MONTHLY MARKET INSIGHT

NOVEMBER 2013 KEY TOPICS TO WATCH (NOV)

Greece Troika Review (Early Nov) Eurozone Interest Rate Decision (7th) US Non Farm Payrolls (8th) Eurozone GDP Q (14th) October FOMC Minutes (20th) UK BoE minutes (20th) Markit PMI Final November (22nd) Eurozone Unemployment (29th)

U.S. FUNDAMENTAL OVERVIEW

Although there was much media hype surrounding the US debt ceiling and government shutdown events, these factors did not have a pronounced negative affect. As US indices once again reached all time highs towards the month end. The reason behind the subdued negative reaction was three fold: Firstly, the governmental shutdown was not prolonged and was a sign of uncertainty rather than inherent economic weakness. Secondly, the debt ceiling debacle (although weakening the credence of the US administration) was raised before the deadline in a similar vein to previous occurrences. Thirdly, the start of the month provided closure to speculation over Ben Bernankes successor, with Janet Yellen being the preferred choice. Yellen is an advocate of QE like Bernanke; providing some positive sentiment for the markets going forward, based on the precedence for continued Fed stimulus. Although it has recently pared monthly losses due to FOMC reassurances about the economy; the Dollar Spot Index neared yearly lows in October. The loss of strength due to ongoing Quantitative Easing, was exacerbated by reduced confidence in the US dollar owing to political stalemate and ineptitude. QE tapering is now set for 2014 as there is no FOMC meeting scheduled for November as the FOMC have stated that the economy still cannot support a reduction in stimulus. The continuation of QE3 is likely to give equity markets a constant upwards pressure until the end of the year. This may be offset slightly by selling pressure at these levels maintaining the S&P 500 price around 1700-1800 for November. The US Q3 Earnings Season has also seen EPS growth figures for the S&P 500 perform better than expected (led by financials) which has encouraged market growth. However, one must be mindful that these estimates have been revised downwards and that revenue growth is still stagnant, which reflects the real state of the economy. When combined with a continuation of the poor economic data seen in October; it is no wonder that the Fed are choosing to maintain QE3, as a large correction is due upon tapering to ensure that the market catches up with reality. At the moment, the fundamentals for key areas such as employment and output are not declining fast enough to warrant considerable negative pressure in November, but actively show the gap between the overbought markets and the truth.

S&P 500 (OCT 2013)

1,800.00

1,780.00 1,760.00 1,740.00 1,720.00 1,700.00 1,680.00 1,660.00 1,640.00

1,620.00

1,600.00 1,580.00

FTSE 100 (OCT 2013)

6,900.00 6,800.00 6,700.00 6,600.00
6,500.00

6,400.00
6,300.00

6,200.00
6,100.00

Oct 02

Oct 03

Oct 07

Oct 08

Oct 10

Oct 11

Oct 15

Oct 16

Oct 18

Oct 21

Oct 23

Oct 24

Oct 28

DAX 30 (OCT 2013)

9,100.00
9,000.00

Oct 29

Oct 01

Oct 04

Oct 09

Oct 14

Oct 17

Oct 22

Oct 25

Oct 01 Oct 02 Oct 03 Oct 04 Oct 07 Oct 08 Oct 09 Oct 10 Oct 11 Oct 14 Oct 15 Oct 16 Oct 17 Oct 18 Oct 21 Oct 22 Oct 23 Oct 24 Oct 25 Oct 28 Oct 29 Oct 30 Oct 31

EUROPEAN FUNDAMENTAL OVERVIEW

Confidence in the Eurozone has been uncertain for the last few months. In October further pressures were applied upon the ECB to lower interest rates further to 0.25% or increase their LTRO programme, in order to stimulate growth. This was a result of low yearly interest rate growth of 0.7%,which is far from Eurozone targets of near 2% growth protracted movements towards a solution (and subsequent movements in Eurozone indices) are likely until the end of the year.

8,900.00 8,800.00 8,700.00 8,600.00

8,500.00

8,400.00 8,300.00 8,200.00

Oct 01 Oct 02 Oct 03 Oct 04 Oct 07 Oct 08 Oct 09 Oct 10 Oct 11 Oct 14 Oct 15 Oct 16 Oct 17 Oct 18 Oct 21 Oct 22 Oct 23 Oct 24 Oct 25 Oct 28 Oct 29 Oct 30 Oct 31

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In November, Eurozone Q3 GDP figures are more likely to be weaker than expected as a result of, high unemployment at 12.1%, and poor PMI manufacturing and services figures which are declining towards contraction at 51.5, 50.9. The strength of EUR/USD is likely to subside as the US recovers from the uncertainty in October. This may increase the competitiveness of Eurozone exports which in turn should begin to embellish output based, Eurozone indicators . The start of November is also host to the latest round of Greek Troika talks which have been delayed since September. These talks always have the potential for volatility especially as if expected Greece have a considerable hole within their budget. The UK has also seen key industrial indicators being pared for October resulting from an appreciating Sterling, albeit on a smaller scale than the Eurozone. UK recovery needs to gain traction for interest rates to rise according to the Bank of England. This article does not constitute as investment advice.