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15 Sep 2011 19 Oct Sep2011 2011 19 Sep 2011 10 Week Ahead: All eyes on European leaders, corporate earnings and China’s economy in focus The week ahead in business and finance Investors await action from European leaders – The Greek sovereign debt crisis will remain at the forefront of investors’ minds this week. Overnight, Germany’s Angela Merkel and France’s Nicholas Sarkozy met to discuss next steps in averting a regional crisis. Both leaders were tight-lipped on the details of their discussions except to say that they have agreed on a plan to support the region’s banking sector. The comments should support investor sentiment towards financials when markets begin trading this week. Financial support for the major European banks is crucial if an orderly default on Greek government debt were to eventuate. Further developments on the crisis are likely over the coming days, ahead of the European Union summit which is due to take place on 17-18 October. Greek leaders will be doubling their efforts to convince the troika of the effectiveness of their policy actions. Significant spending and taxation reforms in Greece are conditional upon receiving the next tranche of bailout funds. Greek debt aside, the European quarterly earnings season commences this week, headlined by results from French major retailer, Carrefour, and luxury goods manufacturer, Burberry. Investors will be interested in the state of domestic consumer demand and the impact current woes on the economy are having. In the case of Burberry, investors will be interested in management’s view on earnings prospects, particularly in its major markets like China. Complementing earnings results will be a range of key economic data points covering inflation, industrial production and merchandise trade. Asia awaits developments in Europe; China and Australia in focus– Asian investors are again likely to be heavily influenced by developments offshore this week. That aside, investors are likely to hone in on the latest reports on China’s economic performance, due out later this week. China’s trade balance will be out on Wednesday, while the latest inflation figures are due for release on Friday. The consumer inflation rate eased to 6.2% in August from 6.5% in July, and the cooling trend is expected to continue for the September numbers. In Australia, a range of economic indicators will be released this week, commencing with the latest ANZ Job Advertisements survey and the National Australia Bank’s Business Conditions survey. These will be followed by a consumer sentiment survey on Wednesday and the all-important labour market statistics on Friday. While Australia’s low unemployment rate has been the envy of other developed markets, it has begun to move higher, edging up to 5.3% in August from 5.1% a month earlier. 1 To know more, visit www.fidelity.com.hk FIL Limited and its subsidiaries are commonly referred to as Fidelity or Fidelity Worldwide Investment. Investment involves risks. In general fluctuation in the performance of emerging markets is normally higher as it tends to be more volatile than other developed markets. Fidelity, Fidelity Worldwide Investment, the Fidelity Worldwide Investment logo and the F symbol are trademarks of FIL Limited. 15 Sep 2011 19 Sep 2011 The Bank of Korea is due to meet this week to review interest rate settings. Although the nation’s inflation is trending above the target range, the board is unlikely to announce a further rate hike while global markets remain unsettled. US earnings season kicks off, Obama to push through new stimulus – The unofficial start to the US earnings season will draw US investor attention this week. Following the close of trade on Tuesday, Alcoa will report its quarterly earnings, followed by Google and JP Morgan Chase on Thursday. Current estimates for S&P500 companies suggest investors will see 12% growth in earnings this quarter. Investor sentiment has however been severely dented by the economic troubles both domestically and abroad, which may limit any upside arising from favourable earnings results. President Barack Obama will be doing his utmost to convince key senators of the merits in passing his US$447 billion jobs package. The “American Jobs Act” combines more funding for unemployment assistance and infrastructure and spending cuts in other portions of the budget, among other items. More evidence of the need to support the labour market came through on Friday, when the latest payroll data showed the national unemployment rate remained unchanged at 9.1%, despite 103,000 new jobs being created. Other areas of interest this week will be the minutes from the latest FOMC meeting as well as retail sales, consumer sentiment and the Empire State manufacturing surveys, due out later this week. Market volumes are expected to be light today owing to a US public holiday with markets to remain open. 2 To know more, visit www.fidelity.com.hk FIL Limited and its subsidiaries are commonly referred to as Fidelity or Fidelity Worldwide Investment. Investment involves risks. In general fluctuation in the performance of emerging markets is normally higher as it tends to be more volatile than other developed markets. Fidelity, Fidelity Worldwide Investment, the Fidelity Worldwide Investment logo and the F symbol are trademarks of FIL Limited. 15 Sep 2011 19 Sep 2011 Summary of key economic events Central Bank Activities 8-Oct US US Federal Reserve's Dennis Lockhart speaks on economy in Atlanta 11-Oct Indonesia Bank Indonesia announces reference rate 12-Oct US US Federal Reserve releases minutes of FOMC meeting Australia Reserve Bank of Australia's Guy Debelle gives speech to Forex Market Conference in Sydney US US Federal Reserve's Charles Plosser speaks on Economy in Philadelphia 13-Oct 14-Oct Japan Bank of Japan to publish minutes of September board meeting US US Federal Reserve's Narayana Kocherlakota speaks in Sidney, Montana Americas 12-Oct US Minutes of FOMC meeting 13-Oct US Trade Balance US Initial Jobless Claims 14-Oct US Advance Retail Sales 15-Oct US University of Michigan Consumer Confidence survey 17-Oct US Empire Manufacturing Survey Asia Pacific 10-Oct Australia ANZ Job Advertisements survey 11-Oct Australia NAB Business Confidence survey China New Yuan loans 12-Oct 13-Oct Japan Trade Balance Japan Bank of Japan Monthly Economic Report Japan Consumer Confidence South Korea Producer Price Index Australia Westpac Consumer Confidence survey India Industrial production Japan Machine Orders Singapore Gross Domestic Product South Korea Unemployment rate Australia Unemployment rate China Trade balance South Korea Bank of Korea Monetary Policy Committee Meeting 14-Oct China Producer Price Index Singapore Retail sales 16-Oct Australia Reserve Bank of Australia board meeting minutes 17-Oct Australia New motor vehicle sales Japan Industrial Production France Industrial Production Germany Current Account Germany Trade Balance UK Nationwide Consumer Confidence Germany Wholesale Price Index Europe 10-Oct 11-Oct 12-Oct 3 UK Industrial Production UK Trade Balance France Consumer Price Index France Current Account UK ILO Unemployment rate 13-Oct Euro-zone European Central Bank publishes monthly report Germany Consumer Price Index 14-Oct Euro-zone Consumer Price Index Euro-zone Trade Balance Sources: Bloomberg, FIL Limited To know more, visit www.fidelity.com.hk FIL Limited and its subsidiaries are commonly referred to as Fidelity or Fidelity Worldwide Investment. Investment involves risks. In general fluctuation in the performance of emerging markets is normally higher as it tends to be more volatile than other developed markets. Fidelity, Fidelity Worldwide Investment, the Fidelity Worldwide Investment logo and the F symbol are trademarks of FIL Limited. 15 Sep 2011 19 Sep 2011 Performance of major US stock market indices Index Standard and Poor's 500 Dow Jones Industrial Average NASDAQ Composite Source: Bloomberg 1-day Performance -0.82% -0.18% -1.10% Index close 1,155 11,103 2,479 US markets US stocks decline despite uplift in labour market – After a day of choppy trading, stocks in the US ended the day lower despite some relatively upbeat employment data amid renewed concerns about the financial situation in Europe. The Dow Jones Industrial Average edged down 0.2%, while the S&P and Nasdaq were down 0.8% and 1.1%, respectively. However, despite the losses on the day, the Dow advanced by 1.7% for the week, while the Nasdaq advanced 2.6% and the S&P gained 2.1%. The key September employment situation report showed stronger than expected job growth as well as upward revisions to the data from previous months. Total non-farm payroll employment increased by 103,000 jobs, as the addition of 137,000 private sector jobs more than offset the loss of 34,000 government jobs. The overall job creation figure far exceeded the 65,000 expected. The revised data for August showed that 57,000 jobs were added rather than the zero initially reported. July figures were also upwardly revised to show an increase of 127,000 jobs. Despite the stronger than expected job growth, the unemployment rate remained at 9.1% in September, unchanged from the previous month. 4 To know more, visit www.fidelity.com.hk FIL Limited and its subsidiaries are commonly referred to as Fidelity or Fidelity Worldwide Investment. Investment involves risks. In general fluctuation in the performance of emerging markets is normally higher as it tends to be more volatile than other developed markets. Fidelity, Fidelity Worldwide Investment, the Fidelity Worldwide Investment logo and the F symbol are trademarks of FIL Limited. 15 Sep 2011 19 Sep 2011 Performance of major European stock market indices Index Stoxx 600 Index FTSE 100 DAX CAC 40 Source: Bloomberg 1-day Performance +0.75% +0.23% +0.54% +0.66% Index close 232 5,303 5,676 3,096 European markets European stocks move higher – European stocks were up for the day and for a second week. Gains were modest Friday, supported by hopes that political leaders are getting serious about containing the region's sovereign debt problems. Morale on Friday was lifted by the better than expected US employment report. London’s FTSE was up 0.2% on the day and 3.4% on the week while France’s CAC gained 0.7% and 3.8%. Germany’s DAX advanced 0.5% Friday and 3.2% for the week and the SMI edged up 0.2% and was 2.2% higher on the week. After markets here closed, Fitch cut Italy's credit rating by one notch to A+ from AA- while it cut Spain's credit rating by two notches to AA- from AA+. The agency also said that the outlook is negative. Earlier, Moody's cut the ratings of 12 UK banks saying there is a lower probability that the government would support financial institutions if they need it. RBS, Lloyds and Barclays were down. Moody's also downgraded several Portuguese banks, citing increased risk from their exposure to sovereign debt, deterioration of domestic asset quality and liquidity strains. 5 To know more, visit www.fidelity.com.hk FIL Limited and its subsidiaries are commonly referred to as Fidelity or Fidelity Worldwide Investment. Investment involves risks. In general fluctuation in the performance of emerging markets is normally higher as it tends to be more volatile than other developed markets. Fidelity, Fidelity Worldwide Investment, the Fidelity Worldwide Investment logo and the F symbol are trademarks of FIL Limited. 15 Sep 2011 19 Sep 2011 Commodities and currencies Commodity Crude oil 1-month futures Spot Gold Thompson-Reuters/Jeffries Commodity Index Source: Bloomberg Close $82.98 $1,637.85 304.75 Change +0.47% -0.82% -0.40% Currency Japanese yen Australian dollar Euro British pound Canadian dollar Source: Bloomberg Close 76.73 0.9768 1.3378 1.5562 0.9620 Change -0.01% +0.23% -0.44% +0.76% +0.23% Closing Yield +2.08% +2.47% +2.0% +0.99% +4.31% Change +0.09% +0.08% +0.06% +0.01% +0.07% Bond markets 10-year Government Bond Futures US UK Germany Japan Australia Source: Bloomberg 6 To know more, visit www.fidelity.com.hk FIL Limited and its subsidiaries are commonly referred to as Fidelity or Fidelity Worldwide Investment. Investment involves risks. In general fluctuation in the performance of emerging markets is normally higher as it tends to be more volatile than other developed markets. Fidelity, Fidelity Worldwide Investment, the Fidelity Worldwide Investment logo and the F symbol are trademarks of FIL Limited.