Final tally for Q1

Continental Europe continues to steam ahead with the greatest upward profit revisions in Germany and the Nordic region.

• M&A continues to be the hot story and highlights the general under-valuation of equities in a helpful economic environment. But if it continues at its present rate it will amount to a frightening 10% of world stock market capitalisation this year; it could indicate a new financial bubble.

• Profit warnings is indicative of the flat market, however the breadth ratio (analyst sentiment) is up 5% in the month.

• Chemical, Insurance and Financial Services sectors continue to have the strongest 3-month 2007 profit revisions. TMT and Oils remain soft.

In the Numbers

• DJ STOXX 600 2007 EPS growth rate is 6.4% compared to 16.5% last year

• DJ STOXX 600 2007 P/E trades at

Valuation

	Trailing 12M P/E	Forward 12M P/E	Dispersion
Travel & Leisure	19.9 x	16.7 x	17.5 x
Industrial Goods & Services	19.6 x	16.7 x	-2.9 x
Automobiles & Parts	16.1 x	13.2 x	-2.9 x
Industrial	19.1 x	16.6 x	-2.5 x
Technology	19.8 x	17.5 x	-2.3 x
DJ Stoxx 600	15.0 x	13.9 x	-1.1

Best – Weekly Performance (1 week 2007 EPS revisions %)

DJ Stoxx /2/ Automobiles & Parts 5.0%

DJ Stoxx /2/ Chemicals 3.7%

DJ Stoxx /2/ Financial Services 3.3%

DJ Stoxx /2/ Oil & Gas 1.9%

Worst – Weekly Performance (1 week 2007 EPS revisions %)

DJ Stoxx /2/ Insurance -1.3%

DJ Stoxx /1/ Health Care -0.8%

DJ Stoxx /1/ Technology -0.6%

DJ Stoxx /1/ Telecommunications -0.5%

European Earnings Score

Good, Bad and the Ugly

	EPS	Pretax	Sales
Good	60%	38%	42%
Bad	28%	34%	29%
in-line	12%	29%	29%

Cost cutting continues to be the main catalyst.

M&A in the Forefront

Rumors, and transactions continue to spur equity markets. European markets are up about 8% from the beginning of the year, however there is a real fear. The bogyman in this case is private equity. If it continues at its present rate it will amount to a frightening 10% of world stock market capitalisation this year, which could indicate a new financial bubble.

These views are independent of FactSet Europe Ltd and are proprietary to Bobby Rakhit. For the full report and individual sector reviews and recommendations please contact rakhitreport@yahoo.co.uk.