The first estimate of Q4 US GDP was better than anticipated at an annualised rate of decline of 3.8%. The figure was better than anticipated due to inventory build up and we can expect this to unwind over the first quarter of 2009 which will inevitably worsen the rate of GDP decline for the start of 2009.

Next week is the big economic numbers week with the manufacturing ISM index in the US on Monday. The figure last time was 32.4 and with the manufacturing sector in real difficulties I would expect to see a similar figure at best and possible worse than last time. On Wednesday we get the equivalent figure for the non manufacturing sector. The figure last time was 40.6 with the consensus expecting around 39 for January. Both sets of ISM data are sitting at historically low levels consistent with a fast rate of contraction in the US economy. On Thursday we get the results of the Bank of England MPC meeting where it is widely expected that another 50bp cut to 1% will be implemented. On the same day the ECB meets, but they have already made it clear that the rate will remain at 2% for the time being. On Thursday we get the last of the initial jobless claims for January in the US and it is already clear that we are heading for a Non Farm Payroll figure of around -600,000 which will be announced on Friday. Also on Friday we get some manufacturing and industrial production data for the UK which will make grim reading.

This has been an uneventful week for trading in my CFD portfolio. I only opened the one position which was a short in Pearson although I did close out a few physical holdings. Today with the market sell off my Unilever short has now moved firmly into profit and with Q4 and full year results to be announced next Thursday I will be keeping a close eye on them as the week progresses. This is a position that I opened before Christmas at £15.52 and it has been as high as £16.80 before moving back. I have a target price of around £15.

Next week I will also be taking a close look at the Vodafone IMS on Tuesday as well as the BP IMS also on Tuesday. I have traded both of these stock during recent months.

Lots of US economic data today, none of which has provided any sign of hope. New home sales fell to an annual pace of just 331,000 way below the consensus estimate of 400,000. The building of new homes in the US is not far off standstill. With so many unsold properties, somewhere around 12 months supply, it is hard to envisage any sign of stability in house prices until 2010 at least. The durable goods orders for December also disappointed on the downside showing a 2.6% decline compared to consensus estimates of a 2% decline. The initial jobless claims figure confirms that we are on course for payrolls to show another 600,000 people out of work in the US during January. The market has sold off today on the back of all of this grim news and with the first stab at Q4 US GDP due to be announced tomorrow I think we can expect further selling pressure if as I expect this figure is worse than expectations. The consensus is for an annualised decline of 5.4% which I think could easily be more like 6%.

The Fed rate will remain at close to zero as announced by the Federal Reserve tonight and they have also made it clear they will purchase long term treasuries if necessary to help stimulate lending. There is no news in this and I doubt it will have much if any market impact. In the UK the banking sector and financials have been bouncing as concerns appear to be easing that full nationalisation was on the cards for some of the biggest banks. The catalyst for all of this was the announcement from Barclays on Monday that it did not expect to need to raise more capital. At the moment I find it difficult to believe that this is the end of the story especially given the ongoing deterioration in bad debts. We have a long way to go and I think nearly every analyst is struggling to come up with a confident valuation or forecast for any of the UK banks although Citigroup appears to be the exception having raised Lloyds to a buy today. I still believe it is a sector only for the brave, but if you had bought in late last week and still hold today some serious returns would have been made!

Excitement over the Obama fiscal stimulus package and the prospect of a bad bank to absorb the toxic debt of US banks and financial institutions is driving the market at the moment. I suspect that this will be short lived. I am unconvinced that the fiscal stimulus package will achieve a great deal apart from reducing the amount by which US GDP falls this year and possibly next. The real problem is that tax cuts may not have the desired effect as the US savings rate is going to rise significantly over the coming months as households repair their broken balance sheets. Consequently there will be little impact on economic growth. Government expenditure will have a greater impact but this may well prove to be a short term boost without any lasting impact. Even $800bn is small compared to the destruction in value we have already seen and are going to see over the coming year. Nevertheless it is a step in the right direction and I do hope that it has the desired effect.

I sold out of my Marks and Spencer CFD portfolio holding today for a profit and I have retained my physical holding. There may be a little more to go for if the market maintains its momentum tomorrow. Not unexpectedly Pearson made some progress today and that short is around 2% out of the money at present, but I am happy to hold that at the moment and my other short Unilever seems to be finding it difficult to make headway even in a strong market and I am still hopeful that it will return back into profit soon.

A quiet day with little to move world markets. The US consumer confidence data fell to a new low which is unsurprising given the speed at which people are losing their jobs. My new short in Pearson has started to move in the right direction and it may be a little while before I achieve my price target. Everything else is very close to where I bought it and it is a case of waiting for a more volatile day. The durable goods orders in the US on Thursday should provide that and with Q4 US GDP on Friday I am sure we will get some big moves in the market before the week is out.

The existing home sales and leading indicators in the US today were positive rather than negative which provided an immediate boost to the market and helped the UK to rally further. The announcement from Barclays that its financial position is stronger than what most if not all commentators and analysts felt was the case helped the market and the financials in general during morning trading.

Today I used the strength in the market to sell out and take profits in my physical holdings of BP and British Telecom whilst I opened a short position in my CFD portfolio in Pearson. I have nothing against Pearson which does have a quality earnings stream, but valuation does now look full and more importantly a significant proportion of their earnings are derived from the US education market. Given the deteriorating position of US state budgets I believe there is earnings risk. In addition the FT will be struggling to maintain momentum in advertising given the state of financial markets and it is difficult to know how Penguin publishing will perform as the recession gathers momentum. On a positive note their US earnings will benefit from the strong dollar which will help to mitigate the impact of an earnings slowdown.

I will comment on the market later on, and for the time being I have placed below our usual notes on the the economic data coming this week.

The week ahead holds a lot of market moving data, but all of it is focused on the US with little in Europe to make any real difference to market sentiment. In addition to which we have the FOMC meeting in the US. With the Federal Reserve rate standing at 0.25% the market focus will be on the statement they issue and any indication of additional quantitative easing such as buying longer dated Treasury securities.

On Monday we get the existing home sales data for the US with the consensus expecting a decline from the November level of 4.49m to 4.4m on an annualised basis. Given the increasing levels of unemployment in the US and the deteriorating credit worthiness of buyers a further decline seems inevitable. With the housing stock standing at close to 12 months of supply the downward pressure on house prices looks set to continue for some time. On Monday we also get the US leading economic indicators which are set to show a further decline month on month. The consensus expectation is for a decline of 0.3%.

On Tuesday we get the US Conference Board consumer confidence data which is expected to decline from the November level of 44.7 to a consensus estimate of 39.1. Given the levels at which unemployment is rising combined with further falls in the equity market it seems likely that another big drop in confidence will be announced.

The FOMC rate decision on Wednesday will leave the rate at 0.25% as there is no where to go, but the accompanying statement will set the tone for market trading.

On Thursday the durable goods order for December are going to be significant. The consensus is expecting a decline of 2.0% for December which would make 5 monthly declines in a row. Given the dire state of the US auto industry at the moment it is difficult to see anything but another decline which could be worse than the consensus figure. On Thursday we also get the initial jobless claims figure for the US with the latest weekly figure expected to show we are headed for a monthly Non Farm Payroll figure of close to 600,000. This is unlikely to shock the market although a further deterioration would be unwelcome news. Finally, on Thursday in the US we get new home sales figures which are expected according to the consensus to decline to 400,000 on an annualised basis. Not a market moving statistic but what is important is stability in the US housing market and without this there is no foundation for recovery. The existing stock of new homes available for sale remains at uncomfortably high levels.

In Germany on Thursday we get unemployment data where the rate is almost certainly going to move higher and for Europe we will have various sentiment indicators published including Business, Industrial, Services and Consumer confidence. We will also see published some data on private sector loans which will inevitably be weak due to much stricter lending criteria and a general unwillingness amongst the financial sector to release cash as they rebuild their battered balance sheets.

Friday brings us to the big market moving data of the week when we get the first stab at Q4 US GDP. Consensus is showing an expected annualised decline rate of 5.4%, but given the sharp contraction in economic activity across all areas during the fourth quarter we would not rule out a bigger figure and this could easily result in a market sell-off. Finally, on Friday we get another confidence indicator with the University of Michigan Consumer sentiment figure.

The UK GDP data today was bad with a fall of 1.5% in Q4 which to me suggests that this year will almost certainly be worse than the anticipated 2 to 2.5% which many economists are forecasting. The ONS retail sales data for December did not look good either. The non seasonally adjusted volume of non food retail sales in December rose 2.4%, but in value terms they fell 3.6% due to heavy discounting and the cut in vat. In food stores, non seasonally adjusted sales value rose by 2.1 per cent but the volume of food sales fell by 2.1 per cent. Food inflation of 4.2% has saved the day for the food retailers, but we expect this benefit will slowly disappear over the coming months providing very difficult conditions for the traditional food retailers whilst the discounters should continue to benefit. The ONS data is notoriously volatile and I would not necessarily place huge emphasis on this data, but it does nevertheless suggest that further downgrades across food and non food stocks are likely over the coming months.

Nothing to report on the trading front today. Next week I will be interested in the WH Smith Christmas trading update. It is a stock that I have been watching for a while and may well start to trade once the update is out of the way on Monday.

The US housing starts were awful falling to a record low in December of 550,000 on an annualised basis. This is the lowest figure since records began in 1959. At this rate housebuilding will soon come to a grinding halt especially given the huge stock of unsold homes. Without a recovery in the housing market is is difficult to see the US consumer starting to spend for a long time to come.

In the market today I was interested in the next profit warning from BT due to a disappointing performance from its Global Services division. This is a result of a review into the operational performance of ongoing contracts which will result in a one off charge of £340m being taken with further charges likely when the Q4 results are announced. . On the plus side the rest of the Group appears to have outperformed relative to expectations with a 5% improvement in EBITDA over the same period last year. The key short term issues for the BT share price aside from the ongoing reorganisation of Global Services are the triennial pension fund review, the results of which will not be known until the final results on the 14th May. Cash flow will be impacted by any additional contributions that the company will have to make as a result of this review and with Global Services also eating into cash it seems almost inevitable that a dividend cut will occur during 2009. We have factored in a worst case scenario of a fall to 8p (currently 15.8p) with consensus sitting around the 10p mark which should be covered by cash flow. The shares today are off by 12% to stand at £1.08 and at this level stand on a worst case forward yield of 7.4% and possibly as much as 9.2%. I believe that at current levels the shares will be underpinned by the prospective yield and the market does appear to be fully discounting a cut. I took the opportunity to buy a small holding this morning at £1.06 and will probably sell out tomorrow if the shares recover any more from the close of £1.118.

I also sold today my holding of Home Retail which I bought after the disappointing trading statement earlier in the month.

I noticed that Unilever sold off today even when the market was up 40 points which suggests the valuation is perceived by the market as looking fairly full which gives me some confidence that they are unlikely to rally much further from current levels.

Sentiment at the moment could not be more fragile, with the market up one minute and heavily down the next. In the absence of any positive news it still seems likely that we are going to test the lows of 2008. I mentioned yesterday that I would look at Daily Mail this morning and I took the opportunity to buy in again at £2.535 and my timing was extremely lucky with the announcement of the sale of The Evening Standard pushing the shares back over the £2.60 mark and I sold out at £2.61. Not a huge profit, but a profit nevertheless. Daily Mail is not without risk at the moment given the weakness in the newspaper advertising market. I may again look to trade the stock, but timing is everything at the moment and it is not difficult to get it very wrong. I also traded this morning in a new stock for me, Standard Life. The is one of the insurers which has a fairly solid capital base even if there were to be a further significant decline in the market. The yield is good and does look sustainable. The shares have traded around £2 up until this week and over the last couple of trading days they have been hit along with the rest of the financial sector. I watched the market and how they were performing early on and having touched down to £1.66 and rebounded over the £1.70 level I decided to take a long position at £1.71 and was fortunate enough to sell out at £1.82. Again not a huge gain, but at the moment very short term profits seem to be the order of the day.

My short in Unilever is not going the way I had hoped at present and they are around £1 above my entry level. My stop is not that far away, but I do feel that the recent strength is purely down to investors seeking safety after the second round of financial stock disasters. Whilst Unilever is a good company I am confident that the shares will find it difficult to make much more headway as the year progresses especially given the impact the worldwide slowdown will have on their volumes combined with pricing pressures. Whether the weight of investor funds seeking a safe haven will outweigh this in the short term remains to be seen. Another favourite short of mine, Next, dipped below £11 today having stubbornly stuck around the £12 level since their latest results.

The desperate attempts by retailers to lure customers in December with big price cuts combined with the cut in vat helped to bring the headline CPI figure down from the November rate of 4.1% to 3.1% which was against consensus expectations of a drop to 2.6%. Nevertheless this was a big drop although a lot will have been due to the 2.5% drop in vat. Food inflation fell only modestly over the period and is one of the main reasons why the drop was not as much as most were expecting. The speed of the decline in the UK economy is likely to put serious pressure on prices over the coming months and with oil at current levels I would expect to see this filtering through to energy prices. The prospect of negative CPI looks increasingly likely before the end of the year.

Sentiment in the market has turned very negative over the last 48 hours. The banking sector is experiencing a blood bath and this is feeding through yet again to the insurance sector. Whether this is justified is open to debate. The risk for the insurers lies with the prospect of a further 20% fall in the market which will leave their capital positions looking very vulnerable. For the brave there are interesting opportunities in the life sector, but they are certainly not without high risk and I feel the prospect of a UK life company announcing a rights issue is getting closer.

Tomorrow we will see another bad start to trading and the prospect of a dip below 4,000 looks increasingly likely. I am looking at a few stocks for my long term physical portfolio and I may look again at Daily Mail for my CFD portfolio if they fall far enough in the morning.

A significant sell off today in the banking sector despite the announcement of a second bail out package has again brought sentiment back into negative territory. The rumour we received was of 2 large long only funds making an exit from the sector and as a result there was some serious heavy selling going on. It is difficult to see much if any value now in a sector where there is a real risk of ongoing nationalisation which may end in full nationalisation something which RBS is now very close to following the conversion of the RBS preference shares to equity. The second bank bail out today may well help to improve lending in the economy, but with losses set to escalate even from the huge levels they currently stand at I find it hard to see today's news as any real answer to the massive economic problems the UK faces and ultimately there is a real risk that it will undermine the public finances to a frightening level.

Pearson announced a trading update today and not unexpectedly they expect to achieve a result better than consensus expectations. The outlook for 2009 is clearly difficult especially for a company that is heavily reliant on US States budget allocation which will be under serious pressure as tax receipts decline. Pearson is a well run company that is still likely to achieve modest growth over the coming year, but at this time I find it difficult to trade them unless they move closer to the £7 level where I feel the shares are likely to find it difficult to make much more headway and become an interesting short opportunity. I will be keeping a close eye on them.

A bounce in the market today was overdue after the declines we have experienced during the first weeks of 2009. Whether the market rallies much further is doubtful and will depend a great deal next week on the US reporting season with many big names due to report. It is unlikely that we will see any painting a positive picture and I think we can expect a good deal of volatility as the week unfolds. We do have the end of the Bush era on Tuesday when Barack Obama takes his oath of office. He will undoubtedly deliver a speech full of determination to end the recession and it is not impossible that the market will respond well to this on the day.

In the UK next week we get the CPI figures on Tuesday which will undoubtedly show a further slowdown in the rate of inflation and we can expect this trend to continue for a while yet. On Wednesday we get the Bank of England meeting minutes which will show a 9-0 vote in favour of cutting interest rates and also on Wednesday we get the UK unemployment numbers which will show another increase in the unemployment rate with many economists predicting over 3m out of work by the end of this year. Not much of significance in the US on the economic front next week. Keep a look out for the initial jobless claims on Thursday which will give further indication as to where we are headed for next month's Non Farm Payrolls figure which looks likely to match the previous monthly decline of over 500,000. On Friday we get retail sales figures for the UK and the first estimate for Q4 GDP which could be as bad as -0.9%.

Yesterday I did take a cfd position in Marks and Spencer and I also bought into some Home Retail Group for my physical portfolio. I think at the moment the retailers do offer some good trading opportunities purely because we have just gone through the Christmas trading statements and most share prices are likely to remain relatively strong until we get close to the next set of announcements in the spring. I do feel that there is a real risk that trading will deteriorate further and more downgrades could follow, but at the moment there is a window for trading and share prices at present do discount an awful lot of bad news.

The rumour mill has been working overtime this afternoon. At the centre of it is speculation that Citigroup will be nationalised over the weekend. That would certainly be a big deal and we seem to be heading back into the world of very bad financial headlines. The nationalisation of Citigroup would be a serious setback for world markets and with short selling of the financial sector in the UK about to get underway tomorrow there is every chance the FTSE is heading sub 4000. The UK banks are taking a terrible hammering today with Lloyds close to going sub £1 this afternoon. This is a sector only for the very brave.

Fortunately this morning I managed to sell out my Daily Mail for a reasonable profit. The much publicised ongoing discussion that may lead to the sale of the Evening Standard has kept the share price strong this week, but I feel that it is better to travel than arrive with this news. Even if the paper is sold it will have no material impact on Daily Mail and I feel that the shares may well sell off if a deal is done.

Unilever is remaining stubbornly strong whilst I wish I had shorted Next again this morning with the shares now off 6% on the day.

Despite the plunge in the market today I have little to report. The US retail sales figures were very bad and suggest that the US recession could easily turn into some far more serious than just a deep recession. The impact of the Obama fiscal stimulus package will be critical and whilst I hope that it will have the desired effect I suspect that it will at best provide a small cushion to what is a serious destruction of household wealth which will be very difficult to stop for some time to come.

On Friday in the UK the ban on short selling of financials will be lifted. I think today has shown that the absence of short sellers makes little difference when a sector is under extreme pressure. The downgrade by Morgan Stanley today of HSBC and the suggestion that the company may have to raise in excess of $20bn in a worst case scenario hit the HSBC share price hard. This is one banking stock that until recently has weathered the storm well. If indeed a dividend cut or capital raising is on the cards the shares will have further to fall and will be a clear target for the shorters when they return on Friday. The entire sector still looks in very bad shape with bad debts likely to increase substantially and with margins being squeezed as the base rate falls it will take banks a long time to repair their balance sheets.

No trades today. My Unilever short moved into profit today and I am keeping a keen eye on Next which I would like to short again.

Steady as she goes with the Tesco Christmas trading statement announced today which was a little better than expectations with like for like growth of 3.5% for the seven weeks to the 10th January against consensus expectations of 2.5%. The figure was helped a little with the fact that they reported on a seven week period against 6 weeks last year and benefited from stronger trading during the last week. The Group also opened more stores on the 26th December compared to the previous year which would also have aided the growth number. Nevertheless a positive figure close to consensus is to be appreciated in the current difficult climate.Non food sales have moved in to positive like for like territory against a negative figure during Q3 with a better performance from electrical and clothing. Elsewhere, Europe was a little disappointing with like for like growth slower than the Q3 figure of 6%. Total international sales increased by 32.7% although a lot of this is due to currency movements. The integration of Homeplus in Korea seems to be going well with a reported 50% sales uplift at newly converted stores. Online sales continue to perform well, up 18% to £273m over the seven week period. Overall the shares to me look up with events, but I would certainly consider buying back in if they dropped below £3.30.

Today I closed out the Next short in my CFD portfolio and I am hopeful of getting back in if they move back up towards the £12 level. I mentioned yesterday my reasons for looking at M&S and today I bought a position into my physical portfolio. I am looking only for a quick short term profit as I can't see the shares moving ahead much until later in the year. The retail Christmas trading statements don't appear to have been as bad as many were expecting, but I wonder if Christmas may have included an element of January sale buying brought forward by consumers given the extent of price reductions and sales we saw in the run up to Christmas. If that is the case the first quarter may be far worse for retailers than the market is now anticipating.

Little market moving information today which left the market drifting lower on the day. My current shorts in Next and Unilever are doing well whilst the long position in Daily Mail moved into profit. The market looks set to open lower tomorrow with the weak Dow tonight and this may give me an opportunity to exit one of my short positions. I am also looking closely at another long position in Marks and Spencer if the shares move close to £2.30. I believe that market valuations for the retail sector are unlikely to move ahead much further from current levels and with a stock such as M&S the downside looks limited in the short term given how close we are to the recent trading statement and as a result even if trading is deteriorating we are unlikely to get news of this until March/April at the earliest with final results likely to be announced in May. I will be taking a close look at the Tesco trading update tomorrow which has already been well covered in the press and like for like sales growth is expected to be reported at around 2.5%. Most analysts are turning negative on the food retailers relative to general retailers. As a result we may see weakness over the coming weeks and this may present a good long opportunity. I am still keen on Tesco whilst I believe there may be an opportunity to short Wm Morrison at some stage in the near future.

The US Non Farm Payrolls today were taken relatively well after the ADP numbers earlier in the week. Nevertheless losing 520,000 jobs in a month is not to be taken lightly and with the unemployment rate now at 7.2% the situation in the US is likely to remain dire for some time.

The market does seem to be anticipating the start of an economic recovery at some point before the end of the year, but I do feel that the risks are skewed more in favour of any recovery starting sometime in 2010. If the data continues to deteriorate I cannot help but feel that there is a real risk of the markets testing the 2008 lows. I don't wish to be overly negative, but it is hard not to when the major indicators are still deteriorating.

Yesterday I bought a few Marks and Spencer in my physical portfolio towards the close of trading and I have sold them today at a nice profit. I remain unconvinced that the retail sector is going to rally much further from here, but with the news yesterday in the US of awful conditions for the major retailers which hit the UK retail stocks hard it did seem likely that we would see some form of bounce today given that the M&S results are behind us. I still have the CFD short in Next.

The 50bp cut in the UK base rate today is not unexpected although a lot of commentators were expecting a full 1%. The decision today does now leave room at least for a further two 50bp cuts over the coming months if necessary although the BofE may now resort to quantitative easing first to see what impact they can generate. I still suspect that rates will fall back close to 0 over the coming months.

The reported weekly initial jobless claims in the US were down although a little better than expected which may help sentiment although I fear the Non Farm Payrolls will be very bad although may have less impact now that the market has digested the equivalent ADP numbers yesterday.

With the weakness in Daily Mail today I decided to take a small long position especially with the market again weak. I have set a strict stop loss especially with the company due to update on trading in early Feb. This is a company that is going to suffer this year, but the dividend looks safe and any sign of an upturn will be very beneficial for the share price.

Dismal results from the US retailers today has taken its toll on the UK stocks and I am happy with the progress of my Next short which I am going to hang on to a bit longer.

The ADP employment data announced today was just awful and shows the extent of the problem facing the US. With an estimated 693,000 jobs lost in December the US is no where near a bottom and the Non Farm Payrolls on Friday are likely to show a very similar figure. Even with the Obama fiscal stimulus package it is difficult to see any meaningful recovery for some time and when you look back in history at previous stimulus packages they generally have had only limited short term impact especially if they come in the form of tax cuts resulting in the recipients increasing their savings rates rather than spending. The recent market rally may well end up being capped and it is notable that as of yesterday the FTSE100 had already exceeded some brokers year end forecasts!

Investors hoping for signs of an improvement in the economic outlook are likely to be disappointed over the coming weeks. There is still little sign of any improvement in economic conditions and if anything we are seeing further deterioration. In the US today factory orders were reported to have declined twice as fast as anticipated during November combined with a downward revision to the October number. The ISM Non Manufacturing Index was a little higher than expectations at 40.6, but still the second lowest figure on record and a clear signal that the US economy remains in the depths of a very significant recession. Pending sales of existing homes fell again in November. One of the key issues that need to be cleared before any kind of recovery can occur is stability in the US housing market, but with stocks of unsold homes way above the average it is difficult to see any kind of stability returning for some time and forecasts of a further decline in home values this year of around 15% in the US are probably not far off the mark. Bearing in mind that this will be the fourth year of falling house prices in the US does provide real concerns for how things will play out for the UK market.

The retailers trading updates kicked off today with Debenhams and Next. I do not follow the former although the figures on the face of it did not look too bad. The same could also be argued of Next, and the shares have responded strongly today with a 12% rise in the share price. I did take a close look at the figures and the greatest concern for me is that whilst they reported a 7% like for like decline in sales during the 21 weeks to the 24th December, bearing in mind that they reported a 4.4% decline for the 14 weeks to 1st November it does suggest that like for like sales growth for the 7 weeks to 24th December deteriorated badly to around -12%. If this trend continues into the New Year 2009 could be a lot worse than the market is currently anticipating. Sentiment however does appear to shifting in favour of the retail sector, but nevertheless with a strong performance in the shares today I decided to open a small short in Next. With a P/E of around 8x and a yield that is now under 5% I believe the shares are starting to look fully valued short term although at the moment with the market seemingly set on a strong January rally they could easily move ahead further which is why I have set a firm stop loss.

The next couple of weeks will focus attention on the retailers. Coverage of the disaster in the high street has been extensive over the Christmas period with many big names disappearing and the Sunday press had a field day with reports of how bad the M&S statement will be on Wednesday. Lots of commentators are suggesting that valuations have baked in the worst case scenario. I suspect not, and there is room for further downgrades and weakness in this sector. Nevertheless we cannot be far off the bottom with some of the big names such as M&S. I am keen to acquire some M&S for my physical and CFD portfolio but I would rather pay around £2 or less bearing in mind the strong likelihood of a dividend cut being announced at some stage this year. We kick off with a statement from Next which I am expecting tomorrow. On Wednesday we have M&S and Sainsbury on Thursday. I believe that valuations for the food retailers are starting to look a little high whilst the non food retailers may well offer some long opportunities over the coming weeks.

This week look out for the ISM Non manufacturing index tomorrow in the US. The manufacturing ISM data on Friday was bad and clearly shows that the US economy is still some way from a bottom. The big data of the week will be the Non Farm Payrolls on Friday in the US. These have scope to be awful and a big figure of over 600,000 jobs lost cannot be ruled out.

A New Year but the same issues to deal with and the next few months are unlikely to be any easier than the end of 2008. What we can hope for and expect is some form of equity market recovery before the year is out although probably not a strong one. It was interesting to read all of the forecasts from the equity strategists for the current year. As always none are expecting the market to fall and the odd one is expecting a very strong rally before the year is out. After the heavy falls of 2008 it would be difficult to predict further equity market falls during 2009 although I do believe there is a small probability that the FTSE will end the year weaker. All will depend on the timing of recovery in the US and the size of the Obama fiscal stimulus package will be key with a $1 trillion dollar figure more than likely. The real risk for the current year is deflation. It seems likely that it will arrive and it is more a question of how short lived it will be and indeed if there is the possibility of deflation quickly returning. Unemployment will rise significantly this year and there will be a significant output gap in the UK and the US which could very easily result in deflation becoming firmly entrenched and that would be very bad news for equity markets.

Still the market seems to be starting the year with a positive mindset and I think there must be a real possibility of the rally we have seen continuing during January. The arrival of the Obama administration will inevitably help, but unless we see the economic data starting to show some signs of at least stabilising I can't help but feel a rally early in the year will soon be lost. Today we kick off with one of the most important pieces of monthly economic data in the US namely the ISM Manufacturing data. It is already sitting at a historically low level and further disappointment will not help. Expectations are for the December figure to be somewhere around 35 and another significant miss may mean the rally ends today! I think there is a real chance of a miss with this figure which is likely to remain weak for sometime and a big miss will suggest that the US is nowhere near the bottom yet.

During the last few trading days the only action I have to report is a sale of my last holding of Tesco which had recovered well from the lows of £2.90 seen towards the end of 2008. I sold out at £3.61 and will look to buy back in if the shares move below £3.30 over the coming weeks. I see today that Daily Mail is trading at £2.90 which I think is a little expensive and I am hopeful of being able to trade this stock again this year if it moves back towards £2.50. The advertising market is going to remain very difficult this year and whilst Daily Mail will be a great recovery stock it is too soon to be taking any long term holdings and I would prefer to wait for more short term trading opportunities.

I still have the Unilever short in place and looking at the Asian markets where a good percentage of their profits are made I still believe that 2009 will be a difficult year for Unilever and the shares will struggle to make headway.