1. Vincent McCarthy, CFA
Senior Investment Consultant
MACRO & MARKETS WEEKLY Actuarial and Investment
www.invesco.ie
S +353 1 294 7600
December 3rd, 2012 e
n Market Summary
Market Recap i
Equity markets closed marginally higher for the week despite mostly weaker
o Equity Indices Value 1Wk YTD
than expected economic data. Top-tier government bonds were in demand r
while peripheral bond yields also moved lower after the Greek issue was North America
DJIA 13025.58 0.12% 6.61%
I
resolved, for now. A deal was agreed by the IMF and Eurozone officials that will
NASDAQ Comp 3010.24 1.46% 15.55%
n
pave the way for Greece to receive the next tranche of bailout funds, estimated
v S&P 500 1416.18 0.50% 12.61%
to be around €44 billion. Unemployment has reached a new high in Europe Europe
e
with youth unemployment in the peripheral nations at crisis levels. The ISEQ Overall 3290.27 0.81% 13.39%
s
slowdown in Germany remains a concern with much weaker than expected t FTSE Eurofirst 300 1119.36 0.80% 11.78%
retail sales in October. The OECD has revised lower the economic outlook for m FTSE 100 5866.82 0.82% 5.29%
the group of 34 member countries that make up the OECD. They have called for e CAC 40 3557.28 0.81% 12.58%
n
the ECB to cut their benchmark interest rate by another 25bps and to explicitly DAX 7405.50 1.32% 25.55%
t Asia-Pacific
commit to keep monetary policy loose for an ‘extended period’, similar to the
NIKKEI 225 9446.01 0.85% 11.72%
commitment made by the U.S. Federal Reserve.
C HANG SENG 22030.39 0.53% 19.51%
o
New Governor at the Bank of England
n Gov. Bond Yields Yield 10 YR Wk Chg Yr Chg
The UK government announced that Bank of Canada Governor Mark Carney will
th
s Germany 09/22 1.37% -0.06 -0.36
succeed Mervyn King as Governor of the Bank of England on June 30 2013. u Ireland 10/20 4.48% -0.12 -3.24
Carney is a Canadian national and will be the first foreigner to take charge since
l U.K. 09/22 1.79% -0.06 -0.47
the bank was founded in 1694. While the appointment has created some t Japan 09/22 0.71% -0.03 -0.29
headlines and discussion, the decision to appoint Sven Goran Eriksson as the a
USA 08/22 1.61% -0.08 -0.17
first foreigner to coach the English football team created much more heated n
t
debate. However, the move did come as a surprise with Paul Tucker, Deputy Forex Rate 1 Wk YTD
Governor at the Bank of England, the bookie’s favourite to take over prior to EUR/USD $1.301 0.39% 0.92%
Actuarial and Investment
the announcement. However, Tucker’s bid to become the next Governor was EUR/GBP $0.801 -0.99% -4.11%
www.invesco.ie by his involvement in the LIBOR-rigging scandal.
likely hindered EUR/Yen ¥107.30
Actuarial and Investment 0.56% 7.43%
USD/YEN ¥82.47 0.12% 7.19%
+353 1 294 7600 Chancellor of the Exchequer has described Carney as “the
George Osborne, www.invesco.ie
outstanding central banker of his generation”. Strong words considering he only Commodities Price 1 Wk YTD
spent a year as Deputy Governor at the Bank of Canada in 2003/2004 before +353 1 294 Oil
WTI Crude 7600 $88.91 0.71% -10.04%
seconding to the Canadian Department of Finance for the position of “senior Brent Crude Oil $111.23 -0.13% 3.59%
associate deputy minister” until he returned to take over as Governor in Gold 100 Oz $1,725.40 -0.24% 9.62%
November 2007 with his formal appointment in February 2008. He has been
credited for his role in helping to navigate the Canadian economy which has Official CB Rates Rate
remained relatively unscathed by the global financial crisis. Like his Euro Refi 0.75%
counterparty Mario Draghi at the ECB, Carney has also worked for Goldman Fed Funds 0.00 - 0.25%
Sachs, spending 13 years with the firm. He joins a long list of former UK 0.50%
Japan 0.00-0.10%
“Goldmanites” in the upper echelons of the financial and political system. It will
be interesting to see whether the new Governor will be more pliable than his Source: FT/Reuters
predecessor as the UK government looks set to miss its fiscal targets and
central bank independence is being increasingly called into question.
Eurozone Unemployment at Record High
The unemployment picture in Europe continues to deteriorate. The Euro-area
(EA17) seasonally-adjusted unemployment hit a new high of 11.7% in October,
approximately 18.703 million people, up from 10.6% a year earlier. The youth
unemployment rate (under 25) is 23.9% compared to 21.2% a year earlier; it is
the highest in Greece and Spain, 57% and 55.9% respectively. German retail
sales fell 2.8% in October, significantly worse than the 0.2% consensus forecast
by analysts. Consumer price inflation fell to 2.2% in November from 2.5% in
October, the lowest level in almost two years.

2. U.S. Economy Economic Calendar – Key Events
There was mixed data on the housing recovery. The new home sales report was
considerably weaker than expected while the Pending Home Sales report and Indicator Region For
the Case Schiller Price Index data were more positive. New home sales were Monday
below the consensus estimate for October and there were also downward Manufacturing PMI Eur, UK Nov
revisions to August and September while the median sales fell for a second Halifax House Price Index UK Nov
consecutive month. However, the Pending Home Sales index, which tracks the ISM Manufacturing US Nov
contract signings for existing homes, increased 5.2% in October. This was Interest Rate Announcement RBA Dec
significantly higher than the consensus estimate of 1% and helped allay some of
Tuesday
the concern following the new home sales report. Another positive note was
Producer Price Inflation Eur Oct
the increase in the S&P/Case-Schiller Index for September; the index tracks the BRC Retail Sales Monitor UK Nov
value of residential real estate in 20 major cities. The second estimate for U.S. Construction PMI UK Nov
GDP in the third quarter was revised up to 2.7% by the Commerce Department, Interest Rate Announcement BOC Dec
well above their advance estimate of 2%. However, underpinning the increase
was inventory restocking while consumer spending was revised lower, raising Wednesday
concern about the sustainability of GDP growth in the upcoming quarters. Composite PMI Eur Nov
Services PMI UK Nov
Outlook Factory Orders UK Oct
It is a busy week on the economic front this week. Key macro data includes ISM Non-Manufacturing US Nov
purchasing manager index (PMI) reports from around the globe, housing data
Thursday
from the UK and the key non-farm payrolls employment report from the U.S.
Interest Rate Announcement ECB, BOE Dec
There are also interest rate announcements from the Reserve Bank of Australia, Eurozone GDP (2nd Estimate) Eur Q3
Bank of Canada, ECB and the Bank of England. They are expected to maintain Trade Balance UK Oct
interest rates at current levels although there is a small possibility that Australia Initial Jobless Claims US Week
may cut their key rate from 3.25% to 3%. Markets will be interested in their
economic outlook but most importantly the possibility of more aggressive Friday
monetary policy easing from the Bank of England and the ECB. U.S. Trade Balance France Oct
Industrial Production Ger, UK Oct
employment data will also be keenly watched with the impact of hurricane
Manufacturing Production UK Oct
Sandy expected to be felt with less jobs added in November. Headline news
Non-farm payrolls US Nov
emanating from the U.S. fiscal cliff negotiations will continue to drive markets. Univ. of Michigan Sentiment US Dec
Closer to home, the latest austerity budget will be in focus with a stream of
negative news set to weigh on the economy.
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