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Financial focus

Weekly Headlines:
• Greece: Finance minister says the worst is over
• UK: FTSE 100 has best January since 1989
• Germany: Unemployment unexpectedly declines
• Russia: Economy probably grew at weakest pace since 2009
• Philippines: Service sector performance helps economic growth
• Energy: Oil heading for best week for 8 years
• Gold: Longest run of monthly losses since May 2012
• Focus on: Is the US set for a rebound or a recession?

Greece: Finance minister says the worst is over
Greece’s finance minister believes that the worst is over for his
country. “There is definitely a glimmer of hope; light at the end of
the tunnel,” Yannis Stournaras said this week. As reforms were
rushed through and a massive austerity package passed late last
year, Greece secured a significant amount of bailout money from
its international creditors. “The probability of Greece leaving the
euro – Grexit – is now very small”, he told the BBC. “We have
managed to turn the economy around. From the markets, there’s
much more optimism. Deposits are coming back to banks, the
government is paying its arrears to the private sector and there is a
change in how Europe sees us. So all of the leading indicators are
positive. We are two-thirds of the way towards our target. So
people can have hope.”

UK: FTSE 100 enjoys its best January since 1989
London’s blue chip market has enjoyed its best January since
1989, despite slipping on the final day of the month. The FTSE 100
lost 46.23 points to close 0.73% down at 6,276.88. Yet despite this
final day dip, the index has nonetheless gained a considerable
6.43% since the start of 2013 – the sharpest January jump for 24
years. Shrugging off lingering global economic fears, the FTSE has
gained 379.07 points since the beginning of the year – adding an
approximate £96bn to the value of the top 100 listed companies.
The increase was narrowly higher than the 6.29% rise that the FTSE put on in January 1998.

Germany: Unemployment unexpectedly declines
German unemployment unexpectedly dipped in January, adding to signs that Europe’s largest economy is
gathering pace. The number of people out of work fell a seasonally adjusted 16,000 to 2.92m. The Bundesbank
said last week the economy appears to be recovering from its Q4 slump, when GDP may have dropped as much
as 0.5%. Confidence among entrepreneurs and investors rose more than economists estimated in January and a
gauge of activity in service industries climbed to a 19-month high.

Russia: Economy probably grew at weakest pace since 2009
Russia’s economy probably grew last year at the weakest pace since a contraction in 2009 and is set to slow
further, casting doubt on President Vladimir Putin’s drive for an investment-led acceleration in output. Gross
domestic product expanded 3.6% in 2012, down from 4.35% the previous two years, according to the median of 18
estimates in a Bloomberg survey. The Economy Ministry estimated growth at 3.5%. The Federal Statistics Service
in Moscow will report the data this week. The slowdown highlights the challenges facing the world’s largest energy
exporter as oil prices are forecast to stagnate this year and Europe’s stumbling economy saps demand for Russian
commodity exports. The government began an open campaign this month to push the central bank to lower rates,
a step the regulator is resisting because of concerns the economy is already growing near its potential. “We need a
government that is more proactive on the reform side,” Peter Westin, chief strategist at Aton Capital in Moscow,
said. “The central bank is doing a good job, but the government is definitely behind the curve when it comes to
what needs to be done to stimulate the economy.”

Argentina: Tumbling valuations spurs buying
The tumble in Argentine stocks that sent valuations to an almost four-year low has spurred Morgan Stanley
Investment Management and BlackRock to buy. Timothy Drinkall, whose Morgan Stanley Frontier Emerging
Markets Portfolio rose 26% in the past 12 months, said he bought Argentine shares last year after avoiding the
country altogether earlier in 2012. By Dec. 31, the nation’s equities accounted for a larger percentage of holdings
than were in the fund’s benchmark index. The MSCI Argentina Index of five companies with operations in the South
American country has rebounded 16% this year following a 39% fall in 2012 that was sparked by President Cristina
Fernandez de Kirchner’s seizure of the nation’s largest oil company and restriction of imports and capital flows.
“Valuations are at extreme low levels,” said Drinkall, whose frontier fund beat 98% of peers tracked by Bloomberg
during the past 12 months. “Sometimes for a market to adjust upwards, things just have to be less bad.”

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