Global Economic Research July 29, 2010 @ 07:30 EST

Daily Points
CAPITAL MARKETS RESEARCH
Derek Holt (416) 863-7707
derek_holt@scotiacapital.com
Gorica Djeric (416) 862-3080 — Tracking the numbers
gorica_djeric@scotiacapital.com

On Deck for Thursday, July 29 BoC Events

Country Date ET Indicator Period BNS Consensus Latest BoC Overnight Lending Rate
CA 07/29 (08:30) IPPI (m/m) Jun 0.5 0.5 0.3
Current Rate: 0.50%
Next Move: September 8 @ 1.0%
CA 07/29 (08:30) Raw Materials Price Index (m/m) Jun 0.8 1.0 -7.2
Bias: Neutral
US 07/29 (08:30) Initial Jobless Claims (000s) Jul. 24 480 460 464
US 07/29 (08:30) Continuing Claims (mn) Jul. 17 4.40 4.53 4.49

KEY POINTS:
 Japanese retail sales advance at a slowing clip
 Euro-zone confidence at a two-year peak Fed Events
 German labour market remains on the mend
 UK house prices fall for the first time in four months Fed Funds Target Rate
 UK mortgage approvals lowest since February Current Rate: 0-0.25%
 Fed’s Fisher speaks on the economy Next Move: August 10 @ 0-0.25%
Bias: Dovish
 Treasury to auction US$29bn of 7s
 No US macro releases The Fed’s Dallas President
Fisher will speak at 1:30pmET on
the U.S. economy at the Greater
CANADA San Antonio Chamber of
Canadian industrial prices are likely to have continued to push higher in Commerce Luncheon. Questions
June, for the third straight month, as commodity prices increased. Over & answer period to follow.
the course of the month, Thomson Reuters/Jefferies Commodity Research
Bureau (CRB) Index was broadly higher, up 1.5% m/m. Crude oil added
2.2% m/m to finish the month at US$75.63/bbl. In contrast, the Canadian
dollar shed 1.8% m/m against its U.S. counterpart, the third straight month
of depreciation. As a result, we expect the headline producer price index
to have climbed by 0.5% m/m in June, up from 0.3% in the previous
month, with the cost of raw material goods advancing at a faster clip of
0.8% m/m.

UNITED STATES
The Fed’s Dallas President Fisher will speak at 1:30pmET on the U.S. Key International Events
economy at the Greater San Antonio Chamber of Commerce Luncheon.
Questions & answer period to follow. ECB
Current Rate: 1.00%
The U.S Treasury is scheduled to sell US$29 billion of seven-year notes. Next Move: August 5 @ 1.00%
Bias: Dovish

No macro releases are scheduled for release today. BoE

Current Rate: 0.50%
Next Move: August 5 @ 0.50%
INTERNATIONAL Bias: Dovish

Japanese retail sales rose 0.4% m/m (3.2% y/y) in June — in line with BoJ
expectations — reversing some of the previous month’s 2.0% (2.8% y/y) Current Rate: 0.10%
Next Move: August 10 @ 0.10%
decline. This was their fifth gain in the past six months, but the pace of Bias: Dovish

…2

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Global Economic Research July 29, 2010

Daily Points

growth seems to be moderating. What’s more, most of the support in June came from the auto sector, heavily boosted by gov-
ernment incentives, which are set to expire in September. Incentive programs for electronics will end in December. Sales at
large retail stores declined by 3% m/m, extending their downward trend to 27 consecutive months, which highlights the weak-
ness in consumer demand.

Economic, business and consumer confidence in the euro zone jumped to its highest level in over two years in July. Gains
were broad based across member nations, led by Germany. The European Commission said that a more favourable business
sentiment was the “main contributor to the overall improvement,” as respondents reported “substantial increases in their order
books.”

Germany's labour market remains on the road to recovery. The unemployment rate moved a touch lower in July — to 7.6%
from 7.7% in the previous reading — in line with the consensus. The number of individuals out of work declined by 20,000,
bringing the total for the year (to date) to 200,000. In May (the latest data point available) 481,000 German’s were still work-
ing part-time, but looking for full-time employment. At the deepest point of the recession, this number was about three times
as high.

Following four months of gains, U.K. house prices started to fall in July, registering a decline of 0.5% m/m (+6.6 y/y), which
brought the average house price to £169,347. Still-restrained lending conditions, concerns over economic outlook — the la-
bour market in particular — and elevated inventories of unsold homes are considered the primary culprits, causing many po-
tential buyers to remain on the sidelines. In the wake of the June budget, fiscal restraint is expected to increasingly shadow
household spending.

Consumer lending in the United Kingdom remained tame, rising by £0.7 billion (0.8% m/m) in June, below the consensus
call, which was looking for an increase of £1.4 billion. Mortgage approvals slipped to 47,643, from 49,461 in May, another
warning over the fragile state of the housing market. Approvals are at their lowest level since February, well below the previ-
ous six-month average of 50,036, and the forecasted 48,800 for June.

E q u i ti e s % change:
FixedIncome Government YieldCurves(%): L a st Cha nge 1 Da y 1 -w k 1 -m o 1 -y r
S & P /T S X 1 1 6 9 6 .6 3 - 2 0 .0 6 - 0 .2 1 .6 3 .8 1 1 .9
2-YEAR 5-YEAR 10-YEAR 30-YEAR Dow 30 1 0 4 9 7 .8 8 - 3 9 .8 1 - 0 .4 3 .7 6 .4 1 5 .7
S &P 500 1 1 0 6 .1 3 - 7 .7 1 - 0 .7 3 .4 6 .2 1 3 .4
Last 1-day 1-wk Last 1-day 1-wk Last 1-day 1-wk Last 1-day 1-wk N a sd a q 2 2 6 4 .5 6 - 2 3 .6 9 - 1 .0 3 .5 6 .1 1 5 .1
DAX 5 3 5 5 .7 4 3 6 .0 6 0 .7 0 .8 9 .0 1 7 .8
U.S. 0.61 0.61 0.56 1.72 1.70 1.68 2.99 2.99 2.94 4.08 4.07 3.95
FTS E 6 2 1 5 .4 0 3 6 .4 6 0 .6 1 .2 4 .4 1 7 .9
CANADA 1.58 1.64 1.52 2.42 2.47 2.37 3.21 3.26 3.16 3.77 3.80 3.73 N ik k e i 9 6 9 6 .0 2 - 5 7 .2 5 - 0 .6 5 .2 1 .3 - 4 .1
Ha ng S e ng 2 1 0 9 3 .8 2 2 .6 4 0 .0 2 .4 4 .2 4 .8
GERMANY 0.85 0.85 0.70 1.74 1.74 1.61 2.74 2.75 2.67 3.45 3.44 3.35 CAC 3 6 8 9 .2 9 1 8 .9 3 0 .5 2 .5 7 .5 9 .6
C o m m o d i ti e s % change:
JAPAN 0.16 0.16 0.15 0.36 0.37 0.34 1.09 1.10 1.07 1.80 1.81 1.84 W T I C ru d e 7 7 .2 4 0 .2 5 0 .3 - 2 .6 1 .7 2 1 .9
N a tu r a l G a s 4 .7 5 0 .0 3 0 .7 2 .3 4 .5 4 0 .6
U.K. 0.88 0.91 0.80 2.18 2.22 2.08 3.45 3.49 3.36 4.42 4.41 4.25 G o ld 1 1 5 7 .0 0 - 1 1 .0 0 - 0 .9 - 2 .9 - 8 .2 2 2 .5
S ilv e r 1 7 .6 3 0 .0 0 0 .0 - 1 .1 - 5 .1 2 9 .6
Foreign- U.S. Spreads(bps): C R B In d e x 2 6 6 .1 6 1 .7 0 0 .6 1 .8 3 .9 9 .3
C u rre n cie s % change:
CANADA 97 102 96 70 78 69 22 28 22 -31 -27 -22 US DCAD 1 .0 3 0 6 - 0 .0 0 8 1 - 0 .8 - 0 .6 - 2 .4 - 5 .4
EURUS D 1 .3 0 8 2 0 .0 0 8 8 0 .7 1 .5 7 .3 - 6 .9
GERMANY 24 24 14 2 5 -6 -25 -24 -27 -63 -62 -60 US DJP Y 8 7 .0 8 0 0 - 0 .3 9 0 0 - 0 .4 0 .1 - 1 .7 - 8 .3
AUDUS D 0 .9 0 2 9 0 .0 0 9 4 1 .1 1 .1 6 .4 1 0 .4
JAPAN -45 -46 -41 -136 -133 -134 -191 -189 -187 -228 -225 -211 G BP US D 1 .5 6 3 7 0 .0 0 3 9 0 .3 2 .5 3 .8 - 4 .5
US DCHF 1 .0 4 6 5 - 0 .0 1 0 2 - 1 .0 0 .3 - 3 .3 - 3 .7
U.K. 27 30 23 46 52 41 46 50 42 34 34 30

Source: Bloomberg. All quotes reflect Bloomberg data as at the time of publishing.
While this source is believed to be reliable, Scotia Capital cannot guarantee its accuracy.