Plenum Glance

Equity indices finished the year on a positive note in general with a gain of 3.46% for the MSCI World Index and 3.80% for the FTSE World. The US recovery is currently confirmed by better unemployment figures (-40K in November) and improved retails sales and Chicago PMI data. Emerging markets are still in favor as well on the prospect of solid growth for 2010 (+5% to +6%) with Brazil and Russia leading the way.

Fears of oversupply and shift in monetary policy from central banks in 2010 were detrimental to government bonds with the 10 US T.Notes up over 75 basis points in December from 3.15% to 3.90%, one of the sharpest move for 2009. In addition, the 10 year gilts in the UK suffered a strong correction on renewed concerned of the UK deficit for 2010 and lack of clear budget guidelines after the election (probably in May 2010). The outlook for 2010 is not too good for the fixed income markets in an environment of exit strategies from the various central banks around the world with unbalanced budgets. Various studies show that more than 3 trillion of bonds will be issued in the G7 countries and there are some fears that the bid to cover ratio will deteriorate rapidly, not to mention countries like Greece which could be trapped being unable to issue new debt.

Commodities were gently bid all month with the DCI Total Return ($) up +2.03% energy products like crude, gasoline, natural gas benefiting from the very cold weather in North America and Europe to recover from the November correction. Base metals were also much in favor with the prospect of solid growth in 2010 in Emerging markets and strikes in copper mines. Precious metals had a mixed performance with gold and silver correcting sharply while platinum and palladium bid due to demand in the industrial sector. Grains were trading higher on the prospect of strong demand from the emerging markets and more demand coming from the ethanol industry.

In the foreign exchange the strong figures coming out the US industry and fears about the debt crisis in Greece triggered a sharp appreciation of the US Dollar from 1.51 to 1.42 versus the Euro. As well, renewed concerned about the ballooning debt in Japan and the news that the BoJ do not have an exit strategy sent the Yen 5% lower for the month. Finally the SNB seems to have given up on preventing the Swiss Franc appreciating versus the Euro around the 1.50 area and there was a sharp sell off in Euro / Swiss from 1.5100 to 1.4850 in the last two weeks of December.