 119bps and 146bps, respectively, close to their tightest levels for almost four years. Ireland's performance is even more impressive - its spreads are trading at 86bps, their tightest level since October 2008.

The support that Ireland now enjoys in the capital markets was demonstrated by a bond auction on March 13. The sovereign sold €1bn in 10-year bonds at a yield of 2.967% - the lowest on record - and the issue was almost three times oversubscribed. Considering Ireland no longer has the safety net of a troika bailout, the ease of access to international investors is encouraging.

However, later in the day the government received news that probably dented the optimism. Ireland's economy shrank by 2.3% in the fourth-quarter of 2013, significantly worse than expectations of a 1.1% rise and well down on the third-quarter's 2.1% expansion. GDP is a questionable measure of Ireland's economic output due to the country's large multinational sector (GNP is preferable), but the data still underlined that the sovereign has a long way to go before it returns to normality.

The market reaction to the GDP number - or lack of it -- also highlighted that economic news has little impact on eurozone sovereigns in the current climate. Ireland's spreads finished the day tighter, and the other peripherals only saw mild deterioration. The ECB's reassuring presence - the OMT programme and its commitment to do "whatever it takes" - means that the periphery is largely insulated from potentially damaging economic news.

Emerging market names are not so lucky, and it remains the most vulnerable asset class to a negative shift in sentiment. Ukraine's problems have so far failed to trigger contagion, with Russia the only sovereign seeing considerable spread widening. China is a different matter, and its disappointing economic figures released recently are concerning investors in both developed and developing markets. Further bad news - possibly from the country's fragile banking system - could send spreads wider.

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