Below we highlight the estimated current year P/E ratios and dividend yields for the major equity indices of 13 countries.  As shown, Europe has the lowest estimated P/E ratios, with Italy, the UK and France all below 10.  The US ranks 3rd to last behind China and Japan.  European equity markets also offer some attractive dividend yields well above 4%.

Writing in Morgan Stanley's Global Strategy Bulletin, Gerard Minack, Toby Walker and Antony Conte are neutral on Australian equities:

We are neutral Australian equities and think risks are to the downside. We think earnings growth will remain positive, but a U.S. recession could worsen what is already a declining trend. We think 2009 consensus earnings growth of 11.7% is more at risk (particularly the 17.6% forecast for metals & mining). Importantly, domestic multiples remain at stretched levels, and we think a multiple de-rating is required to price in what are now substantial global risks. Finally, correlation to U.S. markets means we would not avoid the ramifications of a U.S. bear market or a fall in investor risk appetite.

I come to that last conclusion by seeing treasuries continue to strengthen against the S&P as well as gold and silver. Worst hit by credit fears, as could be predicted, are small caps, who are obviously most likely to be hit by more stringent credit standards.

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