The document provides an overview and analysis of financial markets and economic conditions in Spain, Greece, Germany and the US in July 2012. It discusses topics like Spain's relaxed budget deficit targets, rising non-performing loans in Spain's banking sector, a bailout fund for indebted Spanish regions, Greece's upcoming review by the Troika to determine further bailout funds, the ECB cutting interest rates but not impacting peripheral economies, and solid but slowing US corporate earnings results.

1. FINCOR – Sociedade Corretora, S.A.

2. Markets Perspectives
August 1, 2012
.
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said content or about any resulting effect that could have occurred.

3. July: Recap

4. Spain: The target deficit of the country for the next two years was relaxed by the EU. This represents
the third ajustment so far this year. Are these goals set by the EU credible, taking into account the
economical crisis that the country is facing?
Spain: Government Budget Deficit
11,20%
9,30%
8,50%
6,30%
4,50% 4,50%
3,00%
2008 2009 2010 2011 2012 2013 2014

5. Spain: The banking sector is under pressure, with NPLs increased to their highest levels since 1994.
Source: BNP Paribas
Source: BNP Paribas

6. Spain: Further evidence to the pressure on the Spanish banking sector can be seen by the fact that
loans and deposits continue to fall.
Source: BNP Paribas Source: BNP Paribas

7. Spain: 18bn euros fund for the Autonomous Regions. Valencia, Murcia and Catalonia have already
requested a bailout. Who’s next? What is the real dimension of Spanish debt? Meanwhile, the country
banned the sort-selling of their stocks until October.
Germany: 10Y Government Bond
Yield
7,7 7,621
7,5 7,267
7,3
7,1 7,062
6,962 6,928
6,9
6,7 6,749
6,5
6,3
6,1
Revision of the Valencia
New high NPLs Draghi’s
Government resquests
anmnounced speech
Budget Deficit help

8. Greece: In their visit to Greece, Troika will analyse the policies that the country implemented. This
will lead to a decision on whether Greece will receive the next tranche of their aid package.
According to some European Leaders, Greece won’t receive the next tranches of their aid package if they
don’t fulfill their obligations. Factoring in this sentiment, Citibank considers that there is a 90% probability of
Greece leaving the Eurozone.

9. ECB: Cut the interest rates in the region to 0.75%, a historical minimum. Interest rates on deposits fell to
0%. Even so, this measure had pratically no effect on the markets. Instead, we saw investors begin to search
for other safe assets to pour their money into. As it happened, German Government Bonds became
somewhat of a safehaven. Therefore, this measure had no effect on the economy of peripherical countries.
Germany: 10Y Government Bond
Yield
1,6 1,533
1,5 ECB cuts interest rates
1,4 1,382
1,3
1,2 1,285
1,1
1
Source: Goldman Sachs
Reacting to this crisis, Mario Draghi said that“within our mandate, the ECB is ready to do whatever it takes to
preserve the Euro”. Markets closed the month with a feeling of relief due to these statements.

10. USA – Macro vs. Micro. Two different speeds?
More than half of the companies in the S&P 500 have already presented results for this earnings season.
Earnings results have been surprisingly good, but with a lower dimension than previous quarters.
Earnings Season Sector Positive Negative Inline
Index 71,62% 27,06% 1,32%
S&P500
Oil and Gas 73,91% 26,09% 0,00%
172
Basic Materials 52,63% 47,37% 0,00%
121 Industrials 76,79% 19,64% 3,57%
90 Consumer Goods 75,76% 24,24% 0,00%
41
Health Care 77,42% 19,35% 3,23%
28 Consumer Services 66,67% 30,30% 3,03%
13 10 6 6 6
1 1 2 1 1
Telecommunications 80,00% 20,00% 0,00%
08 -14 Jul
29 - 04 Aug
05 - 11 Aug
12 - 18 Aug
18 - 25 Aug
15 - 21 Jul
22 - 28 Jul
07- 13 Oct
02 - 08 Sep
09 - 15 Sep
16 - 22 Sep
10 - 16 Jun
17 - 23 Jun
24 - 30 Jun
26 - 1 Sep
Utilities 83,33% 16,67% 0,00%
Financials 68,85% 31,15% 0,00%
Technology 69,44% 30,56% 0,00%

11. USA – Macro vs. Micro: two different speeds?
Economic Indicators point for an economic slowdown. Bernanke has already indicated that if the current
situation deteriorates, he will implement new measures.
Leading Indicators
2
1,7
1,5
1
0,5
0
-0,5 -0,3
-0,7
-1

12. Emerging Markets: China cut again its interest rates. Will the economy continue its soft-
landing?
China GDP China PMI Manufacturing
58
11,90% 56,6
10,70% 10,30%
9,60% 9,80% 9,70% 9,50% 9,10% 56
8,90%
8,10% 7,60%
54
53,3
52
50
50,2
48 49

13. Central Banks: Apart from ECB and FED, other central banks made their homework. BOE
increased its QE programme in £50 Billions. Brasil cut SELIC, as the Bank of South Korea cut its interest rates.
SELIC
27,5
22,5
17,5
12,5
7,5

14. Global Economy is slowing down
IMF revised downward its forecasts for GDP of the global economy.
Previous Forecasts New Forecasts Changes in Forecasts
2010 2011 2012 2013 2012 2013
Global 5,30% 3,90% 3,50% 3,90% -0,10% -0,20%
Developed Economies 3,20% 1,60% 1,40% 1,90% 0,00% -0,20%
USA 3,00% 1,70% 2,00% 2,30% -0,10% -0,10%
Eurozone 1,90% 1,50% -0,30% 0,70% 0,00% -0,20%
Germany 3,60% 3,10% 1,00% 1,40% 0,40% -0,10%
France 1,70% 1,70% 0,30% 0,80% -0,10% -0,20%
Italy 1,80% 0,40% -1,90% -0,30% 0,00% 0,00%
Spain -0,10% 0,70% -1,50% -0,60% 0,40% -0,70%
Japan 4,40% -0,70% 2,40% 1,50% 0,40% -0,20%
United Kingdom 2,10% 0,70% 0,20% 1,40% -0,60% -0,60%
Emerging Economies 7,50% 6,20% 5,60% 5,90% -0,10% -0,20%
China 10,40% 9,20% 8,00% 8,50% -0,20% -0,30%
India 10,80% 7,10% 6,10% 6,50% -0,70% -0,70%
Russia 4,30% 4,30% 4,00% 3,90% 0,00% -0,10%
Brazil 7,50% 2,70% 2,50% 4,60% -0,60% 0,50%
Mexico 5,60% 3,90% 3,90% 3,60% 0,30% 0,00%
South Africa 2,90% 3,10% 2,60% 3,30% -0,10% -0,10%

15. Portugal
- Tagus increased the price offered per stock from 2,66€ to 2,76€ on their hostile takeover bid for Brisa. A
decision has to be made before August 8th, but indications are that they will be successful on the takeover.
- BPI launched a rights offering to increase their capital by €200 million. The subscription price per stock is
0,5€.
- In the Earnings Season we would like to underline:
i) BCP results were worst than expected, affected by domestic operations and their Greek operations;
ii) Jerónimo Martins margins decreased on the back of the pressure in their domestic activities. Results
were also affected by the fall of the LFL in Biedronka operations;
iii) Sonaecom results were above expectations due to their fiscal savings;
iiii) Zon results were in line with expectations, with ZAP sales increasing 13% QoQ.

16. Markets Performance
The markets kept pressed during this month, with a special regard to peripherical countries in Europe.
Chg. % Chg. % Chg. % Chg. %
Last Price Last Price
MTD YTD MTD YTD
10Y bond yields: Spread Spain vs. Europe
PSI 20 4688,08 -0,21% -14,67%
FOREX
Euro/$ 1,23 -2,32% -5,10%
Germany IBEX35
CAC 40
6738,1
3291,66
-5,13%
2,97%
-21,34%
4,17%
£/Euro
Euro/Yen
1,2746
96,08
-2,29%
4,08%
-5,95%
3,73%
6,5 6,385 DAX 30 6772,26 5,55% 14,82% Eur/CHF 1,20128 -0,01% 1,29%
FTSE 100 5635,28 1,15% 1,13% Commodities
6 FTSE MIB 13890,99 -2,69% -7,94% CRB 482,44 1,44% 0,09%
SMI 6399,27 5,48% 7,80% WTI Oil 87,96 3,03% -11,03%
5,5 5,464 Euro Stoxx 50 2328 3,24% 4,07% Brent Oil 104,59 6,86% -0,31%
USA Gold 1614,7 1,08% 3,26%
5 DOW 30 13008,68 1,00% 6,48%
S&P500 1379,32 1,26% 9,68%
4,5 Nasdaq 2939,52 0,15% 12,83%
Latin America
Bovespa 56097,05 3,21% -1,16%
4
Mexbol 40704,28 1,26% 9,78%
Asia
Nikkei 225 8695,06 -3,46% 2,84%
Hang Seng 19796,81 1,83% 7,39%

17. Next Month preview

18. Will the ECB act?
Everything points to the reopening of the SMP (Security Market Programme), by purchasing Spanish and
Italian Government Bonds.
However, it won’t be easy to convince Germany to use EFSF for that purpose. Nevertheless, expectations are
high for tomorrow’s meeting.

19. Spain, how deep is the Greece, are you really going
hole? to leave the Eurozone?
How many more regions will ask for a bailout? Will Everything depends on Troika’s report and the
the government ask for one as did Portugal, Ireland Greek commitment with the programme.
and Greece? How are their 10 year government
bonds going to perform? Clearly, we don’t want
contagion to spread to Italy!!

20. Europe: Macro figures don’t look good..

21. FED, what are you going to do?
Will the FED act, and when will it be?
Source: Goldman Sachs
We don’t foresee any significative action by the FED in todays meeting.

22. US: Frustating employment figures, significant macro slowdown QoQ

23. Earnings Season in the US
Earnings season will continue during the month of August. Below, we’ve underlined a few sectors and
highlighted select companies:
Utilities: with Duke Energy Corp
Technology: with Cisco
Oil and Gas: with Marathon Oil Corp

24. Emerging Markets
China, what are you going to do? Everyone is Pressure is mounting in Middle East due to Syria and
expecting another cut on your interest rates. Iran. Oil prices have been rising, which might
increase pressure over inflation.
China Inflation WTI Oil
92,97
6,27% 93
5,73%
5,07% 90
4,70% 4,60%
87 87,47
3,77%
3,47%
2,93% 2,87% 84
2,20%
81
0,67% 78
78,1
75

25. Valuation: P/E below average; but are we already in a recovery phase?
Price/Earnings ratio UBS

26. Time to step in? Or… have I seen this before?
1450
1400 1379,32
1350
1300
1257,6
1250
1200
1150
1100
1050
1 31 61 91 121 151 181 211 241
1257,6
S&P500 in 2012
S&P500 in 2011

27. Asset allocation
Long Term Positive but still conservative due to market risks
Corporate Bonds (name selection)
Emerging Markets Equities
US Equities
Emerging Markets Currencies
Commodities
European Equities
Sovereign Debt from peripheral
Countries in Europe (Spain, Italy, 10
years)

28. Contatos :
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Tel. +351 21 382 40 10
Fax.+351 21 380 30 49
fincor@fincor.pt
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