From worse to bad

*** No follow through for FTSE

*** Is there an M&A boom? Or not?

*** Why to buy Russia, Germany and all the other markets youdon't much lik ------------------- - All the those strategists busily upgrading their forecasts after theFTSE's rise through 5000 last week must have been hoping for a bitmore follow through on Valentines Day. They didn't get it. TheFTSE closed down 2.4 points at 5014.8.

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- Bad performances came from the oil stocks. BP and Shell (bothMoneyweek favourites thanks to their low valuations) had bad daysoff 4.5 and 3.75 pence respectively. Now we like them even more.The Saudis may be talking up their plans to bump up productionmassively but so far its just talk. And odds are that's exactly what itwill remain: oil at $40 means lots of cash and hence politicalstability at home.

- Saudi can't take the domestic political risk that would come withfalling oil prices and it very probably won't. Oil ended the day over$47 and we still think BP and Shell should be core holdings inevery UK portfolio.

- Cadbury Schweppes was another loser, off by 4 _ pencethanks to denials of takeover talks from Kraft Foods andHershey. But don't say good-bye to the M&A boom just yet.

- In New York telecoms company Verizon announced it is to buyMCI in a $6.75 billion deal. The purchase includes an exchange ofstock valued at $4.8 billion and $488 million in cash. MCI will alsopay out dividends totalling nearly $1.5 billion which is nice

- In the UK rumours abounded that Allied Domecq is to bethe target of a joint bid from Pernod Ricard SA and FortuneBrands Inc. The stock was the highest riser on the daydespite a firm denial from Allied Domecq's director ofcorporate affairs, Stephen Whitehead ('We're not intalks.').

- Our advice? Sometimes these deals happen. Sometimes theydon't. But if rumours like this give you a healthy paperprofit why take the risk of losing it? Sell before somethinggoes wrong. It very very often does. -------------------

- Great excitement yesterday as the London Stock Exchangewitnessed the largest ever initial public offering from a Russiancompany. We weren't convinced it would be a winner of a stockright off the market has been pretty unimpressed with Russianstuff ever since Putin took out Yukos, but all went well. Sistema, amassive and diverse group with mobile phone holdings all overEastern Europe, debuted with a market capitalisation of US$1.56billion, a level that its president, Vladimir Yevtushenkov, seems tothink is just for starters. He followed up the listing with anannouncement that he intended to bid for the whole of the Russiannational telecoms holding company Svyazinvest in a deal hepredicts will be worth $3-4 billion.

- 'The large interest in this IPO shows there is demand for Russianstocks even amid political concerns,' said Aivaras Abromavicius ofCapital Asset Management afterward. And so there should be.There's no evidence that the Yukos palava was more than just a oneoff Putin knows as well as anyone that another Yuko wouldn'tmake good PR - and the Russian market is far too cheap at themoment. The economy is growing fast (8% last year) yet there arehordes of stocks on the market trading at p/es below 7 times. Mighta Russian fund be just the thing for this year's Isa?

- Or if the idea of investing your increasingly hard won cash in aRussian fund doesn't sound good what about a German fund? No?Perhaps you should think again. Not only is the market cheap (notas cheap as Russia we admit, but on an average p/e of only 9 times,still cheap) but the corporate sector is forecast to make recordprofits in 2005 and reform is on the way. Its not perfect, far from it,but isn't it better to buy not when things are going from good togreat but when they are on their way from awful to not so bad? Justlike they are in Germany and Russia.

- Back in the market everyone thinks is just great this year, the UK,we've been inundated with press releases from fund managementgroups reminding us that you can't go wrong with equities.Certainly not just before Isa selling season anyway. Well we canassure you that you can. You can go very wrong when you buy anequity fund that charges a 5% initial charge and you can go verywrong when you buy a fund run by a manager who hasn't a cluewhat he's doing. Both are all over the place. Take care not to getseduced by them this Isa season.

Yours Annunziata Rees-MogMoney Morning