Earnings have trumped expectations and developed economies continue to grow, yet corporate credit markets struggled to post gains this week.

The Markit iTraxx Europe closed on Friday at 73.5bps, 1.5bps wider over the week. North America markets fared slightly better, but the Markit CDX.NA.IG was only 1bp tighter at 67bps

On the face of it this might seem like a perverse reaction. There is little doubt that the current earnings season has been a positive one. Apple, Microsoft, Amazon and Facebook are among the bellwethers to have surpassed expectations. Results from banks were mixed, but that was no great surprise given the decline in fixed income trading.

Corporate profitability, it seems, isn't to blame for the market's recent listlessness. But then neither is the performance of the world's traditional economic powerhouses. The Markit Flash Eurozone PMI showed business activity expanding in the region for the fastest rate in almost three years, while the US indices continued to suggest solid growth.

However, the lacklustre showing from the credit markets this week has to be put in historical context. All of the major CDS indices are close to their recent tight levels when the March roll is taken into account, and the rally over the last two years remains impressive. In June 2012 the Markit iTraxs Europe was trading at 184bps - two-and-a-half times its current level.

Decent economic growth, an expectation beating earnings season, low default rates and, above all, accommodative monetary policies give credence to current credit market valuations. But the bullish picture could be smeared by several factors.

Growth numbers are capturing the headlines, but in many countries this masks imbalances that question the sustainability of the recoveries (the UK's renewed enthusiasm for consumption is a case is in point). And emerging economies, by and large, are not sharing in the gains. China's Flash PMI was disappointing, and the world's second largest economy is still a likely catalyst for a reversal in sentiment.

If global growth does fail to meet expectations, then the direction of monetary policy will come under even more scrutiny. In the US, the Fed is set to continue its tapering of QE, though rate rises are some way off. Unemployment in the eurozone remains disturbingly high and most countries are still to regain the lost output since 2008. This alone should prompt authorities to stimulate the economy, but the conventional wisdom of austerity looks set to stay. The threat of deflation may stir the ECB to finally loosen policy, which will be a positive development for risk assets, if and when it occurs.

Eurozone inflation figures are scheduled for publication next week, and they will be closely watched. They are among several important releases that could provide a shift in spread direction.

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