Good morning,

Markets are called to open higher this morning. This is what's happening today:

  • The Bank of Japan began a two-day policy meeting. Japan’s currency has weakened 12% versus the greenback in the past three months on speculation the BOJ, under pressure from new Prime Minister Shinzo Abe, will increase monetary stimulus to lift the economy out of its third recession in five years;
  • European finance ministers meet in Brussels to discuss tackling the debt crisis;
  • US markets are closed for a public holiday
  • France to sell up to EU4.4b 91-day bills, EU1.6b 140-day bills, EU1.6b 350-day bills

Companies in Europe reporting results today: Wioncor Nixdorf, Novozymes, Richemont, Pearson, Afren, Galp Energia, Delonghi

Another important day for Japan as policy makers begin a two day meeting. Markets in Japan are trading lower this morning as investors are worried that policy makers will slow down monetary policy after the weakness we have been seeing in the Yen and the negative effect it could have on inflation. The Nikkei is down 1.5% this morning. However, despite the weakness, the Nikkei is up 3.56% for the year and this is all thanks to the weakness in the Yen. Since the start of the year, the Yen weakened 3.3% against the Dollar. However, what's impressive is that since September 2012, the Yen weakened more than 15% against the Dollar. Of course Japanese exporting companies did very well with the weakness in the Yen becuase it helped them export more goods to other countries. However, having depreciated so much, the Yen could become a threat to inflation and because of this threat, investors are worried that the policy makers in Japan will slow down expansionary monetary policy. We will know the results of the meeting tomorrow as it comes to a close.

Indonesia, Thailand and Malaysia are identified by HSBC Holdings Plc and Credit Suisse Group AG to be among the biggest beneficiaries of Japanese monetary easing and a 10.3 trillion yen ($115 billion) stimulus plan by Prime Minister Shinzo Abe, who wrapped up a tour of Southeast Asia on Jan. 18. In contrast, South Korea may suffer as a weakening yen makes its rival’s automotive and electronics exports more competitive, say Credit Suisse and Australia & New Zealand Banking Group Ltd.

Moving on the Europe, an important finance ministers meeting will take place today. This time the discussion is going to be on the European Stability mechanism (ESM). European finance ministers are likely to clash over how and when the E500bln ESM can bypass governments and provide direct help to banks. With officials declaring the worst of the region’s three-year market emergency over, finance ministers are debating whether the ESM should take over earlier bank bailouts that were routed through governments and what to do with so-called legacy assets.

In the US markets are closed due to a public holiday however, I would like to take the opportunity to talk about a company that report results last friday – Schlumberger. This is what Barclays had to say about the stock after the results – 'A Must Own Stock: In our view, Schlumberger is a primary beneficiary of the multi-year upturn in deepwater, subsea, exploration and international spending that is in the early stages and potentially gaining momentum. The company continues to differentiate itself through solid execution, innovative technology introductions (especially in seismic), increasingly seeking new growth product lines (OneSubsea, alliance with Petrofac), entering new/emerging geographies (Chinese unconventionals, Anton JV and ownership stake), and evolving contract structures (shift towards performancebased contracts). The stock’s relative premium to the group and low absolute multiple also create a clear valuation case as well. We continue to rate the shares Overweight.' Schlumberger shares are trading at $76.50 and Barclay's have a price target of $107 on the stock.

I continue to believe that it is a good time to be exposed to equities. We are seeing investors shift out of low risk investments and put the money into riskier assets. And this is something everyone can see. Look at the value of the Euro against the Dollar, look at the yield on the Bund as it increases, look at the yields on high yield bonds…these are just a few of the many indications that investors are putting risk back on the table. And with valuations in equities being attractive at this point in time, it makes them a good candidate for gaining alpha in 2013.

Good day and happy trading!

Kristian Camenzuli