Equities – Stock markets reacts natural which is healthy.

Nikkei 225 (8.837)  Topix (855)  Dax (4.756)  FTSE 100 (4.414) Dow Jones (8.599)  S&P 500 (890) Nasdaq Comp (1.572)  

Globally we are through the first rounds of stock buying for fresh money. Natural reactions on fundamentals are taking over, which was particular significant last week after the ADP report and labour market data Friday.

Reality still is bleak and it might not be the most pleasant to either write or read about, but its life right now. It would have been worse if the market neglected the dull facts and just going up every day as it would be unsustainable followed by huge drops.

In the never ending hunt for opportunities and sectors / stocks to keep an eye on, I found some cheerful data from Japan. Out of 3788 listed companies 184 expect their fiscal 2008 sales and pretax profits to surge more than 10% year on year. It needs to be said, that it is a study conducted by Nikkei News based on financial statements – not a survey done within like the past weeks.

The study shows that particular retailers offering alternative marks in good quality at competitive prices are faring well, also retailers who are able to lower their profit margins and save costs elsewhere can generate more sales. Very interestingly are the new coming companies those who offer the internet platform where consumers can compare prices.

It confirms the defensive status of retailers in an equity portfolio during a downturn, though this time it is worth to be even more selective.

Looking at Japan I think USD/JPY is the most important factor for the Japanese blue chips this week as they typically are exporters. With USD/JPY around 90,00, Nikkei should come under pressure again.

For continental Europe the ECB meeting on Thursday is the important happening. A 50 basis point rate cut is priced in but depending on the sentiment that day it could result in intraday buying. In Germany the new bank rescue will take a few days to digest, resulting in a negative environment. Impulses from the starting US earning season will give the last flavour of the week.

Partly the same picture for UK, though I expect it to be influenced from the bleak domestic situation but mainly tracking US stock markets.

In US the Dec retail sales on Wednesday will be extremely important (expected -1,4% ex. autos). In addition the earning season is kicked off. The Alcoa Inc. numbers today Monday will be followed closely and so will the Intel Corporation on Thursday.

I keep the targets as they are.

Targets: Nikkei 225 6.683  Topix 697  DAX 3.906  FTSE 100 3.456  Dow Jones 6185  S&P 500 656 Nasdaq Comp 1191

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