time eVeNt SurVey PriOr

data reports (new york time)

most read on bloomberg

Japanese Yen 0.01Brazilian Real –0.06Taiwanese Dollar –0.07Singapore Dollar –0.21British Pound –0.22Mexican Peso –0.43Swiss Franc –0.49Australian Dollar –0.65Danish Krone –0.71Euro –0.71

TOP CURRENCY PERFORMERSOne day spot return in percenttop currency performers

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economic-events calendartime

10y spreads: distance from HigHs employment, Housing, income All Point to DeflationCommentary by riChard yamarone, bloomberg eConomistBig Picture:

Consumer Spending, european rescue Fund, yenWHAT TO WATCH: ■ U.S. consumer spending probably

rose 0.2 percent in august, economists forecast, 8:30 a.m. Global investors in a bloomberg poll say the Fed’s bond-swap program, operation twist, will fail to reduce unemployment. European finance chiefs will next week discuss accelerating

enactment of a permanent rescue fund that provides more capital and a tool for manag-ing defaults. the European Financial Stability Facility still has more than 90 percent of its capacity available after bailing out ireland and Portugal, german Finance minister Wolfgang Schaeuble said. New Zealand lost its top credit grades at s&P and Fitch.

ECONOMICS: ■ Chicago PMI, 9:45 a.m. University of Michigan consumer confi-dence, 9:55 a.m. Milwaukee PMI, 10 a.m. Fed’s Bullard, 11 a.m. Inflation in the euro area accelerated to 3 percent this month, with Italy’s CPI jumping 3.5 percent.

COMPANIES: ■ McGraw-Hill and CME are in talks to combine their stock-market index businesses, uniting the s&P 500 index and the dow Jones industrial average, said a person with knowledge of the matter.

GOVERNMENT: ■ Finland’s Prime Minister Jyrki Katainen won his administration’s first confidence vote. Germany’s upper house holds a vote on the enhanced eFsF.

MARKETS: ■ Japan plans to bolster funds needed to intervene in the currency market and will lengthen monitoring of foreign-exchange market positions.

First Word daybook:

Jurjen van de Pol and brad skillman

11:00 US Fed’s Bullard to Speak in San Diego12:00 GE Merkel at Regional CDU Conference13:00 EC EU’s Van Rompuy Speaks in Sopot, PolandTBA EC EU’s Hedegaard at Conference in DenmarkTBA BP Base Rate AnnouncementTBA CO Overnight Lending Rate

7:30 IN Current Acount Balance -$10.7B -$5.4B

8:30 US Personal Income 0.10% 0.30%

8:30 US Personal Spending 0.20% 0.80%

8:30 US PCE Core (MoM) 0.20% 0.20%

8:30 US PCE Core (YoY) 1.70% 1.60%

9:45 US Chicago Purchasing Manager 55 56.5

9:55 US U. of Michigan Confidence 57.8 57.8

europe Prepares Next Crisis Steps After merkel Vote

ireland eyes Payback for Averting europe’s Lehman

Bond issuance Plunges on ‘Armageddon’ Scenarios

New Zealand yields Surge as Credit ratings Cut

Fed Operation twist Fails on unemployment in Poll

deflation may be looming as a concern again, looked at from the perspective of three primary driving agents of the U.s. economy — households, businesses, and financial markets.

economic activity is cooling, which will place downward pressure on prices, and employment is exceptionally weak, driving the price of labor to lower levels. busi-nesses cannot raise prices or wages in this environment.

the single most important economic in-

dicator in the U.s. is employment, and the pace of job creation has stalled, with no non-farm payroll jobs created during au-gust. While it’s true that the economy has added back 1.9 million of the 8.75 million workers lost during the 2007-09 recession, anyone on main street will tell you they are earning a fraction of what they were before the downturn. that in turn dampens confi-dence and leads to a reduction in spend-ing, and subsequently recession.

all measures of incomes are headed

Stephen Green of Standard Chartered on Asian real estates and America’s chances of falling back into recession.

Economics 09.30.11brief NEwS, ANALYSIS & COMMENTARY

Friday

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riChard yamarone

south. real average hourly earnings contracted by 1.9 percent in the 12 months ended in august, the worst since July 2008. real disposable personal incomes fell 0.1 percent in July, and were up only 1.2 percent over the last year. this is roughly a third of the 3.3 percent average over the past 50 years.

deflation is rampant in the de-pressed housing market. during July, the s&P/Case-shiller home Price index for 20 cities fell 4.1 per-cent over the last year. demand has plunged and supply (inventories) remains at elevated levels. even with record low mortgage rates, the home buyers are still reluctant to commit to such a large expense.

the so-called ‘breakeven rate’ — estimated by taking the difference between the five-year treasury note and the treasury inflation Protected security (tiPs) of the same maturity — has retrenched by 100 basis points after peaking at about 2.5 percent in april 2011. this pattern is similar to what occurred after the 2008 commodity spike, which de-flated once the great recession and associated credit crisis set in. Food, raw material and energy prices plunged as demand collapsed.

turmoil in financial markets may also be a catalyst for price deflation. a meltdown in europe or a hard landing in China are both events that might spur falling prices.

the statement from the sept. 21-22 Federal open market Committee spelled out concerns about falling prices. according to the statement, the committee “anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee’s dual mandate as the effects of past energy and other commodity price increases dissipate further. however, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.”

investors should expect the central bank to keep its foot on the acceler-ator as long as economic conditions appear weak enough to engender deflationary pressures and real wages continue to contract.

09.30.11 bloomberg brief | economics 2

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8,0%4,0%2,0%1,0%0,5%0,25%0,0%–0,25%–0,5%–1,0%–2,0%–4,0%–8,0%

Daily Percentage Change of the Global Equity Markets

Global Equity Performance

POLitiCAL wAtCH by bloomberg neWs

by bloomberg neWsOVerNigHt

euroPe

■ Germany’s retail sales slumped 2.9 in august from July, when they rose 0.3 percent.

Italy’s inflation ■ , calculated us-ing the eU method, accelerated to 3.5 percent in september from 2.3 percent in august. separately, the jobless rate dropped to 7.9 percent in august from 8 percent in July.

France’s consumer spending ■ rose 0.2 percent in august from July, when they declined 0.2 percent.

an index of ■ U.K. consumer confidence rose to minus 30 in september from minus 31 in august, gfk said.

Norway’s jobless rate ■ fell to 2.5 percent in september from 2.7 percent in august.

Turkey’s trade deficit ■ widened to $8.2 billion in august from $6.9 billion a year earlier.

AsiA

Japan’s industrial production ■ rose 0.8 percent in august from July, when it climbed 0.4 percent. sepa-rately, consumer prices, exclud-ing fresh food, rose 0.2 percent in august from a year earlier. another report showed the jobless rate fell to 4.3 percent in august from 4.7 percent in July.

South Korea’s industrial pro- ■

duction rose 4.8 percent in august from a year earlier after gaining 4 percent in July.

China’s manufacturing PMI ■ held at 49.9 in september, hsbC and markit economics said.

Australian loans to the private ■

sector rose 0.2 percent in august from July, when they gain 0.3 percent.

New Zealand home-building ■

approvals jumped 12.5 percent in august from July, when they rose 14.3 percent.

‘Buffett Rule’ Supportglobal investors support

barack obama’s proposed tax increase for those earning $1 million or more. by 63 percent to 32 percent, respondents in a bloomberg Poll approved of the proposal, known as the “buffett rule” in a nod to the chairman of berkshire hathaway, who has said it is wrong that he pays a smaller share of his income in taxes than his secretary. obama said sept. 19 that making sure the wealthy pay at least the same rate as the middle class was “the right thing.” house speaker John boehner ac-cused him of “class warfare.”

Pakistan Rebuffs ClaimsPakistan’s political leaders

rejected as “baseless” allegations by U.s. officials that the country is aiding attacks in afghanistan and called on the government to renew peace efforts with militants. leaders of dozens of groups, including islamic parties, gath-ered in islamabad in a show of unity following U.s. charges that Pakistan-based insurgents struck american targets in kabul. spy chief lieutenant general ahmed shuja Pasha briefed politicians on the security environment amid concerns of a repeat of the U.s. raid that killed osama bin laden.

Google Joins Tax Lobbyas a coalition led by apple,

google and Cisco presses for a tax holiday on more than $1 trillion in offshore profits, it is turning to lobbyist Jeffrey Forbes , once chief of staff to max bau-cus, chairman of the tax-writing senate Finance Committee. data compiled by bloomberg show that Forbes is one of more than 160 lobbyists pushing for the holiday, estimated to cost the government $78.7 billion over 10 years. inde-pendent studies have found that the last time this tax break was tried, in 2004, most of the money was used to buy back stock.

09.30.11 bloomberg brief | economics 3

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FACE OFFmArKet CALLSby bloomberg neWs

top Forecasters of Personal Spending

Paul Kavanaugh, a senior analyst at PFgbest, said gold may rise to $1,750 by year-end, based on Fibonacci analysis.

goldman sachs economist Jose Ursua said the U.s. and europe face about a 40 percent likelihood of a prolonged period of economic stagnation should policy makers fail to restore confidence.

MacNeil Curry, head of foreign exchange and interest rates technical strategy at bank of america merrill lynch, said the euro’s rebound against the dollar will likely continue for just about a week before the currency forms a top and heads lower.

Commerzbank economist Joerg Kraemer expects the european Central bank to cut its benchmark interest rate to 1 percent over the coming months as the euro-region

economy slides into a recession.

alfa bank analysts Natalia Orlova and Dmitry Dolgin cut their forecast for the ruble to 31 per dollar from 29 at year-end.

Citigroup analysts including Luis Costa said the hungarian central bank may fol-low Poland’s example and act to stem the weakening of the forint.

Takuya Kawabata, a researcher at gait-ame.com research institute, said new Zealand’s dollar may fall to a six-month low

versus the U.s. currency as a “long black candlestick” on its weekly chart signals further declines.

Eiji Kinouchi, chief technical analyst at daiwa securities, said China’s central bank may decide to halt gains in the yuan by us-ing a manufacturing gauge as an indicator.

Citigroup economist Jean-Francois Mercier cuts the 2012 forecast for south african economic growth to 2.8 percent from 3.5 percent, and the 2011 expansion to 3 percent from 3.4 percent.

While consumer confidence may have swooned, wallets and pocketbooks haven’t been completely shut, according to James O’Sullivan, mF global’s chief economist, who expects personal spending to have increased 0.3 percent in august.

“We’re still seeing more resilience in spending data than confidence numbers.

best hope is for sluggish growth over the next few months,” he said.

the median forecast is that personal spending rose 0.2 percent in august, according to a bloomberg survey of 81 economists.

the confidence numbers have seen a re-cession-like plunge,” said o’sullivan, one of the top forecasters of personal spend-ing, according to bloomberg rankings.

o’sullivan said the pace of spending could fall off in coming months. “given the backdrop of a big drop in confidence and some slowing in the labor market the

John Herrmann of state street global markets forecasts a 0.8 percent increase in personal income, up from 0.3 percent previously.

Julia Coronado of bnP Paribas expects a 0.2 percent decline. the median forecast is for a 0.1 percent increase, according to a bloomberg survey.

rANK /LASt

mONtH’S rANK

FOreCASter Firm AVerAge errOr

AuguSt FOreCASt

AS OF SePt 30

— Aleksandrs Rozens

*Came closest to actual Source: Bloomberg Rankings

Ranking is compiled from forecasts made during a two-year period ending in August.

methodologyto identify the top forecasters for this index, we compiled estimates submitted to bloomberg news over a two-year period. We calculated the error for each forecast by subtracting it from the actual figure. then we totaled up the errors and divided it by the number of forecasts to derive each forecaster’s average error. to qualify for the ranking, forecasters must have made at least 15 of the 24 forecasts. more than 60 forecasters were ranked. economists not pres-ently associated with a firm, those who had not submitted forecasts for more than two months, and those who had not made at least two con-secutive estimates within the last 6 months were excluded from final ranking.

1 / 2 Richard DeKaser Parthenon Group 0.0895 0.3%2 / 3 David Greenlaw* Morgan Stanley 0.0905 0.1%3 / 1 Stephen Stanley Pierpont Securities LLC 0.0941 0.2%4 / 3 Nariman Behravesh IHS Inc. 0.0952 0.1%5 / 5 Bernd weidensteiner Commerzbank AG 0.0957 0.2%6 / 6 Neal Soss Credit Suisse Holdings USA 0.1000 0.1%7 / 12 Dean Maki* Barclays Capital 0.1087 0.3%8 / 13 Jim O’Sullivan* MF Global Inc. 0.1125 0.3%9 / 8 Patrick Franke Helaba 0.1136 0.3%10 / 7 John Herrmann State Street Global Markets 0.1174 0.1%Median (All 81 forecasters) 0.2%

09.30.11 bloomberg brief | economics 4

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eCB wAtCH david PoWell, bloomberg eConomist

eCB Bond tactics may worsen Crisis by Focusing on Symptom, Not Causethe european Central bank risks

intensifying the debt crisis by focus-ing on liquidity programs, which serve only to alleviate symptoms of the euro area’s main problem, instead of focusing on reducing the upward pressure on sovereign yields.

the governing Council is likely to debate next week restarting their purchases of covered bonds, which financial institutions use for long-term financing, and reintro-ducing 12-month loans, according to an eCb official who spoke with bloomberg news, to reduce the financing costs of banks.

the spread between an index of the yields on euro-area covered bonds and swap rates has increased by 47 basis points since July 1, ac-cording to bank of america-merrill lynch indexes, completely unwind-ing the decline spurred by the eCb’s 60 billion euros of covered bond pur-chases started in June of last year.

in addition, the difference between three-month euribor and the three-month overnight indexed swap rate has risen to 81 basis points from about 21 basis points during the same time period.

that strategy risks intensifying the crisis by giving the impression that the eCb is unwilling to stem its root cause, a lack of demand for the debt of some euro-area countries. the sovereign yields of italy and spain soared in the aftermath of the monthly press conference in august, when President Jean-Claude trichet showed no signs of buying the gov-ernment bonds of those countries.

the eCb can ill afford that out-come at a time when it is already suffering from a lack of confidence.

a bloomberg global Poll, based on interviews from sept. 26 with a random sample of 1,031 subscrib-ers to the bloomberg Professional service, revealed that 45 percent of those who participated believe the eCb’s recent actions have made little difference to the sovereign debt crisis. 26 percent think they have

deepened it, and 26 percent said they have helped.

the primary driver of the rise in financing costs for banks has been concerns over solvency in the after-math of haircuts to their holdings of sovereign bonds, though a debate on increasing the size of the eCb’s securities market Programme ap-pears to be off the agenda.

the eCb’s weekly financial state-ments suggest the governing Coun-cil has decided to cap its purchases at about 15 billion euros per week after an initial show of force during the week ended aug. 12, when pur-chases totaled 22 billion euros.

that approach has failed to pre-vent the intensification of the crisis. the spread between the 10-year sovereign yields of italy and ger-many hit a new record of 398 basis points last thursday, before declin-ing to 357 basis points yesterday. that compares with 268 basis points at the end of the week during which the eCb restarted the program.

the decisions of next week’s meet-ing appear unlikely to halt that trend, which will probably continue under-mining confidence in the banking sys-tem regardless of how many covered bonds the eCb buys or how much liquidity it injects into the system.

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ECB Caps Recent Bond Purchases at 15 Billion Euros Per Week

09.30.11 bloomberg brief | economics 5

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Euro-zone CPI YoY%Euro-zone Core CPI YoY%ECB Benchmark Interest Rate

Inflation Creeping Higher

Source: BloombergECCPEMUY Index, CPEXEMUY Index, EURR002W Index

european inflation unexpectedly accelerated to the fastest in almost three years in september.

the euro-area inflation rate jumped to 3 percent this month from 2.5 percent in august, according to today’s preliminary estimate. that’s the biggest annual increase since october 2008. economists had pro-jected a rate of 2.5 percent, accord-ing to the median of 38 estimates in a bloomberg survey. the euro-area jobless rate held at 10 percent in august, a separate report showed.

the eCb, which aims to keep an-nual gains in consumer prices just below 2 percent, said this month in-flation may average 2.6 percent this year and 1.7 percent in 2012. growth may weaken to 1.3 percent next year from 1.6 percent in 2011, it said.

about 15.74 million people were unemployed in august in the euro region, down 38,000 from the previ-ous month, today’s report showed.

in the 27-nation eU, unemployment held at 9.5 percent. at 21.2 percent, spain had the highest jobless rate among the euro member states. greek unemployment was at 16.7

percent in the second quarter. aus-tria and the netherlands had the lowest rates, with 3.7 percent and 4.4 percent, respectively.

— Simone Meier

euro-Area inflation unexpectedly Quickens to Fastest Pace Since 2008

DAtA wAtCH

Ta r g e t A u d i e n c e / / E x c e p t i o n a l E n g a g e m e n t / / 1 0 0 % S o v / /

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09.30.11 bloomberg brief | economics 6

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09.30.11 bloomberg brief | economics 6

NewS OF NOte

Fed’s Operation twist Fails to reduce unemployment, According to global Poll New Zealand Ratings Cut

new Zealand lost its top credit grades at standard & Poor’s and Fitch ratings, the first asia-Pacific nation in a decade to have its local-currency debt cut from aaa.

the outlook is stable after the long-term local-currency rating was reduced one level to aa+ and foreign-currency debt to aa from aa+, s&P said. Fitch announced similar moves yesterday. the asses-sors cited concern that government and household debt is expanding.

new Zealand was hit by earth-quakes in the past year that strained government coffers. bond yields surged on concern reserve bank governor alan bollard will hold record-low interest rates after the economy almost stalled last quarter.

— Tracy Withers and Chris Bourke

global investors say Federal re-serve Chairman ben s. bernanke’s bond-swap program, known as operation twist, will fail to reduce unemployment as the world’s largest economy slows.

seventy-eight percent of respon-dents say the Fed’s plan to replace $400 billion of short-term debt with longer-term treasuries won’t create jobs for the nation’s 14 million un-employed, according to the quarter-ly bloomberg global Poll of 1,031 investors, analysts and traders.

“there’s probably nothing mon-etary policy can do except keep the psychology of the market positive,” poll respondent Jonathan sadowsky, chief investment officer of vaca Creek asset management, said. “the Fed is actually trying some-thing while the politicians are doing nothing except squabbling.”

investors are evenly divided on whether operation twist is a good idea or a bad one.

sixty percent of respondents see the U.s. economy deteriorating, and 50 percent said it will relapse into recession in the next year. nineteen percent expect another financial meltdown in that period. over the next two to five years, an additional 26 percent expect a crisis.

— Joshua Zumbrun

Europe’s Next Crisis Stepseuropean leaders are turning their

focus to the next steps to stem the debt crisis after german lawmakers approved an expansion of the euro-area rescue fund’s firepower.

With the european Commission now expecting the overhauled 440 billion-euro european Financial

stability Facility in place by mid-october, euro finance chiefs will next week discuss accelerating enact-ment of a permanent rescue fund that provides more capital and a tool for managing defaults.

european officials are also studying measures that include leveraging the eFsF, said holger schmieding, chief economist at Joh. berenberg gossler & Co. there may be ‘‘an orderly greek default this year, with a haircut on greek debt, an immediate recapital-ization of greek banks, european guarantees for restructured greek debt and conditional fiscal support’’ for greece, he said.

greek Prime minister george Pa-pandreou will meet French President nicolas sarkozy today in Paris.

— Tony Czuczka and Patrick Donahue

In Vanity Fair, Michael Lewis tackles America’s regional econo-mies through the prism of muni bonds, California, and meredith Whitney. the point of meredith Whitney’s much-maligned muni call wasn’t to predict muni defaults, he writes: “it was to compare the states with one another so that they might be ranked. she wanted to get a sense of who in america was likely to play the role of the greeks, and who the germans.”http://www.vanityfair.com/business/features/2011/11/michael-lewis-201111

Google’s chief economist offers some insight on how to use the search engine’s tools to gain insight into customer behavior. there are some nifty charts on how consumer behavior varies by day of week.http://www.thinkwithgoogle.com/quarterly/people/hal-varian-predicting-the-present.html

“Dear human: You can’t afford it. Sincerely, economics.”http://www.ritholtz.com/blog/2011/09/dear-human/

Around the weB new research and commentary on the Web

The Web’s best Economics Blogs are on Bloomberg. Click {STNI BESTEcoNomIcSBlogS <go>}

09.30.11 bloomberg brief | economics 7

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1D YTD YoY 30D FORWARD LAST 1D CHG YTD YoY 30D 5Y%Chg %Chg %Chg Chart PE 12M YIELD BPS BPS BPS CHART CDS

MXCA Index Canada 1477.9 1.2% -13.6% -6.6% 12.3 GCAN10YR Index Canada 2.22% 2.1 -90.3 -51.9MXUS Index U.S. 1107.8 0.7% -7.8% 1.9% 11.4 USGG10YR Index US 1.96% -3.8 -133.5 -55.1 52.8

MXAR Index Argentina 2218.1 -0.2% -37.9% -22.1% 7.5 Argentina 1048.1MXBR Index Brazil 2695.7 -0.5% -28.3% -26.5% 8.5 GEBR5Y Index *Brazil (5Y) 11.61% -2.1 189.4MXCL Index Chile 2139.7 -1.3% -26.5% -22.4% 14.6 Chile 143.7MXCO Index Colombia 1035.7 0.7% -6.9% -12.2% 16.9 COGR9Y Index *Colombia (9y) 7.43% -4.0 -84.0 -84.0 188.2MXMX Index Mexico 5298.2 0.4% -18.2% -4.9% 14.6 GMXN10YR Index Mexico 6.51% 0.1 -45.4 37.4 189.5MXPE Index Peru 1250.2 0.0% -31.2% -19.8% 11.1

MXAT Index Austria 96.5 0.8% -33.2% -24.1% 7.4 GAGB10YR Index Austria 2.69% -6.8 -81.4 -11.1 159.8MXBE Index Belgium 44.5 0.8% -13.7% -15.4% 11.0 GBGB10YR Index Belgium 3.66% -7.4 -31.0 52.4 250.6MXCZ Index Czech Rep. 301.1 1.9% -10.8% -10.5% 10.4 CZGB10YR Index Czech Rep. 3.23% 1.1 -67.1 -13.2 148.3MXDK Index Denmark 3142.9 0.8% -22.8% -15.9% 12.2 GDGB10YR Index Denmark 2.13% -6.4 -88.8 -25.5 140.2MXFI Index Finland 68.5 1.6% -31.5% -26.3% 11.5 GFIN10YR Index Finland 2.39% -6.6 -77.3 -15.0 78.6MXFR Index France 84.3 1.0% -19.8% -17.4% 8.6 GFRN10 Index France 2.63% -6.7 -73.4 -3.1 178.6MXDE Index Germany 81.5 1.1% -21.1% -12.1% 8.1 GDBR10 Index Germany 1.94% -6.3 -101.9 -33.4 107.2MXGR Index Greece 17.7 -0.7% -49.3% -54.0% 5.5 GGGB10YR Index Greece 22.60% -7.6 1012.4 1214.4 3535.7MXHU Index Hungary 860.3 1.3% -29.3% -34.3% 6.9 GHGB10YR Index Hungary 8.05% 20.0 10.0 126.0 516.5MXIE Index Ireland 20.2 0.5% -9.0% -1.5% 14.3 GIGB10YR Index Ireland 7.51% -7.6 -155.2 93.3 666.3MXIT Index Italy 44.5 2.1% -24.9% -25.7% 7.1 GBTPGR10 Index Italy 5.52% -5.9 70.2 163.8 460.9MXNL Index Netherlands 65.5 2.3% -18.1% -15.3% 8.2 GNTH10YR Index Netherlands 2.31% -7.2 -84.2 -19.8 102.0MXNO Index Norway 1946.9 0.3% -19.3% -10.6% 8.9 GNOR10YR Index Norway 2.42% -0.6 -129.9 -87.3 49.4MXPL Index Poland 1519.4 0.4% -20.2% -16.0% 9.0 POGB10YR Index Poland 5.92% 0.9 -13.2 42.0 284.3MXPT Index Portugal 56.3 0.4% -16.3% -15.5% 10.5 GSPT10YR Index Portugal 11.08% -8.7 447.5 477.3 1089.3MXRU Index Russia 701.3 -3.0% -24.8% -12.4% n.a RUGE9Y Index *Russia (9y) 5.12% -2.6 -41.9 -41.9 297.2MXES Index Spain 94.5 1.4% -13.2% -20.6% 8.1 GSPG10YR Index Spain 5.07% -2.3 -38.0 95.0 372.3MXSE Index Sweden 7104.8 2.8% -20.6% -14.8% 10.3 GSGB10YR Index Sweden 1.77% -7.2 -150.6 -74.9 59.9MXCH Index Switzerland 729.6 1.0% -13.6% -11.4% 11.1 GSWISS10 Index Switzerland 0.98% 0.2 -73.2 -42.0MXGB Index UK 1541.5 -0.4% -11.6% -6.2% 9.5 GUKG10 Index UK 2.49% -4.1 -90.7 -46.1 90.2

MXEG Index Egypt 881.2 1.0% -39.8% -35.6% 8.2 MXIL Index Israel 191.5 -0.1% -32.0% -29.2% 8.3 GISR10YR Index Israel 4.69% 1.0 -2.0 23.0 194.8MXJO Index Jordan 228.8 -1.2% -17.4% -15.7% n.aMXMA Index Morocco 388.2 -0.1% -10.1% -5.1% 13.5 MXZA Index South Africa 778.3 -2.5% -6.3% 0.1% 10.9 GSAB10YR Index South Africa 8.34% 12.1 18.1 35.3 205.5

MXAU Index Australia 815.0 -0.8% -15.7% -13.2% 10.8 GACGB10 Index Australia 4.22% -4.3 -132.5 -74.3 93.3MXCN Index China 50.7 0.0% -23.8% -23.2% 9.1 GCNY10YR Index China 3.93% 0.0 2.0 60.0 197.0MXHK Index Hong Kong 8891.5 -1.8% -20.5% -16.3% 13.7 HKGG10Y Index Hong Kong 1.32% 1.2 -154.6 -66.9 103.4MXID Index Indonesia 4369.9 1.2% -3.9% -4.0% 13.1 GIDN10YR Index Indonesia 6.91% -11.6 -69.4 -71.3 291.0MXIN Index India 653.1 1.5% -19.5% -18.3% 12.7 GIND10YR Index India 8.43% 8.8 50.9 59.0MXJP Index Japan 467.3 1.0% -16.9% -9.6% 11.9 GJGB10 Index Japan 1.03% 3.2 -9.6 9.2 145.8MXKR Index Korea 502.2 3.1% -14.5% -3.9% 8.2 GVSK10YR Index Korea 3.95% 5.0 -57.0 -16.0 216.7MXLK Index Sri Lanka 608.2 -0.6% -14.5% -20.3% n.aMXMY Index Malaysia 507.6 1.1% -9.5% -5.6% 13.2 MGIY10Y Index Malaysia 3.70% -0.5 -33.6 7.7 196.0MXNZ Index N. Zealand 86.8 0.1% 3.6% 7.9% 12.8 GNZGB10 Index N. Zealand 4.42% 11.2 -144.9 -58.9 107.7MXPH Index Philippines 645.2 -0.2% -12.6% -16.1% 14.1 PDSF10YR Index Philippines 6.23% -4.6 12.7 -0.6 249.0MXPK Index Pakistan 306.8 -0.2% -5.8% 12.8% 5.9 PKIB10YR Index Pakistan 13.02% -8.0 -123.0 -73.0MXSG Index Singapore 1455.2 0.2% -17.4% -14.6% n.a MASB10Y Index Singapore 1.65% -1.0 -106.0 -39.0MXTH Index Thailand 364.2 -0.5% -11.5% -7.0% 10.6 GVTL10YR Index Thailand 3.74% -3.2 1.8 62.3 233.3MXTR Index Turkey 854371.3 1.3% -9.6% -11.3% 8.4 TGBY10T0 Index Turkey 9.32% 1.0 89.0 50.0 284.3

LAST 1D Chg YTD YoY 30D 1Y TICKER LAST 1D YTD YoY 30D 1YPRICE bps/% bps/% bps/% CHART Z-SCORE PRICE %CHG %CHG %CHG CHART Z-SCORE

$$SWAP10 Curncy 10Y US Swap Spread 17.8 0.1 9.3 11.8 2.3 ARS Curncy Argentine Peso 4.21 0.0% -5.4% -5.7% 1.8$$SWAP2 Curncy 2Y US Swap Spread 29.9 -0.3 8.4 12.0 1.9 BRL Curncy Brazilian Real 1.84 0.0% -9.7% -7.6% 2.7USGGBE01 Index 1Y Breakeven Rate 1.0 1.7 0.2 0.8 -0.3 CAD Curncy Canadian Dollar 1.04 0.8% -4.4% -1.4% 0.4.2Y10Y Index 2Y10Y Spread 169.6 -5.5 #N/A N/A#N/A N/A -2.2 CLP Curncy Chilean Peso 512.78 0.0% -8.7% -5.3% 1.6.10YV3MSP Index 3M10Y 194.9 -3.7 -122.5 -40.8 -2.1 COP Curncy Colombian Peso 1917.65 0.0% -0.5% -6.1% 0.5.TED3M Index 3M Ted Spread 36.2 0.0 17.9 22.5 2.7 MXN Curncy Mexican Peso 13.74 0.2% -10.2% -8.4% 3.6.LIBORIOS Index 3M Libor/OIS 28.5 0.1 16.5 17.9 3.3JPEIPLSP Index EMBI+ Spread 413.1 0.0 165.1 136.1 3.1 GBP Curncy British Pound 1.56 -0.1% 0.0% -0.6% -1.4.AAA10Y Index IG Corp Spread 214.1 3.7 55.5 11.1 0.9 CZK Curncy Czech Koruna 18.24 0.9% 2.5% -1.1% 0.9.AAABAA Index IG HY Corp Spread 128.0 0.0 18.0 24.0 -8.1 DKK Curncy Danish Krone 5.50 0.6% 1.2% -0.7% 0.6MUNSMT10 Index Muni Spread 106.2 1.7 12.8 14.1 2.2 EUR Curncy Euro 1.35 -0.6% 1.0% -0.8% -0.6

HUF Curncy Hungarian Forint 216.40 0.5% -3.8% -6.4% 2.0VIX Index CBOE VIX Index 38.8 -5.5% 118.8% 63.9% 1.9 NOK Curncy Norwegian Krone 5.83 0.7% -0.2% 0.7% 0.1SKEW Index CBOE Skew Index 119.0 0.6% -1.5% -0.3% -0.5 PLN Curncy Polish Zloty 3.27 0.3% -9.4% -11.0% 3.3

RON Curncy Romanian Leu 3.22 0.8% -0.7% -2.8% 0.8RUB Curncy Russian Ruble 32.12 0.5% -4.9% -4.9% 1.9

LAST 1D YTD YoY 30D SEK Curncy Swedish Krona 6.84 0.6% -1.9% -1.5% 0.7PRICE %Chg %Chg %Chg CHART CHF Curncy Swiss Franc 0.90 0.5% 3.7% 8.9% -0.2

TRY Curncy Turkish Lira 1.86 0.3% -17.0% -22.2% 2.1C 1 Comdty Corn 632.5 0.3% 0.6% 25.2% 31.3 UAH Curncy Ukranian Hryvnia 8.00 0.1% -0.7% -0.9% 1.2KC1 Comdty Coffee 231.2 0.0% -3.9% 26.3% 32.5SB1 Comdty Sugar 26.8 -0.2% -16.6% 5.9% 37.4 ILS Curncy Israeli Shekel 3.73 0.2% -5.6% -2.5% 1.4W 1 Comdty Wheat 654.3 2.4% -17.6% -4.3% 31.6 ZAR Curncy S. African Rand 8.06 1.2% -17.7% -13.6% 0.0

LA1 Comdty Aluminum 2221.0 0.5% -9.7% -4.2% 20.8 AUD Curncy Australian Dollar 0.97 -0.6% -5.0% 0.5% 0.0HG1 Comdty Copper 323.7 0.0% -27.1% -11.5% 42.0 CNY Curncy Chinese Renminbi 6.38 -0.3% 3.5% 4.9% -1.8GC1 Comdty Gold 1615.5 0.0% 13.7% 23.5% 39.3 HKD Curncy HK Dollar 7.79 0.0% -0.2% -0.4% 0.8SI1 Comdty Silver 30.5 1.3% -1.3% 39.0% 81.0 INR Curncy Indian Rupee 48.97 0.5% -8.7% -8.2% 4.4

IDR Curncy Indonesian Rupiah 8875.00 0.2% 1.4% 0.4% 1.3CO1 Comdty Crude (Brent) 103.7 -0.3% 9.4% 25.9% 29.7 JPY Curncy Japanese Yen 76.88 0.1% 5.5% 8.6% -2.2CL1 Comdty Crude (WTI) 82.1 1.1% -10.1% 5.5% 37.3 SGD Curncy Singapore Dollar 1.30 0.2% -1.2% 1.3% 0.2XB1 Comdty Gasoline 261.9 -1.2% 6.8% 31.3% 36.2 NZD Curncy N. Zealand Dollar 0.76 -0.9% -2.1% 4.0% 1.0NG1 Comdty Natural Gas 3.7 -1.4% -14.9% -5.4% 30.6 KRW Curncy S. Korean Won 1178.10 0.4% -4.4% -3.2% 1.6

THB Curncy Thai Baht 31.08 -0.3% -3.3% -2.3% 0.8CRY Index CRB index 306.0 0.8% -8.1% 6.7% 22.4 TWD Curncy Taiwan Dollar 30.49 0.2% -3.9% 2.5% 0.7BDIY Index Baltic Dry Index 1913.0 -0.4% 7.9% -22.5% 37.6GI1 COMB Index GS Cmdty Index 607.1 0.2% -4.2% 11.0% 25.0 EURGBP Curncy Euro-Pound 0.9 -0.5% -1.0% 0.2% 0.3CMCITR Index UBS-Bloomberg Cmdty 1270.9 0.1% -6.7% 7.0% 22.6 EURNOK Curncy Euro-NOK 7.9 0.1% -1.2% 1.6% -0.8DBLCDBAT Index DBIQ Diversified Ag Index 247.3 1.3% -5.3% 10.4% 18.1 EURCHF Curncy Euro-Swiss Franc 1.2 0.0% 2.6% 9.9% -0.5Source: Bloomberg. Updated at 6:30 a.m. ET

Americas

Europe

Asia/Pacific

Euro Crosses

Middle East & Africa

CURRENCY

North America

Europe

Latin America

Middle East & Africa

Asia/Pacific

CURRENCIES

Indices

Energy

Metals

Agricultural

MSCI EQUITY INDICES

Equity

Fixed Income

TICKER COMMODITY VOLATILITY

COMMODITIES

TICKER SPREAD/RATE/INDEX

10Y GOVERNMENT BOND YIELDS

OTHER INDICATORS

North America

Middle East & Africa

Asia/Pacific

Latin America

Europe

TICKER COUNTRY LAST PRICE TICKER COUNTRY

09.30.11 bloomberg brief | economics 8

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KeeNe’SCOrNer

on air listen on the radio at these regularly scheduled times and dates.

sUrveillanCe ■

Weekdays 7:00 am-10:00 am. tom keene joins ken Prewitt for bloomberg surveillance

bloomberg on the eConomy ■

monday–thursday 7:00-8:00 Pm. tom keene interviews high-profile guests and looks at the economy.

PodCast listen on the web at http://www.bloomberg.com/podcasts/surveillance/

also available on the bloomberg terminal: bPod <go>

twitter / on demand Full interviews are available at tom keene on demand http://www.bloomberg.com/tvradio/radio/ and follow him on twitter @tomkeene_

Bloomberg Brief Economics

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Joseph Brusuelas jbrusuelas3@bloomberg.net 212-617-7664

Michael McDonough mmcdonough10@bloomberg.net +852-2977-6733

Today’s guests: Lakshman Achuthan of Economic Cycle Research, Chris Rupkey of Bank of Tokyo Mitsubishi, Holger Schmieding of Berenberg Bank, James Bianco of Bianco Research.

Q: We just had American data come out, which modestly tilts us away from re-cession. We have seen copper off a cliff. Are we nudging towards recession?A: i’ve spent the last couple of weeks with investor clients and the mood is pretty much across the board negative. i think people think that both europe and the U.s. are heading into something existensially bad at the moment. there is no more stim-ulus coming. and we can see that people are even worrying about China, which over the last few years has been the one bright spot of the world economy.

Q: lan Mulally says no. He is the CEO of Ford Motor Company and should know what consumers are up to.A: Well, i think China is fine. i am the China guy for standard Chartered, so over in China i think it will get easily 8 percent growth next year. but there are a lot of folk who think that China is falling apart. and without exports, without europe and U.s. growing more than 2 percent, they worry about China’s exports.

Q: Can you really trust the numbers from China? We learned we could not trust the numbers from Greece.A: there are some problems in the data, but i live in shanghai and maybe growth is sometimes a bit more than 8 percent, sometimes a bit less than 8 percent. but i think the quality of life increases that you have seen across the country are very real. this isn’t a huge Ponzi scheme. it is not dubai.

Q: When we see export, import dynamics in the United States, is it with Europe or is it more weighted towards Asia?

A: i think the majority is with europe, but at the margin, the growth is with the emerging markets. and the worrying thing

like new york, vancouver, sydney. that is very, very obvious.

(This interview was condensed and edited.)

is that not only did second-quarter exports slow from the first quarter, but when you look out into the global economy, the global economy is slowing. and so if U.s. gdP is being supported by exports, and the global economy is slowing, that is not great for the U.s. economy.

Q: When you look at the distortions – we’ve talked about the distortion of the Swiss franc and, of course, all that is going on in Europe – when you look at the distortion out there for emerging markets, what is it?A: i think right now we need emerging markets to become consumer-driven economies. at the moment, places like China are very much investment driven. however, when we look at these econo-mies, we don’t see this investment as col-lapsing tomorrow and turning these emerg-ing markets backwards. What we see is underlying consumption growth, underlying income growth. and over the next 10 years, 20 years, we think there will be a kind of a global super cycle driven economic growth from the middle class emerging in asia, africa and the middle east.

Q: In terms of real estate, what is the trend in Asia? Is it anything like the U.S. economy?A: What we are getting now, particularly in taiwan and singapore, when the U.s. and europe were loosening policy, the funda-mentals of the economies in these places were still pretty good and so house prices went up a lot. so when you look at places like hong kong, singapore, real estate is very, very expensive. at the same time though, you’ve got real income growth. and you’ve got low levels of leverage. so we look around asia, and what we see is peo-ple using houses as ways to save money. When you look back at the U.s. real estate market pre-crash, the real estate market was a way for american households to borrow money. and that, we believe, is the fundamental difference.

Q: Do you assume in the coming years that there will be greater capital mobil-ity, where the individual – either directly or through institutions like Standard Chartered – will be able to invest out-side the country? Will they be able to buy shares of General Electric?A: absolutely. We are already seeing the first wave of that with Chinese and other asian investors buying real estate in places

tom keene and ken Prewitt talk to Stephen Green, an economist at standard Chartered, about asian real estates and america’s chances of falling back into recession.

09.30.11 bloomberg brief | economics 9

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09.30.11 bloomberg brief | economics 9