Wealth Management Research Update

July 8, 2008, 12:00 PM - Data Source: UBS Wealth Management Research

UBS global outlook 2007:

UBS research focus - Asia's ascent

This UBS research focus report entitled, "Asia's ascent," provides an assessment of the long-term economic growth outlook for several Asian countries and the corresponding implications for investment opportunities in the region. The report also shows the expected impact of Asia on global financial markets.

Daily Market News:

Economic News

Taiwan: Export growth surprised on the upside (July 8, 2008, 7:59 AM)
Due to strong demand from China, Europe and Japan, exports accelerated surprisingly to 21.3% y/y from 20.5% in May. Import growth also rose to 22.5% y/y from 17.6% out of higher oil prices. We expect both exports and imports to ease in 3Q, as higher inflation may dampen global demand.

Taiwan: inflation accelerated in June (July 7, 2008, 3:45 PM)
Inflation rose to 5% y/y from 3.7% in May out of higher food and fuel prices. Food and fuel price growth quickened to 11.9% and 23.2% respectively in June. Core CPI growth edged up to 3.7% from 3.2% in May. Inflation is set to move higher with fuel and electricity price hikes in early July.

Switzerland: Labor market continues to improve (July 7, 2008, 10:27 AM)
The improvement of the Swiss labor market continued in June. The unemployment rate declined to 2.3% from 2.4% in May. Adjusted for seasonal swings, the rate held steady at 2.5%. The number of open headcounts declined slightly over the month, but is still substantially higher than a year ago.

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Equity Markets EU

Daily European Equity Market Comment (July 7, 2008, 4:49 PM)
European stocks advanced on Monday on speculations that equities are now cheap as relative to their earnings. Utilities, Technology and Travel & Leisure were amongst the best performing sectors. Iberdrola, Spain's second-largest power company, advanced on reports that a shareholder in Gas Natural sees no alternative but to merge the two utilities. Nokia and Siemens were amongst the best performing stocks in the DJ STOXX 50 index. Retail, Basic Resources, Healthcare and Banks were amongst the worst performing sectors. Bradford & Bingley, the biggest lender to U.K. landlords, fell on forecasts that late mortgage payments will wipe out earnings. Fresenius, Europe's biggest maker of intravenous drugs, declined after it agreed to buy APP Pharmaceuticals for USD 4.6 bn. Alliance & Leicester fell on speculation about a possible cut in its interim dividend.

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Equity Markets Asia

Daily Asian-Pacific Market Comment (July 7, 2008, 12:09 PM)
On Monday, Asian markets traded higher led by financial and technology stocks. In Japan, the Nikkei index was up almost a percent ending a twelve day loosing streak. Mizohu and Mitsubishi Estate took the index up as the stocks closed up 6 percent and 2.7 percent respectively. In China, the Shanghai composite index was up 4.5 percent led by financial stocks such as China Merchants after the stock rose more than 9 percent. In Hong Kong the Hang Seng index was up 2.3 percent as the banking sector outperformed as some banks forecasted strong first half earnings. In Korea the Kospi index closed up 1.7 percent supported by steel and banking stocks. POSCO and Kookmin bank were the major gainers.

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Forex Markets

EURSKK: Final conversion rate announced (July 8, 2008, 11:40 AM)
Slovakia was given the green light to join the European Monetary Union, with a conversion rate of EURSKK 30.126, the middle of the current trading band. Slovakia will give up their national currency on January 1, 2009.

AUD: Declining business confidence weighs on AUD (July 8, 2008, 10:34 AM)
On Tuesday AUDUSD approached the 0.95 level. The NAB business confidence at a a new seven year low and higher risk aversion continue to weigh on the AUD. Nevertheless, we expect the RBA to remain on hold this year. High interest rates should limit the AUD downside.

USD: under pressure after renewed credit troubles (July 8, 2008, 10:33 AM)
Concerns about the capital adequacy of Fannie Mae and Freddie Mac, the primary mortgage lenders in the US, brought the USD again under pressure. Given the light economic calendar, concerns over the financial sector and the earning result of financial institutions are likely to influence FX markets.

USD: Hope from the G8 (July 7, 2008, 3:43 PM)
EURUSD moved below 1.57 as US data did not add worry and markets look to the G8. We do not expect any new comment on currencies for this meeting - the central banks are not represented - but many are hoping for help on oil prices. Any immediate support of USD, directly or indirectly, is unlikely.

EURNOK: industrial production better than expected (July 7, 2008, 3:30 PM)
Norwegian industrial production declined by 0.7% m/m in May after the strong rise in April by 6%. The data was better than markets had expected. High oil prices and a further rate hike by Norges Bank this autumn should keep EURNOK in 7.8-8.0 trading range for the time being.

CHF: SNB's Jordan sees risks of wage-price spiral (July 7, 2008, 11:19 AM)
SNB's board member Jordan said that the SNB would raise interest rates if it saw the risks of a wage-price spiral developing. Nevertheless, the CHF weakened as a result of recovering global stock markets. We expect the CHF to continue to move in sync with risk aversion in the short term.

AUD: drops after weak job advertisements (July 7, 2008, 11:18 AM)
AUDUSD dropped below the level 0.96 after the greenback recovered on a broad basis and the weak Australian job advertisements. Although employment growth might slow down going forward, interest rates remaining high as a resposne to inflation pressure should keep AUDUSD above the 0.90-level.

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