Members

As at June 2010

Financial market volatility has increased in recent weeks amid growing investor concern over happenings in Europe, the prospect of increased financial market regulation in the United States and, more generally, concern that the economic recovery has hit a rough patch.

In Europe, it is expected that the rescue package announced by the European Central Bank a few weeks ago should be enough to prevent an outright default by Greece, but investors appear to remain concerned about the sharp fall in the value of the euro and are questioning whether the sovereign debt crisis will spill over into other markets.

With regard to financial regulation in the US, a reform package that passed in the US Senate is still a little unclear, but it is considered to be equity market unfriendly.

While many investors have been unnerved by recent events, it is believed the broader economic recovery is still on track. The cyclical recovery remains intact, as interest rates remain relatively low and leading economic indicators continue to have a positive tone.

Europe is the main concern however, and given the magnitude of the recent currency and sovereign debt concerns, equity market performance in the near term is likely to be driven by the broad macro outlook rather than company-specific fundamentals. This suggests that volatility will remain high.