ING sees recession for most of 2009

(Reuters) - The United States and Europe will be in recession for most of 2009, and stocks may hit fresh lows in the first half of the year, analysts at ING said.

But the analysts, who raised the insurance and bank sectors to "neutral" from "underweight," said equities are expected to gain 70 percent from the second half of 2009 through the end of 2010.

They downgraded the oil & gas sector to "underweight" from "neutral" to reflect the group's inverse correlation with financials.

The analysts prefer the retail and media sectors as earnings are expected to pick up in 2010, the healthcare sector since it is unaffected by the recession, and the utilities and telecom sector, which presents a high dividend yield. The brokerage has an "overweight rating on all these sectors.

"We think the dominant theme (in 2009) will be financial health... For every bankruptcy there is also a survivor that gains market share and becomes more valuable," analysts at the brokerage wrote in a Western Europe Equity Strategy note dated January 7.

They also expect a pick up in mergers and acquisitions, while the euro's year-end rally is expected to gradually decline and the U.S. dollar is forecast to be strong.

"(U.S. president-elect) Obama's fiscal package will probably be designed to return the U.S. to growth sometime in second half of 2009, but it will need to be large and well-targeted, and is unlikely to have much impact on activity until 2010," the analysts said.

(Reporting by Antonita Madonna Devotta in Bangalore; Editing by Pratish Narayanan)