Gainers

Losers

Data Provided by MSCI Inc.

Editor's Choice Graph	Graph Description
	The returns of the MSCI All Country Europe Index, past 5 trading days, priced in USD and local currencies

Macro Notes
The euro once again dominated foreign exchange news this past week, this time falling more than 2 percent against the dollar in a market still queasy about the ability of European governments to contain a debt crisis there. Globally currencies followed the euro’s plunge against the dollar, with every major currency down against the greenback.

By midweek, the euro had dipped below $1.30, the first time it has sunk to that level since January of this year. The week concluded with more dour news, as Fitch Ratings announced it has targeted France and six other eurozone countries for potential downgrades.

Even U.S. equity markets still seem to be taking their cues from Europe as the 60-day correlation between the S&P 500 Index and the EUR/USD exchange rate hovers around 0.81, after having peaked at 0.91 in November. A correlation of 1.0 would indicate they move exactly in tandem.

Looking forward, Brazil’s central bank is planning on instituting its “dollar fixing” program Monday that aims to provide support for the real. The market seemed to have priced that in to some extent Friday, as the real retraced some of its losses on the week. So it will be interesting to see what, if any, effect the policy will have going forward.

Gainers

Losers

Data Provided by MSCI Inc.

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

Macro Notes
Unsurprisingly, the European crisis continued last week, leaving European equities well in the red, as both local and U.S. investors suffered with the euro losing ground against the dollar. Hungary was the sole gainer in our European tab last week, with local investors eking out a mere 0.83 percent in gains.

At this point, it’s more appropriate to consider what investors should expect in the coming weeks rather than focusing on day-to-day developments in the eurozone.

Expect to see further credit downgrades this week. Specifically, Austria and France look to be at risk of being downgraded by S&P. Though the markets might be slightly immune to another downgrade, the euro will most certainly suffer further from such an event.

This, in turn, could mean bigger losses for U.S. investors in Europe. On the bright side, the dollar stands to gain the most should the euro tank further, as the U.S. dollar index comprises a 60 percent euro weighting.

Still, the bigger question remains: How far is the U.S. Federal Reserve willing to intervene? Though Bernanke has made it clear the Fed won’t provide more aid to European banks beyond the discount window and swaps, 2008 taught us that anything can happen should things become bad enough.

Gainers

Losers

Data Provided by MSCI Inc.

Editor's Choice Graph	Graph Description
	The Australian dollar slumped last week as concerns over the country’s ability to withstand global weakness persisted.

Macro Notes
As the uncertainty over a solution to Europe’s debt woes hangs over financial markets, the Asia-Pacific region was reeling from the expected fallout from Europe and Chinese economic sluggishness.

Doubts about the Chinese economy are beginning to grow. First were concerns over the country’s future growth. Then came the first decline in foreign direct investment in 28 months—then more talk about a policy shift back to stimulation.

These factors, combined with declining cash flows, import tariffs and an explosion in social unrest, are threatening the growth of the entire region, which is so dependent on China’s sustained expansion.

Look no further than India, where a slowing economy is causing both its currency and stock market to fall sharply. The BRIC economy continues to show signs of fatigue, as profit forecasts have been cut to levels not seen since 2009.

While some are calling for a popping of the country’s economic bubble, India’s central bank is concerned enough to have left interest rates unchanged despite overwhelming evidence of inflation. Dollar investors lost more than 5.5 percent in the Indian market last week.

Slowing growth in China is also rippling into Australia, a country that has benefited greatly in recent years from China’s seemingly unending appetite for natural resources.

The country’s market closed down nearly 3 percent last week in U.S. dollar terms, as the nation tries to come to grips with the impact of diminishing Chinese demand for its exports. The Aussie dollar was the region’s worst-performing currency last week.

That’s not to say that Australia was alone in feeling the pain from the dual threat of European insolvency and Chinese weakness.

Korea, Japan and Taiwan all lost more than 2 percent in dollar terms last week, while U.S. investors in Singapore and New Zealand saw losses of more than 1.25 percent.

In short, there was little shelter from the storm in the Asia-Pacific region, as all but one of the region’s markets—Indonesia—finished the week lower.

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
Colombia was the only country spared last week as Latin America took a large hit across the board. The likes of the Brazilian real, the Chilean peso and the Mexican peso slid as investors turned away from risk.

In Brazil, the central bank restarted a program to sell dollars and repurchase them a month later in an effort to bring the real’s decline under control. Still, their efforts proved challenging as the real has marked a 10.69 percent decline thus far.

In Mexico, central bankers are still unsure of measures to take as they debate whether to raise or lower interest rates. The actions—and inactions—of Latin American central banks are a sign of the times, as many debate how to protect their respective nations in the face of a global economic crisis.

For U.S. investors in these countries, expect to see further decline in the real and the Mexican peso should the European debt crisis intensify, as investors will undoubtedly rush to the dollar as a safe haven.

Gainers

Losers

Data Provided by MSCI Inc.

Editor's Choice Graph	Graph Description
	Returns of the MSCI Israel Capped Investable Market Fund (NYSEArca: EIS) and the MSCI Israel index, past 5 trading days, priced in USD and ILS

Macro Notes
U.S. investors in Israeli equities enjoyed positive results last week powered by strong local returns.

Teva Pharmaceutical makes up almost 25 percent of the MSCI Israel Capped Investable Market Index Fund (NYSEArca: EIS). Teva shares were buoyed by views it will be able to defend its market share.

Specifically, the Tel Aviv-based firm filed suit against a competitor for allegedly violating a patent on a breast cancer drug. It has also won a legal victory by preventing a competitor from selling pain medication that competes with Teva’s.

The Israeli shekel weakened slightly against the dollar, but the strong performance of local stocks overpowered the FX drag.

Meanwhile in South Africa, U.S. investors were hurt last week by both local returns and the weakening rand. The rate of producer price inflation decreased more than analysts expected, but it remains over 10 percent. Consumer price inflation remains high, too, at around 6 percent. The central bank isn’t likely to lower rates despite weakening demand for South Africa’s exports.

Emerging market economies like South Africa’s are feeling the impact of Europe’s debt woes. Investors moved away from risky assets, and concerns grew that Europe might be heading back into recession. Both factors drove down commodities and commodity producers, such as South African extraction-based firms.

Gainers

Losers

Data Provided by MSCI Inc.

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

Macro Notes
Continuing concerns about Europe plagued the North American markets for the first half of last week, as did lack of further action by the Federal Reserve after the FOMC meeting was poorly received.

Markets pared back some losses after another week of reduced initial jobless claims and no change in the Consumer Price Index. Despite the bounceback, both U.S. and Canada ended the week down, 2.85 percent and 4.69 percent, respectively.

Capital inflows in October into the U.S and Canada came in below expectation. However, strong inflows are expected into the U.S. in November and December, as a result of a reduction in risk appetite among investors and improvements in the U.S. economy. Such flows don’t bode well for the Canadian dollar.

In the U.S., this week’s Housing Market Index result on Monday and third-quarter GDP on Thursday will be watched to provide affirmation about the strength of the economic recovery. While GDP numbers were previously revised down from 2.5 percent to 2 percent, an upside surprise would provide support to the recent series of improvements among economic indicators.