EMERGING MARKETS WEEK-Investors cautious after recent rally

By Walter Brandimarte

NEW YORK, April 13 (Reuters) - Emerging markets investors will likely be vigilant this week, monitoring a series of earnings reports by major U.S. banks, especially after the price of bonds and stocks in developing economies rallied.

Total returns on emerging markets bonds climbed 0.7 percent last week according to the JP Morgan EMBI+ index 11EMJ, resulting in gains of 2 percent since Jan. 1, the best performance posted by the asset class so far in the year.

Emerging market stocks also closed the week higher, with the benchmark Morgan Stanley Capital International index for the region .MSCIEF rising 1.3 percent.

"Emerging markets had a good performance recently and I think they can still suffer as we see more signs of recession in the United States," said Luiz Felipe Brandao, emerging markets director with Arkhe brokerage in Sao Paulo.

David Spegel, global head of Emerging Markets Strategy at ING Bank, agreed the recent rallies were exaggerated.

"Although we accept that emerging markets are more resilient and will likely be able to weather the credit drought longer than would have been the case a mere five years ago, in the near term, our market remains subject to the swings of broader credit markets," he wrote in a research note.

"There, we see only a slight reason for greater optimism due to recent developments and otherwise argue that the latest recovery is overdone," he added.

Analysts say that, before increasing their bets on emerging markets, investors need to see signs of improvement in global credit markets and in the balance sheets of banks.