Gainers

Losers

Data Provided by MSCI Inc.

Editor's Choice Graph	Graph Description
	Returns of the MSCI EAFE Index, past 5 trading days, priced in USD and local currencies

Macro Notes
In the past few weeks, Europe’s problems have reverberated throughout world markets. Despite a market surge in late October, a new wave of uncertainty began on Monday.

Indeed, markets nose-dived after Greece’s Prime Minister Papandreou announced a referendum days before what seemed to be a done deal to relieve Greece of half of its debt burden.

Although Mr. Papandreou called the referendum off later in the week, the damage was done. Among all regional and global indexes, investors in Europe felt the biggest loss. U.S. investors were especially burdened by losses of 6.36 percent compared with locals, who lost 4.2 percent.

How long will markets stay on the European roller coaster ride? There’s no way to tell. However, the duration of the uncertainty will in part be determined by how much demand European bonds can generate from investors.

Italy issued 3 billion euros in bonds last week at an interest rate above 6 percent—uncomfortably high, in other words. In the coming weeks, Europe’s political turbulence will most likely continue to influence global markets, positively and/or negatively.

Europe, Australasia and the Far East (EAFE) also lost ground, as the Reserve Bank of Australia announced that its economic outlook continues to be unimpressive.

Gainers

Losers

Data Provided by MSCI Inc.

Editor's Choice Graph	Graph Description
	The returns of the MSCI Greece Index, past 5 trading days, priced in USD and EUR

Macro Notes
Another week, another flurry of European volatility. This time, though, the markets closed firmly in the red.

First, on Tuesday, Greek Prime Minister George Papandreou called for a referendum on the proposed bailout package that had lifted markets the week before.

As anyone who has picked up a newspaper in the past couple of months knows, the Greek populace doesn’t particularly like austerity measures (and 60 percent of Greeks polled last Tuesday said they were against the measure).

On Wednesday, European leaders threatened to kick Greece out of the EU and withhold aid funding until a decision was made regarding the bailout package. Finally, on Thursday, Papandreou agreed to withdraw his planned referendum. While Papandreou postured and flip-flopped, the MSCI Greece USD Index fell more than 10 percent, and the other European countries that are part of the efforts at bailing out Greece weren’t far behind.

As European stocks plummeted, the euro followed suit. While the ECB’s decision to cut rates cheered investors, it further weakened the euro, causing the FX impact to exacerbate European equity losses for U.S. investors.

Gainers

Losers

Data Provided by MSCI Inc.

Editor's Choice Graph	Graph Description
	The Australian Central Bank cut rates by 25 basis points last week, exacerbating U.S.-dollar-denominated losses in the Australian market.

Macro Notes
Asian markets withstood another week of systemic market weakness, with every market in the region closing lower. On the bright side, China managed to finish flat, though any silver lining is a sight for sore eyes in this environment.

European turmoil has indeed spread to the region, as Asian factory activity has slowed to its lowest levels in three years.

An unexpected decline in Chinese PMI led the charge, as austerity measures in Europe, combined with slackening EU GDP figures, have dampened demand for Asian goods. This has revealed itself in export data, as Korea’s exports hit their lowest level since 2009. On the bright side, short-term inflationary pressures seem to be abating, as input prices in the latest PMI readings showed signs of easing.

The muted inflation expectations have eased pressure on central bankers to raise rates, possibly even paving the way for Asian central bank easing. Australia, always ahead of the curve, was the first to do just that, cutting rates 25 basis points on Wednesday. The ensuing sell-off in the Australian dollar compounded U.S. investor losses, as the Australian market finished the week nearly 3 percent lower.

Even Singapore, the region’s bastion of economic restraint, gave in to concerns over global growth by easing monetary policy. Singapore’s central bank decided to mute the appreciation of the Singapore dollar by altering the slope of the country’s managed currency band. The market obliged by selling Singapore dollars, which translated to a 2 percent decline for U.S. investors.

Japan had the unenviable distinction of being the region’s weakest market for U.S. investors, as the Bank of Japan laid out the multiple downside risks facing the country’s economy. The weakness in the yen and the Nikkei stock index came despite the release of a report showing that the country’s GDP likely returned to a growth rate of 1.5 percent between July and September.

Gainers

Losers

Data Provided by MSCI Inc.

Editor's Choice Graph	Graph Description
	The returns of the MSCI Brazil Index, past 5 trading days, priced in USD and BRL

Macro Notes
The ongoing turmoil and lack of a unified front in Europe renewed fears of a global recession for investors in Latin America. Both local currencies and equity markets lost ground during the course of the week, as news of a Greek referendum on the eurozone’s latest bailout plans shook markets.

U.S. investors in Brazil were the biggest losers, as the country’s currency, the real, recorded its largest fall since September, bringing losses of 3.65 percent to U.S. investors.

Traders expect that the Brazilian central bank will cut rates further after the European Central Bank lowered benchmark borrowing costs.

The outlook grew even murkier after the ECB’s president announced that Europe may be heading toward a mild recession. Though Brazil’s economy is slated to grow by 5 percent next year, other countries in the region are predicting that economic growth will be in the area of 3.5 percent.

U.S. investors in Mexico also experienced “enhanced” negative returns, as the peso depreciated and brought returns of -2.85 percent to U.S. investors in Mexico. That compares with a -0.17 percent return experienced by local investors. However, Citigroup and Moody’s report that Mexicans living in the U.S. are increasing the amount of money they send to Mexico at the fastest pace in five years—a sign that the peso’s current slump may be temporary.

Gainers

Losers

Data Provided by MSCI Inc.

Editor's Choice Graph	Graph Description
	The returns of the MSCI Egypt Index, past 5 trading days, priced in USD

Macro Notes
Last week, Egypt was the only country to finish in the green, but just barely. U.S. investors in Egypt outperformed their local counterparts by a mere .01 percent gain on returns (2.21 percent compared with 2.20 percent). All investors in Israel, Morocco and South Africa lost money.

Investors in Israel registered the largest downside returns. U.S. investors in Israeli equities lost 5.65 percent compared with locals who lost 3.64 percent on Israeli equities.

The share price of EZchip Semiconductor Ltd. plummeted after the company announced a drop in sales. According to Bloomberg News, a lack of consumer confidence is to blame for the Israeli company’s diminished revenue. It appears that Europe’s debt crisis is driving customers to delay purchases.

Midweek, Teva Pharmaceutical Industries Ltd. announced a drop in quarterly earnings. Revenue will drop from $18.3 billion to $18.6 billion, a far cry from the company’s estimates in July that revenue would come in at $19 billion.

However, the Teva has been trying to expand its businesses away from its focus on U.S. generic drugs. This is a wise move, considering that the company’s North American generic drug sales dropped by 48 percent last quarter.

Gainers

Losers

Data Provided by MSCI Inc.

Editor's Choice Graph	Graph Description
	The returns of the MSCI United States Index, past 5 trading days, priced in USD

Macro Notes
Like almost all equities last week, stocks in North America suffered from the renewed uncertainty surrounding Europe.

Even though it was short-lived, Greece’s Prime Minister George Papandreou’s plans to hold a referendum on accepting the next round of bailouts spooked the markets. Now Papandreou looks to be on his way out, despite surviving a vote of no-confidence on Friday. The whole series of events continues to stoke uncertainty, which doesn’t bode well for equities in the U.S. and Canada.

Economic data coming out North America did little to offset these uncertainties. While the unemployment rate in the U.S. edged down to 9.0 percent, the increase of 80,000 jobs came in below expectation. Canada posted the largest single-month job loss since March 2009, shedding 54,000 jobs.

The filing for bankruptcy protection by MF Global Holdings Ltd. last Monday sparked a new wave of concerns about the stability of financial institutions with exposure to European debt. Not surprisingly, financials led the sectors in declines last week.

Jitters regarding financial institutions didn’t end there, as Jefferies Group Inc. (NYSE: JEF) saw its stock price tumble on concerns about its exposure to Europe. For now, everything in financial markets begins and ends with what’s happening in Europe.