This week's thought-provokers for investors

Zürich, (PresseBox) - Another very volatile week, but equity markets ended on a positive note, at least in the developed countries. Bond markets corrected, driven by infl ation fears and ECB President Trichet's speech on Thursday. The EUR started a strong recovery, overcoming the 1.39 level against the USD. The Swiss franc is above 0.93 against the USD. Brent crude stabilised at levels above USD115/bbl, and gold is trading higher than USD1400/oz.

The eurozone producer price index came in ahead of expectations, with a 1.5% month-on-month spike.

This sharp increase in producer prices - the biggest since 1982 - was mostly driven by energy prices, which surged by 3.2% between December 2010 and January 2011. Crude oil has appreciated by 50% in the last six months, fuelling fears that energy-driven infl ation will continue to come in above expectations. These latest fi gures put even more pressure on the ECB. The least we can expect is a more hawkish tone going forward. However, a rate hike any time soon is still very unlikely given the fragile economic situation in many eurozone countries and the fact that higher rates do not help tame infl ation coming from higher energy and food prices.

Standard & Poor's has warned of further downgrades for Portugal's debt, just a day after Portugal bought back EUR110 million in two of their government bonds maturing in the second quarter. The move was another attempt to signal the country's fi nancial strength after the government achieved spending cuts of 3.9% in the last two months. The rating agency noted the progress made by Portugal with "fi scal stabilisation and economic reforms" in the last few months, but emphasised that the cost for issuing debt are now on unsustainable levels. For weeks, Portuguese yields for maturities of fi ve years and longer have been trading above 7%, a level usually seen as a threshold for sustainable funding.

It is becoming more and more likely that Portugal will fi nally have to accept a fi nancial bailout, similar to Greece and Ireland. The summit of European leaders later this month will be crucial regarding the question of whether a general solution for the region can be found or whether Europe will continue to muddle through case by case.

According to Fed Chairman Bernanke's latest testimony, the US economy is on a sustainable recovery path. But rising commodity prices are driving up infl ation expectations. In that case the Fed will have to respond even though the recovery is not yet completed. Ben Bernanke suggested that infl ation pass-trough was at a historical low and that therefore the likelihood of intervention was also low. Most of the Q&A focused on questions about fi scal policy.

The question remains when and how the Fed's extremely accommodative monetary policy can be exited and how such an exit is going to aff ect the real economy.

Chinese PMI data showed the largest month-onmonth decline since 2004, falling from 54.5 to 51.7 in February. Also, new order growth has eased to the slowest pace since last August. These latest numbers may signal a cooling in the growth of China's manufacturing sector. At the same time, purchasing prices continue to rise.

The latest data give some hope that China's eff orts to control growth are fi nally having some eff ect. A moderate decline in the rate of economic expansion is a positive development in China as long as we don't see a signifi cant slump in growth rates.

Thailand's consumer price index showed a smallerthan- expected increase of 2.87% year-on-year in February, with a 5.15% increase in food and beverage prices being the major driving factor. Core CPI (which excludes volatile food prices) was up 1.45% year-onyear, not as high as projected earlier.

Thailand's latest infl ation fi gures helped to allay fears over rampant infl ation in Southeast Asian emerging markets.

In Indonesia consumer price infl ation eased to 6.84% from a year earlier in February, less than expected. But annualised core infl ation still accelerated to 4.36% after 4.18% in January.

The Indonesian central bank is likely to maintain its key interest rate of 6.75% after an increase in February due to concerns related to rising food prices.

GAM AG

Swiss & Global Asset Management is one of the leading dedicated asset managers in Switzerland and worldwide. At the end of December 2010, Swiss & Global had client assets under management totalling CHF 80.4 billion and employed more than 250 staff . The company off ers a comprehensive range of investment funds, tailored solutions for institutional clients and customised private labelling services. Swiss & Global Asset Management is a unique combination of Swiss roots - in the form of long-standing client relationships and strong quality awareness - and a network that spans the globe, with more than 1,000 distribution contracts in some 30 countries. Swiss & Global Asset Management emerged from Julius Baer Asset Management in October 2009 and is the exclusive manager of Julius Baer funds. Swiss & Global is a company of the GAM Holding which is listed on the SIX Swiss Exchange. For more information visit our website at www.swissglobal-am.com.

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