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FEATURE ARTICLE, PAGE 5

Are Stocks Cheap?

Congress Passes Bailout BillAfter Global Equity Markets First Hammeredby Bailout Uncertainty, Credit Market Strains

U.S. Economic Downturn Deepens Canadian Growth Unsustainably Strong in July Commodities Tumble on Global Growth Fears ECB Softens ToneRate Cut Coming Wachovia Bought by Wells Fargo, not Citigroup

OCTOBER 3, 200


2/13

PAGE 2 FOCUS OCTOBER 3, 2008

After the latest bout of intense volatility and clear signs the U.S. econom

is on the ropes, markets are now fully priced for a 50 basis point rate cu

from the Federal Reserve this month, with many looking at an imminen

move. This prospect was priced in even before the fate of the massiv

rescue package in the second try in the House was known. Th

macroeconomic case for renewed rate relief is mounting rapidly, amidstring of weak U.S. results for September: (1) the ISM for manufacturing posted i

biggest monthly drop in almost 25 years, falling to a recession-like 43.5 last month, (

auto sales plunged 27% y/y, with plenty of remarks about tight credit crimpin

activity, and (3) payrolls fell 159,000, their largest drop this cycle, and the survey wa

taken even before the worst of the financial storm hit.

There is some concern that a rate cut could be washed aside by the relentless ris

in credit spreads. Arguably the most unsettling development in recent weeks has bee

the steep back-up in Libor, with 3-month US$ rates rising another 57 bps this week t

4.33%. Its fair to ask how much good a 50-bp cut from the Fed would do when marke

rates are rising by more than that amount in the space of a week. Still, the combinatioof the rescue package, a Fed rate cut, and the flood of liquidity measures by all centr

banks may help stem the rising tide in interbank rates. The fact that two banks (We

Fargo and Citigroup) were competing to buy Wachovia could be viewed in a positiv

light. Meantime, the Fed has cranked up the size of its balance sheet massively in recen

weeks, as it sometimes seems to be the lender of only resort these days. In the past wee

alone, the Fed increased various credit lines by $284 billion, and other central banks ar

also opening the taps wider. In addition, the Bank of England appears poised to cut rate

next week, and the ECB revealed that a rate cut was discussed at this weeks polic

meeting, a clear prelude.

The case for a cut in Canada is also building (see Bens piece) and the centrbank is ramping up its liquidity measures. The extraordinary hit to the TSX this wee

made the case that much louder. After outperforming almost all other marke

through the first half of the year, the rising tide of the global credit crisis fully washe

over the TSX, with the index sliding more than 13% in the space of just five session

dating back to last Friday. The TSX was pounded in two separate 7% down days, wit

the first hit delivered to all global markets by the Houses nay vote and the deepenin

credit strains, and the second was a serious sideswiping from commoditie

Commodity price measures are not just back to levels of a year ago, but all the wa

back to levels prevailing in late 2005, and the sell-off is taking no prisoners.

darkening global growth outlook and a rejuvenated U.S. dollarwhich had its beweek in yearshave both pounded on resource prices.

In case you are looking for a shred of optimism: No fewer than three bea

markets have been halted in their tracks in the second week of October in the past tw

decades alone. In 1990, 1998, and 2002, the S&P 500 hit bottom in that period. Is th

fourth time a charm? Of course, a real optimist would hope that the bottom wa

reached in the first week of October in this episode. A pessimist would note this late

bear actually began in the second week of October last year, and that the third wee

of October has a bit of history itself.

Our Thoughts

DOUGLAS PORTER


3/13


It looks like the Bank of Canada may follow in the Feds footsteps. In the pa

two weeks, weve seen July GDP surge 0.7% and August inflation accelera

in Canada. Usually, that combination would not be conducive to rate cut

but the GDP gain is simply unsustainable, as the big increases were in oil

gas output and manufacturing. And, inflation is likely to retreat wit

commodity prices falling and the economy slowing.Given the recent dramatic turn of events in global financial markets and th

intensifying credit market strains, we now expect the Bank of Canada to cut rates at th

October 21 meeting, if not sooner. The two downside risks cited by the Bankthe U.

economy and credit conditionshave worsened markedly over the past three week

The U.S. economy is in recession and the economic data stateside have deteriorate

further. Canada will feel the knock-on effects of the U.S. downturn. In addition, th

global slowdown is undercutting commodity prices, which will in turn weigh o

domestic demand in Canada. Meantime, credit conditions have tightened globall

While Canada has fared better than most, we have been impacted as well. In respons

the Bank of Canada initiated at least $20 bln in PRAs in an attempt to calm monemarkets. With these key risks intensifying, the Banks forecasts for Canadian growth an

inflation have likely been revised down, opening the door for easing at, or perhap

before, the next scheduled meeting.

The credit crisis is taking big bites out of economic activity around th

world, and even the strongest Canadian provinces are not immune. Th

challenge facing Central Canada is well-documenteda manufacturin

sector burdened by competitiveness issues and a deepening U.

downturn. While Ontario managed to skirt technical recession in Q2, re

GDP was up only 0.2% y/y, the slowest pace in four years. Exporcontinued to weigh on growthfinal domestic demand was up a solid 4.2% y/y. Th

outlook is even weaker as the credit crunch continues to take its toll on U.S. growth.

Meantime, the outlook for the once-resilient western provinces is now als

deteriorating. A global economic slowdown has dragged oil prices down more tha

$50 in the space of just three months, to levels close to those that represent brea

even prices for marginal oil sands projectsmost reports peg this in the $80-$9

range. At the same time, tighter credit conditions threaten to hit the resource an

agriculture sectors. While large oil companies have built up plenty of cash during th

commodity boom, the junior energy and farm sectors tend to be more financing

dependent. Finally, tighter lending standards and declining confidence threaten tweigh further on western housing markets that have led the country for the past fou

yearsaverage prices are down in B.C. for the first time since 2001, and residenti

construction in Alberta is running at half the pace of last year. This is not a deat

sentence for the economy of Western Canadajob growth and consumer spendin

are still solid, and near-$100 oil will keep cash from existing projects flowing. Rathe

its meant to point out that no region of the country is fully sheltered from the howlin

credit crisis, and a period of modest economic growth is in the cards out west after

four-year boom.

Our Thoughts

ROBERT KAVCIC


4/13


GOOD NEWS BAD NEWS

CANADADespite decent economic

data this week, equities

pummelled, led bycommodities

CAD weakens markedly

Real GDP at Basic Prices +0.7% (July)

Conference Boards Consumer Confidence Index

+2.6 pts to 85.7 (Sep.)

Industrial Product Prices -0.2% (Aug.)

Raw Material Prices -7.7% (Aug.)

Auto Sales +1.7% y/y (Sep.)

CANADA

UNITED STATESCongress passes packageEconomic downturn sped

up in September

Latest merger news: WellsFargo and Wachovia. Whatabout Citigroup?

Conference Boards Consumer Confidence Index

+1.3 pts to 59.8 (Sep.)

Personal Income +0.5% (Aug.)

Average Hourly Earnings +0.2% (Sep.)

Nonmanufacturing ISM -0.4 pts to 50.2 but still

expandingChicago PMI -1.2 pts to 56.7 (Sep.)

but still expanding

U.S.

Nonfarm Payrolls -159,000 (Sep.)

Unemployment Rate unch at 6.1% (Sep.)5-yr high

Manufacturing ISM -6.4 pts to 43.5 (Sep.)

Factory Orders -4.0% (Aug.)

Construction Spending unch (Aug.)

Real Personal Spending unch (Aug.)

Redbook -1.3% (Sep. 27 wk)

AutoSales -27% y/y (Sep.)

S&P Case-Shiller House Prices -16.3% y/y (July)

Challenger reports announced layoffs rise

33% y/y (Sep.)

Initial Claims +1k to 497k (Sep. 27 wk)

EUROPEECB stays on hold but rate

cut discussed as Trichet

acknowledges downside

risk to economy

European governmentsswoop in to nationalize

banks

Ireland and Greeceguarantee deposits

EurozoneConsumer Prices slowedto+3.6% y/y (Sep. P)

EurozoneProducer Prices -0.5% (Aug.)

EurozoneRetail Sales +0.3% (Aug.)

EurozoneServices PMI revised up to 48.4 (Sep. F)

GermanyUnemployment-29,000 (Sep.)

GermanyRetail Sales +3.1% (Aug.)

U.K.GfK Consumer Confidence +4 pts to -32 (Sep.)

EUROPE

EurozoneEconomic Confidence -0.8 pts to87.7 (Sep.)

EurozoneManufacturing PMI revised down to

45.0 (Sep. F)

EurozoneJobless Rate +0.1 ppts to 7.5% (Aug.)

U.K.Manufacturing PMI -4.3 pts to 41.0 (Sep.)

U.K.Services PMI -3.2 pts to 46.0 (Sep.)

U.K.Credit Conditions tighten (Q3)

ItalyJobless Rate +0.2 ppts to 6.8% (Q2)

JAPANRecession already here?

RetailSales +0.7% (Aug.)

JAPANTankan Survey -8 pts to -3 (Q3)

Jobless Rate +0.2 ppts to 4.2% (Aug.)

Household Spending -4.0% y/y (Aug.)

Industrial Production -3.5% (Aug. P)

Indications of stronger growth and a move toward price stability are good news for the economy.

Jennifer Lee, Economist

Recap


5/13


Are Stocks Cheap?Robert Kavcic, Economic Analyst

Stock markets are in the grip of the worst downturn sinc

the bursting of the technology bubble. With prices no

deep in bear market territory, and record-breaking poinmoves almost a daily phenomenon, it begs the questio

Are stocks cheap yet? While valuation metrics give mixe

results, stocks generally look to be on the cheap side, bu

the earnings numbers on which those valuations are base

remain subject to downside risk.

The equity bear market is now a year old, with the S&P 50

down 29% from its October-07 peak. This puts the curren

selloff in-line with the average post-war recessio

experience (Table 1

). The current episode is outdone onby the tech-wrecka bear market exaggerated by hig

technology valuationsand two cases in the 1970s. St

at almost 12 months old, the bear market lags th

historical norm of about 16 months in duration.

The widely used Fed valuation model compares t

earnings yield offered by stocks (essentially the inverse

the p/e ratio) to the yield on government bonds, suggestin

that stocks are cheap when their earnings yield more tha

Treasuries. With earnings yields still relatively high and bon

yields probing multi-decade lows, this simple modsuggests that the S&P 500 is 44% undervalued at curre

levels. But, the model contains some major flaws that nee

to be addressed in the current environment. First, with 1

year Treasury yields near the lowest level since the 1950

the basic Fed model is losing reliability. That is, as intere

rates fall toward zero, the implied fair value of stoc

approaches infinitycase in point is the Japanese Nikke

which is unrealistically 75% undervalued by this measur

Also, the basic model discounts future earnings at a risk-fre

rate. It seems unreasonable to discount volatile corporaearnings at a risk-free rate in the current environmen

which has seen corporate yield spreads surge (Chart 1) an

earnings consistently miss expectations. To account for th

risk, we add the spread between corporate BAA rates an

10-year Treasuries to the basic model. This risk-adjuste

version suggests that, while less attractive than under th

basic model, the S&P 500 is still 13% undervalued at curre

levels (Chart 2).

Feature

* calculations based on month-end

RANKING THE RECESSIONS

Decline*

(percent)-46%

-40%

-33%

-29%

-24%

-19%

-16%

-12%

-12%

Duration

(months)21

23

19

12

20

17

5

8

15

Year1974

2001

1970

2008

1982

1957

1990

1953

1960

TABLE 1

S&P 500 Peak to Trough Decline

CORPORATE RISK SURGESCHART 1

United States (ppts)

BAA Long-Term Treasuries

04 05 06 07 081.0

1.52.0

2.5

3.0

3.5

4.0

STANDARD VALUATION MODEL IGNORES RISKCHART 2

S&P 500 (percent)

82 87 92 97 02 07-60

-40

-20

0

20

40

60

80

Risk-Adjusted

Model

FedModel

Overvalued

Undervalued


6/13


As with any valuation model, the quality of the inputs is

critical consideration. In this case, the only flimsy variable

the forward-year earnings estimate, which faces considerab

downside riskanalysts are currently projecting a sharp 42

rebound in S&P 500 operating earnings over the next yea

While financial earnings are expected to bounce back fro

negative levels, cyclical sectors including consum

discretionary, technology, energy and materials are all pricin

in double-digit growth even as credit conditions deteriorat

global economic activity continues to weaken and pro

margins contract (Chart 3). As such, these sectors will like

face downward revisions in the coming quarters.

That said, how far do earnings still have to fall? U

corporate profits have been firmly in a cyclical downtren

since 2006Q3, but remain about 20% above normalizelevels (Chart 4). We calculate normalized earnings b

taking the historical average share of profits from nomin

GDPa proxy for profit margins. While down from i

cyclical high, the current 10.9% profit margin has about

ppts further to fall before reaching postwar-average leve

a reversion that would offset much of the undervaluatio

seen in most earnings-based measures.

Given the clear and present earnings risk, its wort

considering some non-earnings based valuation measure

The equity q-ratio compares the market value nonfinancial corporate equity to the replacement value

corporate assets. When the ratio is less than 1, as it

currently, it implies that the cost of buying the equit

market is cheaper than the cost of building the underlyin

businesses from scratch. By this measure, stocks look th

most attractive theyve been since 1992 (Chart 5). A relate

measure that includes the financial sector is the S&P 50

price-to-book value, and its down sharply from the 199

peak and also at a 16-year low. These asset-base

valuation measures appear supportive of stock priceparticularly outside the financial sector.

The Bottom Line: A range of metrics suggests that valuation

have indeed moved into attractive territory and at least don

pose a headwind to stock prices. However, the market w

continue to grapple with the possibility of a long earning

recession, and a turnaround in corporate profits will need

be on the horizon to drive stocks higher on a sustained basis.

Feature

* Financials excluded (not meaningful)

EARNINGS ESTIMATES STILL HIGHCHART 3

S&P 500* (percent)

Forward-Year Consensus Earnings Growth

Consumer Disc.

Telecom

Technology

Energy

Health Care

Consumer Staples

Utilities

Materials

Industrials

0 10 20 30 40 50

* Nominal GDP Average Profit Share

PROFIT RECESSION IN FULL SWINGCHART 4

United States ($blns)

80 85 90 95 00 050

500

1,000

1,500

2,000

Normalized*

CorporateProfits 20%

Gap

* (market value of equity / current value of corporate net worth, non farm nonfinancial sector)

CHART 5

NON-EARNINGS MEASURES LEND SUPPORTS&P 500 Price-to-Book Value

56 66 76 86 96 060

1

2

3

4

5

6

Equity Q-Ratio*

56 66 76 86 96 060.0

0.5

1.0

1.5

2.0


7/13


CANADA I II III IV I II III IV 2007 2008 2009

Real GDP (q/q % chng : a.r.) -0.8 0.3 1.7 -0.4 0.6 1.4 2.0 2.4 2.7 0.7 1.0

Consumer Price Index (y/y % chng) 1.8 2.3 3.5 3.4 3.4 2.5 1.9 2.1 2.1 2.7 2.5Unemployment Rate (%) 5.9 6.1 6.1 6.4 6.6 6.7 6.6 6.6 6.0 6.1 6.6

Housing Starts (000s : a.r.) 234 220 197 190 188 185 184 183 228 210 185

Current Account Balance ($blns : a.r.) 17.8 27.0 10.1 5.2 0.4 -2.5 -4.4 -5.5 13.6 15.0 -3.0

Interest Rates

(average for the quarter : %)

Overnight Rate 3.83 3.00 3.00 2.67 2.50 2.50 2.58 3.17 4.35 3.13 2.69

3-month Treasury Bill 2.99 2.54 2.31 2.04 2.00 2.34 2.85 3.36 4.14 2.47 2.64

10-year Bond 3.73 3.67 3.63 3.38 3.40 3.57 3.76 3.94 4.27 3.60 3.67

Canada/U.S. Interest Rat e Spreads(average for the quarter : bps)

90-day 90 89 79 78 57 60 74 88 -34 84 70

10-year 7 -22 -23 -12 -13 -17 -21 -24 -36 -12 -19

UNITED STATES

Real GDP (q/q % chng : a.r.) 0.9 2.8 -0.6 -0.6 0.5 1.4 2.2 2.5 2.0 1.5 0.8

Consumer Price Index (y/y % chng) 4.2 4.3 5.3 4.3 3.6 2.7 1.5 1.6 2.9 4.5 2.3

Unemployment Rate (%) 4.9 5.3 6.0 6.4 6.6 6.8 6.8 7.0 4.6 5.6 6.8

Housing Starts (mlns : a.r.) 1.05 1.03 0.91 0.83 0.80 0.83 0.89 0.95 1.34 0.96 0.87

Current Account Balance ($blns : a.r.) -703 -733 -702 -643 -609 -577 -553 -539 -731 -695 -570

Interest Rates

(average for the quarter : %)

Fed Funds Target Rate 2.75 2.00 2.00 1.50 1.50 1.50 1.58 2.08 5.00 2.06 1.67

3-month Treasury Bill 2.09 1.66 1.52 1.26 1.43 1.74 2.11 2.48 4.47 1.63 1.94

10-year Note 3.66 3.88 3.86 3.49 3.53 3.74 3.96 4.18 4.63 3.73 3.85

EXCHANGE RATES

(average for the quarter)

US/C$ 99.6 99.0 96.0 93.0 92.0 91.2 90.4 89.6 93.5 96.9 90.8

C$/US$ 1.004 1.010 1.042 1.075 1.087 1.097 1.107 1.117 1.074 1.033 1.102

/US$ 105 105 108 108 110 114 113 111 118 106 112

US$/Euro 1.50 1.56 1.50 1.39 1.38 1.35 1.33 1.31 1.37 1.49 1.34

US$/ 1.98 1.97 1.89 1.77 1.74 1.73 1.72 1.70 2.00 1.90 1.72

Note: Blocked areas represent BMO Capital Markets forecasts

Up and down arrows indicate changes to the forecast

2008 2009 ANNUAL

Economic Forecast


8/13


CANADA Douglas Porter, CFA, Deputy Chief EconomiThere will be a string of housing-related data next week, including building permits f

August on Monday, housing starts for September on Wednesday, and new hom

prices for August on Friday. They are all expected to point in the same direction

slowdown. Only the starts data will have been in any way affected by the latest seveflare-up in financial turmoil, although its too soon to see a major impact. We look for

drop in starts to the 205,000 area, which masks a much more serious slowdown

single-family activity. Those starts have dropped back to their lowest level since th

start of the decade in recent months, as only buoyant condo activity has held up th

broader figures. That support is expected to give way over the next year.

Coming just days before the federal election, and during the midst of the financi

hurricane, the September employment report will carry some outsized attentio

However, since the survey was conducted in the middle of the month (i.e. before th

worst of the turmoil), the results may lack fireworks. Looking through the recent bswings in employment, there has been no net new job creation over the past s

months, and we expect a similar no-growth story for September, with the risks tilted t

the downside. That may compare favourably with the 9-month string of job losses

the U.S., but its a long way from last years average monthly gain of 30,000. Th

subdued performance is expected to bump up the unemployment rate a tick to 6.2%

matching the highest level since late 2006, and up from the 5.8% secular low at th

start of the year. Average wages are likely to moderate a bit further to a 3.7% y/y pac

well down from the scorching 4.9% peak also seen at the start of the year.

Exports likely weakened in August amid a pullback in commodity prices and slowin

U.S. spending. That should cut the trade surplus to $4.2 billion from Julys $4.9 billio

taking it to a six-month low. But we likely aint seen nothing yet on the trade fron

with resource prices in retreat and the U.S. consumer battening down the hatches. A

recently as late last year, the surplus dipped to $2 billion, and it could easily go lowe

still if the U.S. economy takes a serious step back. Net exports look to remain th

biggest drag on the Canadian economy for quite some time yet.

In an already crowded economic calendar on Friday, the Bank of Canada will for th

first time release the results of its Senior Loan Officer Survey. This will provide som

clear evidence if lending standards have been significantly changed in Canada

recent months. (The only caveat would be that the survey may already be a tad dated

since it was likely conducted prior to the most intense financial turmoil.) Perhap

providing an early read, Governor Carney said in last weeks speech that there is n

evidence at this point that our corporations are facing unusual credit restrictions.

addition, the Bank will also release its usual Business Outlook Survey, and its expecte

to show some ratcheting back in expectations for sales, employment and capit

spending, as well as less serious price pressures.

Key for Next Week

Housing StartsWednesday, 8:15 am

Sep. (e) 205,000 a.r.Consensus 209,000 a.r.

Aug. 211,000 a.r.

EmploymentFriday, 7:00 am

Sep. (e) unchConsensus +12,500 (+0.1%)

Aug. +15,200 (+0.1%)Unemployment Rate

Sep. (e) 6.2%Consensus 6.2%

Aug. 6.1%

Average Hourly WagesSep. (e) +3.7% y/yAug. +3.8% y/y

Merchandise Trade SurplusFriday, 8:30 am

Aug. (e) $4.2 blnConsensus $4.7 bln

July $4.9 bln

Bank of Canada SurveysFriday, 10:30 am


9/13


UNITED STATES Jennifer Lee, EconomiThe minutes to the Federal Reserves September 16th meeting (when the decision t

stay on hold was unanimous) will be mildly interesting, if to get a handle on ho

nervous policymakers were becoming. Remember, the meeting was just two day

after Lehman went belly-up and Bank of America bought Merrill Lynch. The amount odiscussion regarding inflation concerns will also be of interest, especially by Fishe

given that in the press release, the reference to elevated energy prices was removed

Look for pending home sales to drop for the second straight month in August. We a

calling for a 1% decline in this leading indicator of housing activity, adding to July

outsized 3.2% fall. This will leave sales just slightly below year-ago levels, as dramatical

reduced prices and foreclosures beckon to potential homebuyers with the ability t

obtain credit. Anecdotal reports also suggest that foreigners are taking advantage

these times as their opportunity to dip their toes into the U.S. housing market.

The August trade deficit is expected to narrow but only modestly. Crude oil pric

dropped, on average, by about $15/bbl in the month but it takes time to show up

the trade data. Meantime, after possibly hitting rock bottom in July, the Feds trade

weighted U.S. dollar surged in August, which will curb already-slowing export activit

Also, the exports component in the manufacturing ISM series leads the trade numbe

by a month or two and the component edged lower in June and July, suggesting th

exports grew at a slower pace in August. Finally, Chinas trade surplus continued t

widen in the month. Look for a trade shortfall of about $60 bln in the month.

FOMC MinutesTuesday, 2:00 pm

Pending Home SalesWednesday, 10:00 am

Aug. (e) -1.0%Consensus -1.1%

July -3.2%

Trade DeficitFriday, 8:30 am

Aug. (e) $59.5 blnConsensus $59.0 bln

July $62.2 bln

Key for Next Week


10/13


OCT 3* SEP 26 WEEK AGO 4 WEEKS AGO DEC. 31/07

Call Money 3.00 3.00 0 0 -125Prime Rate 4.75 4.75 0 0 -125

Fed Funds (effective) 2.00 2.00 0 0 -225Prime Rate 5.00 5.00 0 0 -225

Canada 1.35 1.83 -48 -100 -247United States 0.53 0.84 -32 -124 -271Japan 0.56 0.57 -1 -2 1Eurozone 5.34 5.14 20 38 66United Kingdom 6.27 6.26 1 53 28Australia 7.99 7.74 25 81 107

Canada 2.61 2.83 -22 -11 -114United States 1.74 2.10 -36 -57 -131

Canada 3.80 3.68 12 33 -19United States 3.69 3.85 -16 -1 -33Japan 1.45 1.47 -2 -2 -6Germany 3.91 4.16 -25 -9 -39United Kingdom 4.37 4.55 -18 -1 -14Australia 5.29 5.61 -33 -34 -104

US/C$ 92.46 96.75 -4.4 -1.8 -7.7

C$/US$ 1.082 1.034 /US$ 105.68 106.01 -0.3 -1.9 -5.4US$/Euro 1.3748 1.4614 -5.9 -3.6 -5.8US$/ 1.773 1.845 -3.9 0.4 -10.7US/A$ 77.47 83.10 -6.8 -5.0 -11.5

CRB Futures Index 326.79 364.57 -10.4 -11.1 -8.9Oil (generic contract) 94.58 106.89 -11.5 -11.0 -1.5Natural Gas (generic contract) 7.38 7.63 -3.3 -0.9 -1.4Gold (spot price) 829.35 878.75 -5.6 3.2 -0.5

S&P/TSX Composite 11242 12126 -7.3 -12.3 -18.7S&P 500 1139 1213 -6.1 -8.3 -22.4Nasdaq 2022 2183 -7.4 -10.4 -23.8Dow Jones Industrial 10645 11143 -4.5 -5.1 -19.7Nikkei 10938 11893 -8.0 -10.4 -28.5Frankfurt DAX 5725 6064 -5.6 -6.6 -29.0London FT100 4926 5088 -3.2 -6.0 -23.7France CAC40 4019 4163 -3.5 -4.2 -28.4S&P ASX 200 4695 4905 -4.3 -3.7 -25.9

* as of 10:30 am

2-year Bond

Currencies

Commodities

Equities

CHANGE FROM: (BASIS POINTS)

(% CHANGE)

Canadian Money Market

U.S. Money Market

3-Month Rates

Bond Markets

10-year Bond

Financial Markets Update


11/13

MONDAY OCTOBER 6 TUESDAY OCTOBER 7 WEDNESDAY OCTOBER 8 THURSDAY OCTOBE

JAPAN Leading Index

Aug. P (e) 89.2July 91.4

Bank of Japan Monetary Policy

Meeting (October 6-7)

BoJ Monthly Report

Machine OrdersAug. (e) -2.7% -2July -3.9% -4

Machine Tool OrdersSep. PAug. -13.9% y/y

EUROZONE G E R M A N Y

Factory OrdersAug. (e) -0.5% -4.7% y/yJuly -1.7% -0.7% y/y

E U R O Z O N E

Real GDPQ2 F (e) -0.2% +1.4% y/yQ1 +0.7% +2.1% y/y

G E R M A N Y

Industrial ProductionAug. (e) -0.3% -2.8% y/yJuly -1.8% -0.6% y/y

F R A N C E

Trade DeficitAug. (e) 4.5 bln

July 4.8 bln

G E R M A N Y

Trade SurplusAug. (e) 12.0 blnJuly 13.9 bln

ECB Monthly Repo

U.K.

Industrial ProductionAug. (e) -0.2% -2.0% y/yJuly -0.4% -1.9% y/y

Manufacturing ProductionAug. (e) -0.2% -1.6% y/yJuly -0.2% -1.4% y/y

Nationwide Consumer ConfidenceSep. (e) 49Aug. 52

Trade Deficit NAug. (e) 7.6 bln 4July 7.7 bln 4

Bank of England Moneta

Meeting (October 8

OTH

ER

Reserve Bank of Australia Monetary

Policy Meeting

A U S T R A L I A

EmploymentSep. (e) unchAug. +14,600

Jobless RateSep. (e) 4.3%Aug. 4.1%

M E X I C O

CPI CoSep. (e) +0.7% +Aug. +0.6% +

OCTOBER 6 OCTOBER 10


12/13

* date approximate Upcoming Policy Meetings Bank of Canada: October 21, December 9, January 20 FOMC: October 28-29, December 16, Ja

MONDAY OCTOBER 6 TUESDAY OCTOBER 7 WEDNESDAY OCTOBER 8 THURSDAY OCTOBE

CANADA8:30 am Building Permits

Aug. (e) -3.0%July +1.8%

10:00 am Ivey Purchasing ManagersIndex

Sep. (e) 49.0

Aug. 51.5

8:15 am Housing StartsSep. (e) 205,000 a.r.

Consensus 209,000 a.r.Aug. 211,000 a.r.

10:00 am Pending Home SalesAug. (e) -1.0%

Consensus -1.1%July -3.2%

10:35 am DoEs Petroleum Status

Report (Oct. 3 week)

UNITED

STATES

1:00 pm 3 & 6-month T-billauction $53.0 bln(New cash $8.0 bln)

8:55 am RedbookOct. 4Sep. 27 -1.3%

1:15 pm Fed Chairman Bernanke

speaks on the economyand markets in

Washington

2:00 pm FOMC Minutes from

September meeting

3:00 pm Consumer CreditAug. (e) +$5.0 bln

Consensus +$5.8 blnJuly +$4.6 bln

5:00 pm ABC News/WashingtonPost Consumer ComfortIndex

Oct. 5Sep. 28 -41

Presidential Debate

1:00 pm 10-year TIPS auction$9.0 bln(New cash -$7.0 bln)

8:30 am Initial ClaimsOct. 4 (e) 475,000 (-22,00Sep. 27 497,000 (+1,000)

10:00 am Wholesale InveAug. (e) +0.4%

Consensus +0.4%July +1.4%

10:00 am Conference BoaConfidence Inde

Q3Q2 39

10:35 am DoEs Natural GaReport (Oct. 3 w

Chain-Store SaleSep. (e) +1.4% y/yAug. +1.7% y/y

North AOCTOBER 6 OCTOBER 10


13/13


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