Weekly Market Recap
May 7, 2012
• Gingrich suspended his presidential campaign.• The ECB left its policy rate unchanged at 1%.
• Personal income rose more than expected.• The ISM Manufacturing survey beat estimates.• The unemployment rate fell to 8.1%.• Nonfarm payrolls rose 115,000 in April.• Next Week: International Trade, Consumer Sentiment.
Thought of the Week
Although stress in Europe seems to have subsided atleast temporarily, a number of issues remain,particularly with respect to Asia. Europe is one of Asia’slargest export markets, making continued stress there anegative for many Asian economies. Additionally,European banks need to strengthen their balance sheetsto meet new capital requirements, which as shown inthis week’s chart, has resulted in an -11.3% decline inEuropean bank lending to emerging Asia since 2Q11. Itwill be necessary to look at the 1Q12 data to gauge theeffectiveness of the ECB’s LTRO in reducing Europeanbank stress; although other banks temporarilysupplemented this decline in lending in 2H11, a furtherreduction in lending to Asia would put added pressureon this region, particularly given their reliance on creditto drive economic growth.
Question of the week:
The labor force participation rate fell to 63.6% in April;when was the last time it was this low?
Prior week's question:
According to Moody's, what percentage of U.S. non-financial corporate cash is held overseas?
Answer to prior week's question:
According to Moody's, nearly $700bn, or 57% of totalU.S. non-financial corporate cash, is held overseas.
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12,72412,21813,22813,038Dow Jones 30
3.452.452.252.1910 Year Municipal
3.221.871.931.8810 Year Treasury
0.590.240.260.262 Year Treasury
0.250.250.250.25Fed Funds Target
6.776.02-2.24-1.61MSCI - EAFE
1 week YTD
4.764.074.044.0530 Year Mortgage
0.320.640.460.466 Month CD
80.6676.9480.4579.88¥ per $
1.651.551.621.62$ per £
1.491.301.331.31$ per €
114.421.5317.5914.23Russell 1000 Growth
76.552.5815.0911.44Russell 1000 Value
Wtd AvgMkt Cap(billions)DividendYieldP/ETrailingP/EForwardIndexCharacteristics
S&P 500 Sector Returns
S & P 5 0 0 T e c h n o l o g y M a t e r i a l s E n e r g y F i n a n c i a l s I n d u s t r i a l s C o n s u m e r D i s c r . H e a l t h C a r e C o n s u m e r S t a p l e s U t i l i t i e s T e l e c o m 0 . 2 - 0 . 2 - 0 . 5 - 1 . 6 - 2 . 1 - 2 . 7 - 2 . 8 - 3 . 3 - 3 . 5 - 3 . 7- 2 . 4
S & P 5 0 0 E n e r g y U t i l i t i e s C o n s u m e r S t a p l e s M a t e r i a l s T e l e c o m H e a l t h C a r e I n d u s t r i a l s C o n s u m e r D i s c r . T e c h n o l o g y F i n a n c i a l s 1 6 . 5 1 5 . 8 1 5 . 6 8 . 1 7 . 2 7 . 1 7 . 1 5 . 6 - 0 . 2 - 1 . 0 9 . 6
1 w e e k Y T D
1 w e e k
Y T D
Note: All returns represent total return including dividends.
Chart of the Week
European Bank Lending to Developing Asia is Declining
Consolidated foreign claims of reporting banks - immediate borrower basis, $bn
$0$200$400$600$800$1,000$1,200'05 '06 '07 '08 '09 '10 '11