U.S. broker JP Morgan unveiled its top stock picks for 2002 on Friday in an equity market whose central themes it said would be disinflation and the corporate restructuring this will bring about. 

Forecasting consumer price inflation for developed markets at just 1.1 percent next year, the broker said some sectors were better positioned than others to weather what it called the ``disinflation storm.'' 

``We believe the recent outperformance of cyclicals will soon end and that non-cyclicals will outperform through the first quarter of 2002,'' JP Morgan said, boding well for defensive sectors such as healthcare, consumer goods and oil. 

Earnings disappointments would continue to dominate the corporate news, it said in its ``Global Strategy for 2002'' document as disinflation erodes pricing power from virtually every producer of goods and services. 

JP Morgan highlighted the disparity between earnings growth of cyclical stocks and non-cyclicals over the high-inflation period of 1973-1980. Cyclicals posted earnings increases of 144 percent over the period, against 83 percent for non-cyclicals. 

Conversely, with inflation trending lower since 1980, cyclicals have notched up 230 percent earnings growth compared with 511 percent for the non-cyclicals. 

Thus, the broker said, in a climate of very low inflation or even disinflation, and with negative real interest rates in some countries, cyclicals were poised to come out on top. 

In an environment hostile to price increases, companies in a position to restructure by cutting jobs, closing inefficient capacity or greater outsourcing would also have a competitive advantage, JP Morgan said. 

Consolidation would also be key, it said, with the caveat that this did not always lead to efficiency gains. 

``The bigger issue is whether industry consolidation to adjust capacity will mean that more inefficient capacity is shut down, rather than just an indiscriminate shutting down of capacity in general.'' 

The reasons cited for including stocks in the top picks list varied widely, but defensives figured heavily. 

Accordingly, healthcare groups Eli Lilly, HCA, Mitsubishi Pharma, Novartis, Pfizer and Pharmacia all figure in the 34 selections from developed economies, along with consumer groups General Mills, Japan Tobacco and Nestle. 

Oil stocks BP, Phillips Petroleum and TotalFinaElf also figure, along with utility and home services group Centrica. 

Tech stocks are not left out entirely, however, prominent inclusions including SAP and Sun Microsystems. Featured telecoms companies are Hutchison Whampoa and NTT. 

Among the financial stocks, Bank of Ireland, HBOS and Societe Generale are listed, while the only automotive group to make the list is Toyota Motor.