Daily market update by UWCFX

06.12.2011

S&P plays politics prior to EU-summit;

EURO countries
downgraded

On the eve of the EU summit Thursday and Friday the US rating agency Standard and Poor has created new panic in
the markets by downgrading all members of the EURO including Germany and France. Germany is loosing its triple
A rating and France is degraded to AA. All EURO-countries are set under immediate economic surveillance. The S&P
decision would put increased pressure on banks and bigger companies also threatened by downgrading.

The news came just hours after Sarkozy and Merkel in a joint press conference announced agreement on how to
tackle the Euro-zone crisis. France and Germany are proposing a revision of the European Treaty to be ratified by
member states by March 2012. A part of the package is introduction of stronger budget discipline whereby immediate
sanctions are going to be taken against member countries not following its obligations. Monthly EU- meetings at top level
is also included and a more effective mechanism for the rescue of troubled sovereign economies.

The package was well received by the market. Europe and the US rose till S&P spoiled the party in late US-trading. After
listing impressing gains over the last weeks the Asian exchanges are steeply down. Oil prices are falling as precious
metals. Gold is falling 40 dollar from inter day high on yesterday.

The downgrading has put the Euro under increased pressure. Euro/USD is 1.3377. Speculators are watching the
EURO drama, and it is expected that the EURO shall be under constant attacks for weeks and months to come.
Japanese Yen is strengthened and trading at 77,76 against the dollar.

07.12.2011

EURO remains firm
before key summit

EURO remained firm against the dollar (1.3426) in Wednesday’s morning trade in Asia as investors trimmed
their holding of positions considering whether to bet on a further decline in the common currency ahead of
crucial EU-summit on Thursday and Wednesday and European Central Bank (ECB) meeting on Thursday.

Market participants are closely watching any developments and new moves with eyes mainly on the
compromise package worked out between Merkel and Sarkozy indicating a rewriting of the European
Treaty. The rating agency Standard and Poor shocked markets yesterday with news that it intends to
downgrade all members of the EURO-zone.

While most concentration so far has been on Germany and France, Premier Cameron yesterday stated that
he shall veto any revision of the EU-treaty not in accordance with British interest. This tells
that the indicated Merkel/Sarkozy proposal by far is a foregone conclusion. Any transfer of power and
authority to Brussels shall most likely be met with fierce resistance from more nationalistic member
states.

Australian GDP grew 1,0 % from previous quarter and climbed 2,5 % from a year earlier. 0,8 was expected.
The better than expected figures supported risk sentiment and benefited higher yield currencies as the Euro.

A senior dealer at Barclays Bank in Tokyo claimed many investors seem to cover Euro/USD short positions
and that the ground appears to be firm in the 1,33 segment. In short term there is an upward bias versus
dollar. Euro/USD will likely continue to be volatile driven by any headlines prior to the EU-summit.

Oil prices have stabilized over the last 24 hours. Trend towards a stronger Yen continues; USD/JPY at 77,72.
Gold is trading at 1729 up from yesterday’s low at 1703.

08.12.2011

Short term EURO fate
hangs on the summit

The short term fate of the EURO rests to a considerable degree on the outcome of the highly anticipated end of the week meetings
in the European Central Bank (ECB) and the two days summit of European leaders Thursday and Friday.

There are strong rumors this morning that ECB shall cut it’s interest rate with at least 50 basic points from today’s
1.75 % level. This shall allow banks to pledge a wider range of collateral to borrow funds from the central bank and
to extend the duration of the long term lending facility to two or thee years.

These eventual measures might be seen as a prelude to the summit and as an effort to avoid a new global banking
crisis. Normally a cut in the interest rate is seen as negative to a currency, but this is not normal times. Markets
have factored a 25 bps cut. No action might therefore be seen as negative and lead to a steep fall in the Euro presently
trading at at 1.3407 versus USD.

In addition to ECB actions, Markets are expecting that the often fractious EU-group shall come up with a viable
program necessary to ensure progress in tackling the Euro-zone debt crisis. Merkel and Sarkozy seem to agree on
stricter budget discipline by transferring national sovereignty to Brussels.

The overriding challenge, however, remains to find a balance between harsh austerity measures and economic growth. Critics are
claiming that the proposals deal with the consequences and not the reasons for the crisis giving banks
closely connected with the political elites a free ride leaving the taxpayers once again to pay for their excesses.

Stock markets ended flat or in the negative zone yesterday. Futures are down as are markets in Asia. Oil prices striving to keep above the USD 100 level (NYMEX 100,55). Gold is stabile on 138.

Market update – 09.12.2011

England blocks
EU-treaty revision

After a marathon session running into the early morning hours England blocked Sarkozy-Merkel’s proposal for a new and revised EU-treaty giving the European Commission more decision power on the cost of member states.
Premier Cameron made it clear the proposed revisions did not give England the necessary guarantees and especially not for its financial services industry.

Cameron stressed that England is not a part of the Euro-zone, and he sees the inflexibility of the EURO as mainly responsible for the financial crisis. He offers England’s support, but obviously see the EURO-crisis as primarily a problem for continental Europe.

An intergovernmental agreement between the 17 EURO-members seem in this situation to be the most likely outcome. To avoid the impression that ECB (European Central Bank) is acting as a lender of last resort, 200 Billion Euros is going to be transferred to the International Monetary Fund (IMF) to create an extra firewall to bail out EURO-zone countries like Spain and Italy fighting with big budget deficits.

European leaders tried after the meeting to give this outcome towards a two-tier Europe a positive spin.
Markets have reacted cautiously. The steep falls in futures seen through the night seem to have stopped for now.
Euro/USD is flat at 1.3325 while YEN continues to be strengthened versus USD at 77,59.

Oil prices have fallen more than two dollars on the prospects of increased uncertainty and slower economic growth. Last quarter result for industrial output in China shows that the dramatic growth seen for many years have come to a halt.
Gold prices which reached 1750 inter day yesterday, have been in free fall at present trading at 1708.

Market update - 12.12.2011

Markets calm down:
Asia opens in blue


The Asian stock exchanges opened the week up on positive US macro numbers and some
optimism after last weeks EU summit. “The Michigan Consumer confidence” shows
growing consumer confidence to future development of US economy.

MSCI Asia Pacific Index is up 1,2 % with five shares up against one in red. In Japan is the
Nikkei up 1,2 %. Kospi in South Korea increases 1,48 %. The exception in Asia is Shanghai
Composites in China down 0,57 %.

The European Union summit which ended last Friday did not solve any fundamental
problems connected to the sovereign debt and looming bank crisis, but gave some
temporary relief which markets seem to have reacted positively to.

National budgets shall be subject to review by the EU Commission in an effort to
introduce stricter budgetary discipline. Membership countries which are not behaving
in accordance with strict rules might be subject to strict sanctions.

The British Prime Minister David Cameron rejected to support the final agreement
which might have opened for a revision of the EU-treaty. Any revision of the treaty
demands unanimous decisions. The proposed drafts are supported by the 17 Euro-members
and 9 of the other EU-members.

The EURO/USD is still under pressure this morning at 1.3356. USD/JPY is stabile at
77,62. Oil prices are stabile; NYMEX close to 99 and Brent trading in the interval
108 – 109. Gold prices are steeply down trading at 1691.

Market update - 13.12.2011

Global markets drop
on EURO concern

After a couple of days of digesting the result of end of last week’s EU summit meeting, global markets are back in deep red. Instead of the summit leading to a relief Christmas rally, dark skies are back on the horizon. The sovereign debt crisis, a strong need for recapitalization of major European banks, a looming recession and the future of the Euro are back on the top of the agenda.

The EURO continues to be under strong pressure and reached a 10-week low versus dollar at 1.3198. EURO is also loosing ground versus yen, JPY dipping to 102,60. The markets are expecting that S&P rating agency already this week is going to follow up it’s threat to downgrade all countries within the EURO-zone.

Eight Spanish banks were yesterday placed under review for a possible downgrade by another rating agency, Moody’s Investors Services, adding strongly to the question marks and uncertainties in the whole banking sector.

Support at the 1.3150 mark for Euro/USD is vital. A clear breach of the mark can technically open the Euros downside to 1.2860 reached in January 2011. As long as the European Central Bank gives up it’s reluctance to purchase more euro-zone sovereign debt, the Euro seemed in for further dips.

In many financial circles there are increased concern about the austerity course chosen by European leaders. Strict austerity measures can according to many economists only lead to a repetition of similar mistakes European leaders made between the two world wars leading to mass unemployment and economic recession.

Markets all over the world are strongly down along with deep plunges in the gold and precious metal prices. Gold trading at 1651 with analysts forecasting steeper falls.

Market update - 19.12.2011

Fitch and Moody’s have
fired a volley across Europe...

On Friday, on December, 16th, after abundance before the various American macroeconomic data published during a week, the statistics of the USA has given out only one significant result. The consumer price index in November hasn't undergone changes at expected increase on 0.1 % and after decrease on 0.1 % in October. Thus without foodstuff and energy carriers the increase in consumer prices has made 0.2 % against 0.1 % last month. In aggregate these indicators confirm FR'S statements that there is no serious inflationary pressure that allows it to continue to keep interest rates at exclusively low levels.

In the middle of day stock markets have painfully reacted and in the moment have fallen on negative territory after it became known that the international rating agency Fitch though has kept the higher credit rating of France ААА, but has changed the forecast on it with stable on negative and in addition has placed ratings of Italy, Spain, Belgium, Ireland, Slovenia and Cyprus on revision towards deterioration. Fitch motivated the actions by that the summit which has taken place on last week of EU in Brussels hasn't promoted to the main task permission, despite acceptance of some positive steps on struggle against debt crisis in the Euro area countries. In turn, rating agency Moody's, being guided by similar preconditions, has lowered a sovereign credit rating of Belgium on 2 points with АА1 to АА3 at the negative forecast of development of a situation.

The price for gold with has risen for 21.00 dollar or 1.3 % to value of 1595.60 dollars. Gold has risen in price owing to certain easing of dollar and as the price for a precious metal became again attractive to investors after decrease almost for 140 dollars following the results of 4 previous trading sessions. As a whole for a week loss has made 6.8 %.

Oil has gone down in price to the minimum mark since November, 2nd against concern in prospects of global demand for the energy carriers, burdened by the European debt crisis. In comparison with final level of last Friday oil has had loss in 5.9 %.

Today Ministers of Finance of the European Union countries will have a teleconference on which will discuss the further steps on overcoming of debt crisis of a Euro area. Representatives of 27 EU countries will discuss a question on bilateral credits of IMF and the EU countries, and also some points of the new tax agreement.

It is difficult to foretell a direction of the markets, undoubtedly that Christmas rally to which investors got used – this year won't take a place.