Equities – It feels heavy…….

Nikkei 225 (7.750)  Topix (770)  Dax (4.381)  FTSE 100 (4.190) Dow Jones (7.850)  S&P 500 (827) Nasdaq Comp (1.535)  

Also this week US markets will be leading, but with some regional twists.

First a quick comment on the G7 meeting from the weekend. I hope they enjoyed the nice Italian food because that must have been the best outcome. In good times, G7 had very difficult to agree about anything so it’s an illusion to believe they find each other in tough times. The statement confirms that there are no common goals or mutual interest in coordinated economic action. Each country goes back to continue with what they are doing. The statement from the next G20 meeting will be very colourful but very limited in terms of what markets will expect of good news.

US:

Dow Jones is leading the way for US stocks again so I expect S & P and Nasdaq to follow despite some appetite for large tech stocks.

The General Motors plan that they have to present Tuesday will attract attention. I think it will highlight the problems for the automotive industry in particular and the manufacturing sector in general. In that context we should expect the US car part suppliers to ask for USD 25 billion in support as well.

Last week we had 2 important reactions in the US stock market. The much stronger than expected January retail sales which didn’t cause any buying at all – that would have had been the case 1 week earlier. Every body knows that it was a very short lived winter sales hype behind the upbeat number. Investors are getting very serious concerned about the macro economy. The second happening was the news from Thursday about the help package for house owners. I wonder if this came as a reaction on Dow Jones touching the November lows or was it just a coincidence ? I watched the market rebound 3% 1 hour before the bell – very sad for a bear, probably speculative, but also a sign that it’s important to get the housing market stabilised before the economic downturn can find a bottom. 

More about the help package for house owners should come out during the week, which might give support to the equity market, but short lived. The US housing market will also be of interest with NAHB on Tuesday (exp. and housing starts on Wednesday (exp. 530.000).

Germany:

I addition to the impulses from US, the possible government intervention in the case Hypo Real Estate confirms the severe situation. The growing focus on the serious economic problems for Eastern and Central Europe will weight as well.  All this topped with some earning reports. Daimler AG on Tuesday, Merck KGaA on Wednesday and MAN AG Thursday. 1 or 2 could surprise and support the market.

Japan:

This morning we got the long awaited Q4 numbers, unfortunately worse than expected. Wisely the Japanese government tried to front run the bad news by announcing an even bigger stimulus package during the weekend. The market reaction shows that investors want to see real economic growth or as minimum a feeling of foothold – not in sight yet. Best support, window dressing ahead of year end next month.

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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