Equity Market Update

Global Market Update :

o Equity Markets lost the upward momentum from last month as fears of EU sovereign debt crisis reemerged. Concerns on EU debt contagion accelerated as cost of borrowing for large nations like Italy, Spain and France rising which affected investor confidence. However, the markets rebounded from the month lows at the end of month on the back of news that central banks eased dollar funding and resilient US economic data.
o The worst preforming markets in November were Hong Kong and India which corrected by 9.5%. The BSE Sensex hit a 23 month low, YTD down 21% and is one of the most performing equity markets.
o The US Markets (Dow Jones) was the best performing market with 0.76% returns in November and the one of the only developed market which has delivered positive returns YTD in 2011.US

US Economy Update :

Resilient US macro data and policy cooperation held the market

• Better-than-expected macroeconomic data of the US
- US consumer confidence jumped from a previous 40.9 to 56.
- US ISM manufacturing index rose to 52.7in November from 50.8 in October.
• The Federal Reserve cut the cost of emergency dollar funding for European banks as part of a globally coordinated central bank response to the continent’s sovereign debt crisis. The new interest rate has been reduced to the dollar overnight index swap rate plus 50 basis points.
• Payroll gains in the U.S. improved last month, while an increase in the number of Americans leaving the workforce helped push the jobless rate down to 8.6 percent, the lowest level since March 2009.

Euro Region: Key developments :

• UK PMI Manufacturing decreases for the second successive month to 47.6 points in November, following 47.8 points registered the in October.
• S&P reduces its credit ratings on 15 big banking companies, mostly in the Europe and the US as the result of an overhaul of its ratings criteria.
• UK budget office cuts the country’s economic growth forecast for 2011 to 0.9% from the 1.7% it had predicted in March, and trims the 2012 forecast to 0.7% from 2.5.
• Greek Prime Minister George Papandreou gave in to pressure from France, Germany and from within his own country and scrapped a referendum on a bailout package for the country proposed by the European Union (EU).
• Private sector activity in Euro zone declined for the third straight month in November, coming in at 47.2 thus remaining below the 50.0 (the level that distinguishes expansion from contraction).
• The sale of German govt. bond or bunds failed on Wednesday (23rd November) with the German govt. being able to sell only €3.644 bn of the €6 bn in 10 years bunds on auction for an average yield of 1.98%
• The UK economy rebounded with the GDP growing at 0.5% in the third quarter both over the second quarter as well as on an annual basis. The growth was driven by stock building and government spending.
• European Central Bank cut in the euro zone’s benchmark interest rate from 1.5% to 1.25%, while warning of a mild recession.
• Fitch Ratings says France's AAA rating would be at risk if the euro-zone debt crisis intensifies; also downgrades Portugal's rating to junk status to BB+ from BBB-.