EYE ON EUROPE: DISCORD & DIVERGENCE

NTC business condition survey data was released today for the Eurozone showing a sharp decline to 4.1 43.61 on a year over year basis to the lowest levels in a decade. Economic contraction, particularly in the manufacturing sector, is increasing the pressure on ECB policy makers to lower rates further. The decline in manufacturing is also exacerbating the tension between EU partners - with French President Sarkozy taking a particularly shrill stance with the creation of a €20 billion fund to defend his nations “strategic companies” from ``foreign predators''.

Importantly, today’s NTC data also revealed that German industry came fared significantly better than the Eurozone aggregate with manufacturing coming in at 42.88 and services at 48.31. We continue to believe that, on a relative basis, the German economy is more stable structurally than the other major economies in Europe and remain long the German equity market via the EWG ETF.

Andrew Barber
Director

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