Q3 | 2010

As of 30 June 2010
{ }

GTTM: A guide to global financial markets

EUROPE
 Table of Contents Print

EUROPE

WORLD

UNITED STATES

JAPAN

EMERGING MARKETS

FIXED INCOME

OTHER ASSET CLASSES

TOPICAL CHARTS
Home

1
 EUROPE Print

MSCI Europe Index at Inflection Points 3

Europe Equity Valuations 4

Europe Returns by Style (EUR) 5

Europe Returns by Country % (EUR) 6

Eurozone GDP and Inflation 7

Eurozone Unemployment, Retail Sales and Confidence Indicators 8

Eurozone Market Scorecard 9

TOC

2
 MSCI Europe Index at Inflection Points Print

MSCI Europe Index 1995 – June 2010, log scale

Europe

1.800
Equities

4 September 2000 16 July 2007

P/E 20,9 P/E 13,3
1.600
1.623 1.641
30 June 2010
P/E 9,9
1.400
{

1.028 }

+205% -58% +143% -58%

1.200

1.000

+44%
800

12 March 2003 9 March 2009

P/E 13,9 P/E 7,8
600 676 714
18 April 1995
P/E 12,7
532
Dec 94 Dec 95 Dec 96 Dec 97 Dec 98 Dec 99 Dec 00 Dec 01 Dec 02 Dec 03 Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09
TOC

Source: FactSet, MSCI, J.P. Morgan.

Returns are cumulative and based on MSCI Europe price movement only and do not include the reinvestment of dividends. Past performance is not indicative of future returns. Data is from 31/12/9 4 to
{ }

30/06/10 on a daily frequency. FactSet Aggregates for forward P/E.

{ }

3
 Europe Equity Valuations Print

Forward P/E Ratio Europe

Europe

28 One Year
Equities

29 February 2000 Earnings

24 23,5 Growth
Forecast:
20 24% 30 June 2010
{

9,9
16

12
Average since 1999
8 14,6

Dec 99 Dec 00 Dec 01 Dec 02 Dec 03 Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09

Dividend Yield vs. 10 yr EMU Bond (Generic)

8

6 10 yr EMU Bond 30 June 2010

3,7%
4 {

2 2,6%
Dividend Yield

Dec 99 Dec 00 Dec 01 Dec 02 Dec 03 Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09
TOC

Source: Bloomberg, J.P. Morgan. FactSet Aggregates Composite Index and I/B/E/S for forward P/E and dividend yield, data is on a monthly frequency. 10 year EMU Generic Bond yields from FactSet.

4
 Europe Returns by Style (EUR) Print
Europe

2001 2002 2003 2004 2005 2006 2007 2008 YTD Q2 2010
Equities

2009
MSCI MSCI MSCI MSCI MSCI MSCI DJ Stoxx MSCI MSCI MSCI MSCI
Europe Europe Europe Europe Europe Europe 50 Europe Europe Europe Europe
Small Cap Small Cap Small Cap Small Cap Small Cap Small Cap Growth Small Cap Small Cap Growth
-5,0% -25,4% 35,0% 23,7% 37,6% 30,4% 9,6% -40,5% 60,3% { 4,6%
}
{ -3,0% }

MSCI MSCI MSCI MSCI MSCI MSCI MSCI DJ Stoxx MSCI MSCI MSCI
Europe Europe Europe Europe Europe Europe EMU 50 Europe Europe Europe
Value Value Value Value Value Value Value Growth Small Cap
-10,8% -30,4% 21,9% 16,3% 28,9% 23,1% 8,5% -42,4% 34,6% { 3,0%
} { -4,8% }

MSCI MSCI MSCI MSCI MSCI MSCI MSCI MSCI MSCI MSCI MSCI
Europe Europe EMU EMU Europe EMU Europe Europe Europe Europe Europe
Growth
-15,3% -30,5% 19,9% 13,4% 26,7% 22,8% 8,2% -43,3% 32,5% { -2,0% }
{ -5,9% }

MSCI MSCI DJ Stoxx MSCI MSCI MSCI MSCI MSCI MSCI MSCI MSCI
EMU Europe 50 Europe EMU Europe Europe EMU Europe Europe EMU
Growth Growth Value
-17,9% -30,7% 18,4% 12,6% 26,3% 20,2% 3,2% -44,3% 30,5% { -6,9% } { -8,7% }

DJ Stoxx MSCI MSCI DJ Stoxx MSCI DJ Stoxx MSCI MSCI MSCI MSCI MSCI
50 EMU Europe 50 Europe 50 Europe Europe EMU EMU Europe
Growth Value Value Value
-19,1% -33,4% 15,8% 9,4% 24,3% 18,0% -1,8% -46,1% 28,7% { -7,8% } { -9,0% }

MSCI DJ Stoxx MSCI MSCI DJ Stoxx MSCI MSCI MSCI DJ Stoxx DJ Stoxx DJ Stoxx
Europe 50 Europe Europe 50 Europe Europe Europe 50 50 50
Growth Growth Growth Growth Small Cap Small Cap
-19,9% -36,1% 9,7% 8,9% 24,3% 17,3% -7,2% -51,6% 25,6% { -11,1% } { -10,2% }
TOC

Source: FactSet, MSCI, Dow Jones, J.P. Morgan.

All data is reported in euro and represents total returns including the reinvestment of dividends and calculated with maximum withholding tax, when applicable. Past performance is not indicative of future
returns. Changes in currency exchange rate and political or economic climate can raise or lower returns.

5
 Returns by Country % (EUR) Print

MSCI Europe Index Weight % 2008 2009 YTD Q 2 2010

Europe
Equities

{ {
Europe

United Kingdom 33,2 -45,7 -38,9 0,3 -4,8

Equities

France 15,4 } -39,8 -29,1 -8,0 -9,7

Switzerland 12,7 -26,3 22,7 8,5 -2,0

Germany 12,3 -42,7 22,6 0,2 -3,0

Spain 5,5 -37,0 40,6 -21,0 -12,1

Sweden 4,6 } -46,5 60,7 17,9 3,2

Italy 4,5 -46,6 24,0 -14,2 -12,7

Netherlands 4,2 -45,2 38,6 0,9 -3,9

Finland 1,6 -52,3 9,2 -2,5 -18,2

Denmark 1,6 -44,6 32,8 21,9 4,5

Belgium 1,5 -64,4 53,6 1,7 -3,1

Norway 1,2 -62,0 82,7 { -9,5 -8,8

Austria 0,5 -66,6 40,3 -9,6 -13,7 }

Greece 0,4 -64,3 21,4 { -39,4 -34,2

Portugal 0,4 -49,3 37,3 -12,5 -8,0

Ireland 0,4 -70,3 9,4 -6,3 -11,4

MSCI Europe Index 100 -43,3 32,5 -2,0 { -5,9 }

TOC

Source: FactSet, MSCI, J.P. Morgan. Index weights and total returns as at 30/06/10 . Past performance is not indicative of future returns.
}

6
 Eurozone GDP and Inflation Print

Real GDP Inflation

Europe

% change year on year % change year on year

Equities

Forecast
Forecast GDP Headline CPI
6,0 2010: 1,1% 6,0 2010: 1,5%
2011: 1,3% 2011: 1,6%

5,0
4,0
Headline CPI
Average First Quarter 2010 4,0 May 2010
2,0 1,4% 0,6% 1,6%

3,0
0,0
2,0

-2,0
1,0 Core CPI
May 2010
-4,0 0,8%
0,0

Dec 99 Dec 01 Dec 03 Dec 05 Dec 07 Dec 09 Dec 99 Dec 01 Dec 03 Dec 05 Dec 07 Dec 09
TOC

Source: FactSet, Eurostat, J.P. Morgan.

Headline inflation includes all items, core includes all items except energy, food, alcoholic beverages and tobacco (FactSet definition). Forecasts are from Bloomberg consensus and represent annual
growth and headline inflation rates.

7
 Eurozone Unemployment, Retail Sales and Confidence Print
Indicators
% Unemployment Confidence Indicators
Europe

11 March 2010
10,4% 40
Equities

10
30
9 Services Sector Confidence
May 2010
20 3,5
8

10
7

Index level
Dec 99 Dec 01 Dec 03 Dec 05 Dec 07 Dec 09
0

% Retail Sales Growth (Value YoY%)

6 -10

4
April 2010
-1,8% -20
2 Consumer Confidence
May 2010
0 -30 -17,8
-2 Industrial Sector Confidence
-40 May 2010
-4 -6,4

Dec-99 Dec-01 Dec-03 Dec-05 Dec-07 Dec-09 Dec 99 Dec 01 Dec 03 Dec 05 Dec 07 Dec 09
TOC

Source: FactSet, Eurostat, OECD, J.P. Morgan.

Monthly data for all indices, using ILO definition for eurozone unemployment. Retail sales (by value) and confidence indicators are all eurozone. Data is from 31/12/99 to the most recent available.

8
 Eurozone Market Scorecard Print
Europe

First quarter GDP growth for the eurozone grew 0,6% compared to the same period the previous year, and rose 0,8%
Equities

versus the previous quarter at an annualised rate. This was somewhat disappointing given the weakness of the euro
Overall Economy ' recently; Germany registered just 0,6% growth at annualised rate and France grew by 0,5%, while Greece saw a
significant contraction of 4,0%. Bloomberg consensus estimates suggest the region may grow by 1,1% in 2010, and by
1,3% in 2011.

Eurozone unemployment is currently 10,4%. It is likely to fall as economic recovery takes place, but in those countries
Employment ' that will be seeing a shrinkage of the state due to budget deficit reduction, a rise in public sector unemployment may limit
the overall fall.

Exporters have benefited from recent weakness of the euro against the dollar and the yen, but domestic demand growth
Corporate Earnings &' remains weak and perhaps still dependent on fiscal stimulus programmes.

The European Central Bank (ECB) repo rate stands at 1%, and may remain at that level for the rest of 2010 given the
fiscal and economic problems facing many of the peripheral eurozone countries. Core eurozone bond markets have
proved a safe haven relative to those of peripheral eurozone countries, helping to reduce corporate borrowing costs.
Interest Rates &' However, with M3 eurozone money supply down 0,7% year on year, it appears there is not much bank lending taking
place in the region in aggregate. The ECB's instance on sterilising its bond market purchase operation is illustrative of a
generally more hawkish stance than that of the Bank of England or the US Federal Reserve.

Eurozone headline CPI inflation of 1,6% year on year might seem dangerously close to the ECB's 2% target to some at
the central bank, but this hides substantial regional variations. Greek inflation was 5,4% over the same period, while
Inflation & Germany saw prices rise by only 0,2%. Bloomberg consensus estimates suggest little change in the year on year rate of
eurozone inflation over the next year, as fiscal retrenchment limits regional growth prospects.

It is unclear whether European banks will require more state aid, and whether bond market investors will look kindly on
governments that add to their deficits through nationalising more bank debt. However, if the recent austerity budgets that
have been announced throughout the region do indeed cut into the region's budget deficits, bond investors may be more
Key News Items &' sympathetic to attempts by governments to re-capitalise banks should it prove necessary. Recent anecdotal evidence
TOC

suggests that Germany has seen a boom in exports recently, suggesting a two-speed recovery in the eurozone is taking
place with the core countries outpacing the peripheral countries.

Source: FTSE, J.P. Morgan.

Opinions, estimates, forecasts and statements of financial market trends that are based on current market conditions constitute our judgment and are subject
to change without notice.
9
 WORLD Print

World Stock Market Returns (EUR & Local Currency) 11

World Returns (EUR) 12

World Index Weighting by Country and Changes in Dividends 13

MSCI World by Sector (EUR) 14

Growth and Value 15

Market Returns after Consecutive Down Years S&P 500 Index 16

Dollar vs. Sterling/Euro/Yen 17

Oil and Commodities 18

Credit Suisse Global Risk Appetite Indicator 19

VIX and VDAX Volatility 20

World Economic Data 21

Government Deficits by Country 22

Consensus Estimates 2010 and 2011 23

TOC

Demographic Pyramids 24

10
 World Stock Market Returns (EUR & Local Currency) Print

2001 2002 2003 2004 2005 2006 2007 2008 2009 YTD Q2 2010
World

EUR 3,1% -20,2% 30,1% 16,8% 55,0% 20,9% 26,7% -23,0% 73,4% { 14,5% }
{ 5,1% }

MSCI MSCI MSCI MSCI MSCI MSCI MSCI Japan MSCI MSCI
Japan Asia
Asia Asia
EM EM EM EM EM ex Japan ex Japan TOPIX EM TOPIX ex Japan
Local 7,8% -7,3% 46,4% 16,0% 35,3% 28,6% 37,6% -40,6% 62,8% { -6,4% } { -2,8% }

EUR 1,5% -22,2% 22,4% 12,6% 45,3% 20,2% 26,1% -33,7% 67,2% { 12,9% }
{ 1,3% }

MSCI MSCI MSCI MSCI Japan MSCI US MSCI MSCI MSCI

Asia Asia MSCI Asia
Asia Asia
ex Japan ex Japan ex Japan Europe TOPIX Europe EM S&P 500 ex Japan ex Japan EM
Local -1,2% -11,7% 45,2% 12,7% 45,2% 19,6% 33,2% -37,0% 67,2% { -2,9% } { -5,5% }

EUR -7,1% -22,7% 15,8% 9,1% 41,9% 18,6% 3,2% -43,3% 32,5% { 10,1% } { 0,4% }

US Japan MSCI MSCI MSCI MSCI MSCI MSCI MSCI MSCI Japan
Asia Asia
S&P 500 TOPIX Europe ex Japan ex Japan EM Europe Europe Europe EM TOPIX

Local -11,9% 17,5% 20,3% 11,8% 24,1% 28,5% 6,5% -38,5% 28,6% { -4,2% }
{ -13,9% }

-15,3% -30,5% 15,3% 8,1% 26,7% 3,6% -4,9% -49,8% 22,5% 9,3% -2,2%
EUR
{ }
{ }

MSCI MSCI Japan Japan MSCI US US MSCI US US US

Asia S&P 500
Europe Europe TOPIX TOPIX Europe S&P 500 S&P 500 ex Japan S&P 500 S&P 500

-16,1% -29,1% 25,2% 11,3% 25,5% 15,8% 5,5% -47,8% 26,5% -6,7% -11,4%
Local { } { }

EUR -25,5% -33,9% 7,1% 2,9% 20,9% -8,7% -14,5% -50,8% 1,5% { -2,0% } { -5,9% }

Japan US US US US Japan Japan MSCI Japan MSCI MSCI

TOPIX S&P 500 S&P 500 S&P 500 S&P 500 TOPIX TOPIX EM TOPIX Europe Europe

Local -18,9% -22,1% 28,7% 10,9% 4,9% 3,0% -11,1% -45,9% 7,6% { -6,2% } { -9,5% }

Source: FactSet, S&P, FTSE, MSCI, TOPIX, J.P. Morgan.

TOC

All data is reported in euro and local currency and represents total return including the reinvestment of dividends and calculated with maximum withholding tax, when applicable. Data for MSCI EM
represents total return including dividend gross of withholding tax and net of domestic tax credit. Past performance is not indicative of future returns. International investing involves a greater degree of risk
and volatility. Changes in currency exchange rate and political and economic climate can raise or lower returns.

11
 World Returns (EUR) Print
World

5 years to June 2010

300 MSCI Emerging Markets 15% p.a. MSCI Europe ex-UK 3% p.a. FTSE 100 2% p.a. 300
Equities

S&P 500 1% p.a. TOPIX Japan 0% p.a.

250 250

200 200

150 150

100 100

50 50

Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09

20 years to June 2010, log scale

MSCI Emerging Markets 21% p.a. MSCI Europe ex-UK 15% p.a. FTSE 100 14% p.a.
1.000 S&P 500 16% p.a. TOPIX Japan -6% p.a. 1.000

500 500

300 300
200 200

100 100

50 50
TOC

Dec 89 Dec 91 Dec 93 Dec 95 Dec 97 Dec 99 Dec 01 Dec 03 Dec 05 Dec 07 Dec 09

Source: FactSet, MSCI, FTSE and S&P, J.P. Morgan.

All data is reported in euro and represents total return including the reinvestment of dividends and calculated with maximum withholding tax, when applicable. Data for MSCI EM
represents total return including dividend gross of withholding tax and net of domestic tax credit. Past performance is not indicative of future returns.
12
 World Index Weighting by Country and Changes in Print
Dividends
MSCI AC World Index: % Weighting by Country
World

China 2% India 1%
France 4% Brazil 2% Other 5%
Equities

Switzerland 3% Korea 2%
Germany 3% Em. Taiwan 1%
Spain 2% Markets
Europe United
13%
Italy 1% 17% Kingdom 8%
Other 4%
Japan 9%
United States
44% Developed
Pacific 5%
Canada 4%

Source: FactSet, MSCI, J.P. Morgan. Data as of 30/06/10 .

{ }

Changes in Regional Dividends (EUR), log scale

Annualised Return Payout Ratio
250 Asia Pacific ex-Japan 6,0% 39,9% { }

Europe ex-UK 4,5% 44,5%

200
{ }

Japan 4,1% 32,9% { }

US 0,6% 26,2%
150
{ }

UK -0,5% 39,2% { }

100
TOC

Dec 99 Dec 00 Dec 01 Dec 02 Dec 03 Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09
Note: Regular dividends only. Data is from 31/12/99 to 30/06/10 , rebased to 100. Source: FactSet, MSCI, J.P. Morgan.
{ }

13
 MSCI World by Sector (EUR) Print
World

Cons Cons Info Telecom MSCI

Equities

Energy Materials Industrials Disc Staples Healthcare Financials Tech Services Utilities World
MSCI World
weight % 10,0 7,3
{ } 11,0
{ } 9,9
{ } 10,5
{ } 10,2
{ } 20,5
{ } 12, 0
{ } 4,2
{ } 4,4
{ } 100
{ }

Q 2 2010
{ } { }

return (EUR) % -7,3 -6,8 -2,2 -0,8 } 1,7 -1,5 -6,6 -4,0 2,2 0,5 -3,3

YTD return
-2,7 1,2 13,1 12,5 12,3 6,4 3,6 5,7 4,5 2,7 5,9
(EUR) %
} }

Dividend yield 3,0 1,7

} 2,1 1,7 3,0 2,7 2,7 1,1 5,8 4,9 2,5
%

Historic P/E 14,4 24,9 20,4 25,5 15,8 12,8 n/a 19,8 12,6 11,4 17,4

Forward P/E 10,4 11,4 } 14,0 15,0 13,9 } 11,1 10,9 13,3 11,3 12,3 12,2

S&P 500
S&P 500 impl.
35,4 35,2 34,0 32,5 20,5 23,4 38,1 30,1 n/a 23,3 28,1
Volatility by
sector
TOC

Source: FactSet, J.P. Morgan.

All calculations are total return on the MSCI World index including dividends reinvested for the stated period. Performance is total return and in EUR. Sector weightings as at 30/06/10 . Past
{ }

performance is not indicative of future returns. Volatility is implied volatility over the next 12 months. Forward PE based on next 12 month consensus estimates from I/B/E/S.

14
 Growth and Value Print
World

Percent of months since 1975 that one index has outperformed the other over different time periods

7,3 9,0 6,9 7,0 5,9 4,9 6,1 4,8 6,4 5,5 6,5 5,7 1,6 7,3 8,9
100%
Average excess return (annualised) %

75%
S&P 500 Growth S&P 500 Value

50%

25%

0%
1-Year 2-Year 5-Year 10-Year 15-Year 20-Year 25-Year 30-Year
TOC

Rolling time periods

Source: FactSet, Bloomberg, J.P. Morgan. Data as at 17/12/09. The chart shows percentage of times one has outperformed the other with rolling time periods.

15
 Market Returns After Consecutive Down Years S&P 500 Print
Index
World
Equities

1933-1936
+190%
09/10/02 -
1942-1945 09/10/07
+122% +121%
09/03/09 -
1975-1976
30/06/10
{ }

+66% + 57%
{ }

-17%
1940-1941 -38%
-47%
1973-1974 -55%
-65%
24/03/00 -
09/10/07 -
1929-1932 09/10/02
09/03/09

Great World War II Oil Crisis Internet Bubble Credit Crunch

Depression Bursting
TOC

Source: Dimson, Marsh and Staunton, S&P, FactSet, J.P. Morgan. Market returns represented by S&P 500 index returns in dollars, dividends reinvested. For complete calendar years, except where
stated otherwise, most recent returns as at 30/06/10 . Past performance is not indicative of future returns.
{ }

16
 Dollar vs. Sterling/Euro/Yen Print
World

$ per £ and € ¥ per $

2,2 140
Equities

Do
$ per £

lla
rw
2,0

ea
130

ke
ns
ag
1,8

ai
30 June 2010

ns
tY
$1,50
120

en
s
1,6 ncie
r e
ur 30 June 2010
anc
pe ¥89
uro 110
tE
1,4 ins
aga $ per €
s
en
eak
lla rw
1,2 Do 100
30 June 2010
$1,23
1,0
90

0,8

Dec 99 Dec 01 Dec 03 Dec 05 Dec 07 Dec 09 Dec 99 Dec 01 Dec 03 Dec 05 Dec 07 Dec 09
TOC

Source: FactSet, J.P. Morgan. Data is weekly. Data is from 31/12/99 to 30/06/10 .
{ }

17
 Oil and Commodities Print

WTI Crude Oil Price Commodity Indices

World

$ per barrel
Metric tons (thousands)
Equities

350 60.000

Metals
120

Metals, Gold & Agricultural Indices

300
50.000

Chinese Steel Production

Inflation adjusted
100 250
40.000
80 200
30.000
60 150

20.000
40 100
Agricultural
Gold Products
20 10.000
50
30 June 2010 Chinese Steel
$84 Production
0
Dec 69 Dec 79 Dec 89 Dec 99 Dec 09 Dec 94 Dec 99 Dec 04 Dec 09
TOC

Source: FactSet, Bloomberg, J.P. Morgan. Price used is West Texas Intermediate crude, monthly Source: S&P Goldman Sachs Commodity Index, FactSet, National Bureau of Statistics of China,
frequency. Data as at 30/06/10 .
{ } steel production in thousand metric tons. J.P. Morgan. Data is on a monthly frequency, latest data
as at 30/06/10 . { }

18
 Credit Suisse Global Risk Appetite Indicator Print
World

10
Equities

Euphoria
6
Standard Deviation

30 June 2010
0 -2,60

-2

-4
Distress

-6
81 83 85 87 89 91 93 95 97 99 01 03 05 07 09
TOC

Source: Credit Suisse, J.P. Morgan.

The Credit Suisse Global Risk Appetite Indicator compares aggregated risk-adjusted returns across 64 markets (both equity and fixed income). It compares six month excess returns over cash with 12
month volatility for each asset, and plots the resulting score on the vertical (Y) axis. Data as at 30/06/10 .
{ }

19
 VIX and VDAX Volatility Print
World

90

VIX
Equities

80 VDAX
Credit
Crunch
70

Russian
60 Crisis Eurozone
Debt
Crisis
Volatility

50 Asian Gulf
Crisis War 2
Tech
40 Bubble

30

20

10
Cheap Money
TOC

Dec 95 Dec 97 Dec 99 Dec 01 Dec 03 Dec 05 Dec 07 Dec 09

Source: Bloomberg, Chicago Board Options Exchange, Deutsche Boerse, J.P. Morgan. VIX is the name of the Chicago Board Options Exchange Volatility Index, a popular measure of the implied volatility
of S&P 500 index options. Referred to by some as the fear index, it represents one measure of the market's expectation of volatility over the next 30 day period. VDAX is the name given to the Deutsche
Boerse equivalent, based on the DAX.

20
 World Economic Data Print

Q1 GDP Growth Money Supply

World

QoQ CPI Inflation Growth Current

Equities

YoY Annualised Unemployment YoY YoY, M3 Account as %

% % % % % GDP
Austria 0,2K -0,4L 4,9L 1,9K -3,4K 1,2
Belgium -1,0L 0,4L 11,6L 2,3K 2,6L -0,3
Finland -0,8K -1,8L 8,4L 1,0K -1,3K 1,9
France 1,2K 0,5L 10,1J 1,6K -2,1L -2,1
Germany 1,7K 0,6K 7,7L 0,2L 0,2K 5,5
Greece -2,5J -4,0L 11,6K 5,4K -0,3J -7,2
Italy 0,5K 1,7K 8,5K 1,4K 6,3L -2,8
Netherlands 0,6K 1,0J 5,6J 1,0K 5,1K 5,3
Spain -1,3K 0,3K 19,7K 1,8K -5,2L -4,3
Eurozone 0,6K 0,8K 10,4L 1,6K -0,7K -0,1

Denmark -0,4K 2,6K 4,1L 2,2K 3,0K 2,9

Sweden 3,0K 5,9K 8,8L 1,2J 0,2L 6,8
Switzerland 2,2K 1,6L 4,0L 1,1K 5,4L 8,9
UK -0,2K 1,2K 7,9K 3,4J 2,7LM4 -1,0
US 2,4K 3,0L 9,7J 2,0L 1,8LM2 -3,2
Japan 4,6K 5,0K 5,1K -0,9K 2,8KM2 3,5
TOC

China 11,9K n/a 9,6L 3,1K 21,5LM2 4,1

Source: EIU, BEA, OECD, FactSet and J.P. Morgan. Arrows represent change on previous quarter. Unemployment rate is ILO and local definitions.

21
 Government Deficits by Country Print
World

In percent of GDP and Summer 2010, unless otherwise specified

Gross
Equities

Maturing Financing
Debt Deficit Needs Gross Debt Average
(a) (b) (a + b) (2009) Maturity (years)
Australia 2,0 5,0 7,0 15,5 4,8

Belgium 20,8 5,1 25,9 97,3 5,4

Canada 15,9 5,3 21,2 82,5 5,6

France 16,9 8,2 25,1 77,4 6,5

Germany 10,2 5,7 15,9 72,5 6,0

Greece 13,4 8,1 21,5 115,1 7,4

Ireland 7,7 12,2 19,9 64,5 6,7

Italy 21,2 5,2 26,4 115,8 6,7

Japan 54,2 9,8 64,0 217,7 5,2

Portugal 13,0 8,8 21,8 77,1 6,2

Spain 10,3 10,4 20,7 55,2 6,7

Sweden 6,8 3,3 10,1 40,9 6,0

United Kingdom 8,6 11,4 20,0 68,2 12,8

United States 21,2 11,0 32,2 83,2 4,4

TOC

Source: IMF Fiscal Monitor, 14/05/10, p. 21, J.P. Morgan.

22
 Consensus Estimates 2010 and 2011 Print
World
Equities

Policy Rates %
Real GDP Growth % CPI Headline Inflation % Actual Forecast
2010 2011 2010 2011 Jul 10 Dec 10
France 1,3 1,4 n/a n/a 1,00 1,00
Germany 1,9 1,6 1,1 1,4 1,00 1,00
Eurozone 1,1 1,3 1,5 1,6 1,00 1,00

Switzerland 2,0 2,1 1,1 1,1 0,25 0,50

UK 1,2 2,0 3,1 1,9 0,50 0,50

US 3,2 2,9 1,8 1,7 0,25 0,25

Japan 2,2 1,9 -1,1 -0,3 0,10 0,10
China 10,1 9,3 3,4 3,5 5,31 4,75
TOC

Source: All are consensus estimates from Bloomberg 30/06/10 , J.P. Morgan.
{ }

23
 Demographic Pyramids Print
World

United States Germany

Equities

United Kingdom
Age Age Age
100+ 100+ 100+

80-84 80-84 80-84

60-64 60-64 60-64

40-44 40-44 40-44

20-24 20-24 20-24

0-4 0-4 0-4

15 10 5 0 5 10 15 4 2 0 2 4 3 2 1 0 1 2 3

Japan China India

Age Age Age

100+ 100+ 100+

80-84 80-84 80-84

60-64 60-64 60-64

40-44 40-44 40-44

20-24 20-24 20-24

0-4 0-4 0-4

6 4 2 0 2 4 6 75 50 25 0 25 50 75 75 50 25 0 25 50 75

Male Female
TOC

Source: US Census Bureau, International Division, J.P. Morgan. National data and independent sources are combined to make assumptions for the current year. Populations are in millions. Data as
at March 2010.

24
 UNITED STATES Print

US S&P 500 Index at Inflection Points 26

US Equity Valuations 27

US Returns by Style (USD) 28

US GDP and Inflation 29

US Market Scorecard 30
TOC

25
 US S&P 500 Index at Inflection Points Print

S&P 500 Index 1995 – June 2010, log scale

United States

{ }

9 October 2007
1.800 27 March 2000
P/E 17,7
P/E 31,6
1.565
1.600 1.527
30 June 2010
{ }

1.400 P/E 12,6

1.031
{ }

1.200

+231% -49% +101% -57%

1.000

800 +52%
9 October 2002
P/E 17,2
777
9 March 2009
600 P/E 7,9
677
12 January 1995
P/E 21,0
462

Dec 94 Dec 95 Dec 96 Dec 97 Dec 98 Dec 99 Dec 00 Dec 01 Dec 02 Dec 03 Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09
TOC

Source: FactSet, S&P, J.P. Morgan.

Returns are cumulative and based on S&P price movement only and do not include the reinvestment of dividends. Past performance is not indicative of future returns. Data is from 31/12/94 to 30/06/10 on
{ }

a daily frequency. FactSet for forward P/E.

26
 US Equity Valuations Print

Forward P/E Ratio S&P 500

United States

One Year
30 Earnings
31 January 2000
25,2 Growth
25 Forecast:
Average since 1989 24%
16,2 30 June 2010
{ }

20 12,6

15

10
Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec
89 91 93 95 97 99 01 03 05 07 09

Dividend Yield vs. 10 yr US Treasury Yield

10 10 yr US Treasury Yield
8
30 June 2010
6
3,0%
4

2
Dividend Yield
1,9%
Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec
89 91 93 95 97 99 01 03 05 07 09
TOC

Source: MSCI USA and I/B/E/S for forward P/E, data is on a monthly frequency. FactSet Aggregate Index for dividend yield, Thomson Datastream. Treasury prices from FactSet. Reuters, J.P.
Morgan.

27
 US Returns by Style (USD) Print
United States

2001 2002 2003 2004 2005 2006 2007 2008 2009 YTD Q 2 2010
{ }

Russell Russell Nasdaq Russell Russell MSCI US MSCI US Russell Nasdaq Russell Russell
2000 Mid Cap Mid Cap Mid Cap Value Growth 2000 2000 2000

2,5% -16,2% 50,8% 20,2% 12,7% 22,0% 11,6% -33,8% { 45,3% } { -2,0% }
{ -9,9% }

Russell Russell Russell Russell MSCI US Russell Nasdaq MSCI US Russell Russell Russell
Mid Cap 2000 2000 2000 Value 2000 Value Mid Cap Mid Cap Mid Cap

-5,6% -20,5% 47,3% 18,3% 6,0% 18,4% 10,7% -35,4% 40,5%

{ }
{ -2,1% } { -9,9%}

MSCI US S&P 500 Russell MSCI US MSCI US S&P 500 Russell S&P 500 MSCI US MSCI US Nasdaq
Value Mid Cap Value Growth Mid Cap Growth Value

-11,8% -22,1% 40,1% 14,6% 5,4% 15,8% 5,6% -37,0% 36,7%

{ } { -5,5% } { -10,8% }

S&P 500 MSCI US MSCI US S&P 500 S&P 500 Russell S&P 500 MSCI US Russell Nasdaq MSCI US
Value Value Mid Cap Growth 2000 Value

-11,9% -22,6% 33,4% 10,9% 4,9% 15,3% 5,5% -39,0% 27,2%

{ } { -6,6% }
{ -11,1% }

MSCI US MSCI US S&P 500 Nasdaq Russell Nasdaq MSCI US Nasdaq S&P 500 S&P 500 S&P 500
Growth Growth 2000 Value

-13,3% -23,0% 28,7% 9,1% 4,6% 10,4% 0,5% -40,5% 26,5%

{ }
{ -6,7% }
{ -11,4% }

Nasdaq Nasdaq MSCI US MSCI US Nasdaq MSCI US Russell Russell MSCI US MSCI US MSCI US
Growth Growth Growth 2000 Mid Cap Value Growth Growth

-19,3% -31,2% 24,8% 6,8% 2,1% 8,9% -1,6% -41,5% { 18,0% } { -8,1% } { -12,1% }
TOC

Source: FactSet, MSCI, Russell, S&P, Nasdaq Composite, J.P. Morgan.

All data is reported in USD and represents total return including the reinvestment of dividends and calculated with maximum withholding tax, when applicable. Past performance is not indicative of future
returns.

28
 US GDP and Inflation Print

Real GDP Inflation

United States

% change year on year % change year on year

Forecast
Forecast GDP Headline CPI
2010: 3,2% 2010: 1,8%
2011: 2,9% 2011: 1,7%
6,0 6,0

Headline CPI
4,0 4,0 May 2010
Average First Quarter 2010 2,0%
2,0% 2,4%
2,0 2,0
Core CPI
May 2010
1,0%
0,0 0,0

-2,0 -2,0

-4,0 -4,0

Dec 99 Dec 01 Dec 03 Dec 05 Dec 07 Dec 09 Dec 99 Dec 01 Dec 03 Dec 05 Dec 07 Dec 09
TOC

Source: BEA, J.P. Morgan.

Headline inflation includes all items, core includes all items except energy and food (FactSet definition). Forecasts are from Bloomberg consensus and represent annual growth and headline
inflation rates.

29
 US Market Scorecard Print
United States

First quarter GDP growth in the US rose 2,4% compared to the same quarter in the previous year, and at an annualised
rate of 3,0% versus the last quarter of 2009. Recent labour market and housing data has been weaker than had been
Overall Economy & expected, but the US is nonetheless recovering from the recession at a much faster pace than the major European
economies. Bloomberg consensus estimates are for GDP growth of 3,2% in 2010 and for a slightly lower rate of 2,9% in
2011.

Unemployment has stabilised at 9,7%. However new job creation is not robust and some analysts fear that a
Employment &' 'jobless recovery' is taking place.

While blue chip companies can continue to benefit from strong demand growth in Asia and the emerging markets, mid
Corporate Earnings &' and small cap stocks are vulnerable to weak consumer demand growth at home and will be more susceptible to any
disappointment in growth data over the coming months.

The Federal Reserve Bank appears to be in no hurry to raise interest rates, given subdued core inflation and weak
Interest Rates
& money supply growth. The Bloomberg Consensus estimate for the Fed's target rate is to remain at 0,25% until the year
end. Despite the large US budget deficit, Treasury yields fell in May and June which has helped to lower the cost of
borrowing for corporates.

Headline CPI inflation stands at 2,0% year on year (down from 2,2% in April). Inflation does not appear to be a
Inflation & major risk as long as disinflationary forces, such as high unemployment and weak wage growth, remain in place.

The US is unlikely to face a double dip recession, but it faces several challenges over the coming months. These
include: 1) the difficulty of increasing domestic consumption at a time when households are paying off debt and
rebuilding savings, and employment growth is weak. 2) The difficulty of exporting more when trading partners in
Key News Items &' Europe have also adopted the export growth strategy, and have the advantage of weaker currencies. In Asia, China
has slightly revalued the yuan but other large exporters remain wedded to a dollar peg. 3) The impact on the
economy of the eventual withdrawal of the fiscal stimulus.
TOC

Source: FactSet, J.P. Morgan.

The above is shown for illustrative purposes only.
Opinions, estimates, forecasts and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change
without notice.
30
 JAPAN Print

Japan TOPIX Index at Inflection Points 32

Japan Equity Valuations 33

Japan GDP and Inflation 34

Japan Market Scorecard 35

TOC

31
 Japan TOPIX Index at Inflection Points Print
Japan

TOPIX Index 1990 – June 2010, log scale

{ }

3.500
4 January 1990
3.000 P/E 46,5
2.868
2.500

26 February 2007
2.000 P/E 19,9
-73% 1.817

1.500

30 June 2010
{

P/E 14,5
+135% -60%
{

1.000 841

+16%
28 April 2003
P/E 21,9 13 March 2009
773 P/E 8,9
724

Dec 89 Dec 91 Dec 93 Dec 95 Dec 97 Dec 99 Dec 01 Dec 03 Dec 05 Dec 07 Dec 09
TOC

Source: FactSet, TOPIX, J.P. Morgan.

Returns are cumulative and based on TOPIX price movement only and do not include the reinvestment of dividends. Past performance is not indicative of future returns. Data is from 31/12/89 to 30/06/10
{ }

on a daily frequency. FactSet aggregates for forward P/E.

32
 Japan Equity Valuations Print

Forward P/E Ratio Japan

Japan

8 August 1994 One Year

80 74,4 Earnings
Growth
Average since 1989 Forecast:
60 30,3 54%
30 June 2010
14,5
40

20

Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec
89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09

Dividend Yield vs. 10 yr JGB Yield

%
10

6
10 yr JGB yield 30 June 2010
4
Dividend yield 2,2
{

2
1,1
Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec
89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09
TOC

Source: FactSet Aggregate Composite Index and I/B/E/S for forward P/E and dividend yield, data is on a monthly frequency. JGB yield from FactSet. Reuters, J.P. Morgan.

33
 Japan GDP and Inflation Print

Real GDP Inflation

Japan

% change year on year % change year on year Forecast

Forecast GDP
Headline CPI
2010: 2,2%
2010: -1,1%
2011: 1,9%
2011: -0,3%
First Quarter 2010
5,0 4,6% 2,5

2,5 Average
0,8%
Core CPI
0,0 May 2010
-1,6%
0,0
-2,5

-5,0

-7,5 Headline CPI

May 2010
-2,5 -0,9%

Dec 99 Dec 01 Dec 03 Dec 05 Dec 07 Dec 09 Dec 99 Dec 01 Dec 03 Dec 05 Dec 07 Dec 09
TOC

Source: FactSet, Ministry of Internal Affairs and Communications, Economic & Social Research Institute, J.P. Morgan.
Headline inflation includes all items, core includes all items excluding energy and food (FactSet definition). Official Japanese core CPI excludes fresh food only; this was at -1,2%. Forecasts are from
Bloomberg consensus and represent annual growth and headline inflation rates.

34
 Japan Market Scorecard Print
Japan

First quarter GDP growth came in at an impressive 4,6% over the same period the previous year, and was at 5,0% at an
annualised rate versus the pervious quarter. Japan is benefiting from an inventory rebuild in Asia and elsewhere, and
Overall Economy &' from temporary government schemes to boost consumption. However the strengthening yen, persistent deflation and a
ballooning fiscal deficit create a problematic macro economic background. The Bloomberg consensus estimate for GDP
growth is 2,2% this year and 1,9% in 2011.

Unemployment has risen since April, and now stands at 5,1%. Nonetheless, it is low by the standards of other G7
Employment &' countries.

Export driven companies have enjoyed strong overseas sales growth, but the 19% fall of the euro against the yen in the
first half of 2010, and the 5% fall of the dollar (and Asian currencies pegged to the dollar), may slow down export growth
Corporate Earnings &' later this year. Domestic focused companies face weak demand growth, aggravated by persistent deflation and an aging
population.

The Bank of Japan's call rate stands at 0,1%. Given the deflationary environment, interest rates are positive in contrast
Interest Rates &' to all other major developed economies. The call rate is likely to remain very low, given the persistent problem of
deflation.

Headline CPI inflation is currently standing at minus 0,9% year on year. Given the country's shrinking population and
Inflation ' relatively weak consumer sector, deflation seems likely to persist.

Investors hope that the new government will engage in long-awaited supply-side reforms, which will stimulate
Key News Items ' competition within the economy and boost consumer demand. Japan may be able to muddle on without them in the near
term, but the longer term picture is bleak if economic reform is not addressed.
TOC

Source: FactSet, J.P. Morgan.

Opinions, estimates, forecasts and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice.

35
 EMERGING MARKETS Print

Emerging Markets Valuations, Returns and Data 37

EM Asia ex Japan Index at Inflection Points 38

Emerging Markets Indices and GDP Growth 39

China GDP and Inflation 40

TOC

36
 Emerging Markets Valuations, Returns and Data Print

MSCI Emerging Markets USD Index at Inflection Points, log scale

31 October 2007
Emerging Markets

1.800 Returns (EUR) 2008 2009

{ YTD Q2 { }

P/E 18,5
1.600 MSCI EM -50,8% 73,4% 10,1% 1,3% 1.338 30 June 2010
1.400
{ { { } { }

{ }

MSCI EM Asia -50,3% 68,8% 12,7% 4,8% P/E 10,4

1.200
{ { { { }
{

31 December 1999 MSCI EM EMEA -53,3% 62,9%

{ { 7,9% -4,2%
{ { } {918
1.000 P/E 22,4 MSCI EM Europe -66,3% 80,4%
{ { 5,2% -6,5%
{ { }

391 MSCI EM Latin America -48,8% 97,8% 4,9% -2,7%

800
{ { { { }

+392% -63%
600 31 March 2000 +84%
P/E 24,6
499 31 March 2003
P/E 12,7 27 February 2009
400 -46%
272 P/E 7,9
499

Dec 99 Dec 00 Dec 01 Dec 02 Dec 03 Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09

Economic and Demographic Data GDP $ Q1 GDP Population

GDP per Growth Unemployment Millions Growth Median
$bn Capita YoY % Rate % % p.a. Age
Eurozone 14.510 32.600 0,6K 10,4L 492 0,1 n/a
UK 2.149 35.200 -0,2K 7,9K 61 0,3 40,5
US 14.260 46.400 2,4K 9,7J 310 1,0 36,8

China 8.789 6.600 11,9K 9,6L 1.330 0,5 35,2

India 3.560 3.100 8,6K 10,7J 1.173 1,4 25,9
Brazil 2.025 10.200 9,0K 7,3K 201 1,2 28,9
Korea 1.356 28.000 8,1K 3,2L 49 0,3 37,9
Russia 2.116 15.100 2,9K 7,3L 139 -0,5 38,5
South Africa 495 10.100 1,4K 25,2K 49 -0,1 24,7
Mexico 1.482 13.500 4,3K 5,4L 113 1,1 26,7
TOC

Source: FactSet, CIA, EIU, MSCI, J.P. Morgan. Data is from 31/12/ 99 to 30/06/10 . Forward PE based on 12 month consensus estimates from I/B/E/S for MSCI Emerging Markets. GDP USD and GDP Per
{ } { }

Capita data is based on purchasing power parity methodology, most recently available data and is provided by the CIA, data as at 24/06/10. GDP growth data is first quarter 2010, year on year percent
change. Arrows represent change on previous quarter. Unemployment data: ILO and local definitions. Past performance is not indicative of future returns.

37
 EM Asia ex Japan Index at Inflection Points Print

MSCI Asia ex Japan 1995 – June 2010 , Log scale

Emerging Markets

{ }
Equities

900
800 1 November 2007
P/E 26,4 {30 June 2010 }

700 P/E 12,2

750 { }

547
{

600

8 August 1997 17 February 2000

500 P/E 23,0 P/E 16,4
406 413
400 -57% +137% -48% +250% -60% +83%

300

20 November 2008
P/E 7,4
299
200
21 May 2003
P/E 11,4
3 September 1998 214
P/E 10,9
174

Dec 94 Dec 95 Dec 96 Dec 97 Dec 98 Dec 99 Dec 00 Dec 01 Dec 02 Dec 03 Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09
TOC

Source: FactSet, MSCI Asia ex Japan, J.P. Morgan.

Returns are cumulative and based on MSCI Asia ex Japan price movement only and do not include the reinvestment of dividends. Past performance is not indicative of future returns. Data is from 30/12/94
to 30/06/10 on a daily frequency. FactSet Aggregates for forward P/Es. Forward PE based on 12 month consensus estimates from I/B/E/S.
{ }

38
 Emerging Markets Indices and GDP Growth Print
Emerging Markets

Brazil India GDP Russia

BOVESPA 30 June 2010 GDP SENSEX 30 June 2010 RTS 30 June 2010 GDP
Equities

10
{
{ { }

P/E 13,4 P/E 16,7 3.000 P/E 8,5 15

72.000 {

24,000
{ }

12
{

60.936 17.701 2.000 1.339

60.000 8
{ } {
{

20.000 10 10
48.000 1.000
6 18,000
8 5
36.000 400
4 300
10.000
12,000 6 200 0
24.000 2
4 100
0 6.000
6,000 -5
First Quarter 2010 First Quarter 2010 2 40
-2 4.000 8,6% First Quarter 2010
9,0% 30 -10
12.000 2,9%
0 0 20
-4
Dec 99 Dec 01 Dec 03 Dec 05 Dec 07 Dec 09 Dec 99 Dec 01 Dec 03 Dec 05 Dec 07 Dec 09 Dec 99 Dec 01 Dec 03 Dec 05 Dec 07 Dec 09

MSCI China China GDP KOSPI Korea GDP FTSE-JSE All Share S. Africa GDP
{ 30 June 2010 15 2,500 { 30 June 2010 14 35,000 { 30 June 2010 8
P/E 17,8 { P/E 11,6 {
30,000 P/E 12,3 {

100 60 14 2,000 1.698 12 26.259

25,000 6
{ {

80 13 10
1,500 20,000
12 8 4
50 11 6 15,000
10 1,000 2
40 4
9
30 2 10,000
0
8
0
7 First Quarter 2010
20 First Quarter 2010 First Quarter 2010 -2 1,4% -2
500
11,9% 6 8,1% -4
Dec 99 Dec 01 Dec 03 Dec 05 Dec 07 Dec 09 Dec 99 Dec 01 Dec 03 Dec 05 Dec 07 Dec 09 Dec 99 Dec 01 Dec 03 Dec 05 Dec 07 Dec 09
TOC

Source: Factset, Bloomberg, J.P. Morgan

Returns are cumulative and based on price movement only and do not include the reinvestment of dividends. Past performance is not indicative of future returns. Data is from 31/12/99 to 30/06/10 . FactSet { }

Aggregates for historic P/E. GDP is percentage change year on year.

39
 China GDP and Inflation Print

Inflation
Emerging Markets

Real GDP % change year on year

Equities

% change year on year Forecast

Forecast GDP 25
Headline CPI
2010: 10,1% 2010: 3,4%
16 2011: 9,3% 2011: 3,5%
20
Food
14 May 2010
Headline CPI
15 May 2010 6,7%
12 3,1%
Average
9,6% 10
10

8 5

6 0

4
-5 Non-food
May 2010
2 First Quarter 2010 1,6%
11,9% -10
Dec 99 Dec 01 Dec 03 Dec 05 Dec 07 Dec 09
Dec 99 Dec 01 Dec 03 Dec 05 Dec 07 Dec 09
TOC

Source: National Bureau Of Statistics of China, J.P. Morgan.

Headline inflation includes all items, food includes grain, meat, poultry & related products, eggs, aquatic products, fresh vegetable and fresh fruits. Non-Food is tobacco and liquor products, clothing,
household facilities, articles & maintenance services, medicines, medical care & personal articles, traffic and communication equipment, recreational, educational & cultural articles & services and
residence (FactSet definition).

40
 FIXED INCOME Print

Government Fixed Income Market Returns (EUR and Local Currency) 42

US Deficit Trade 43

US Deficit and Foreign Holders of Treasuries 44

International Yield Curves 45

ECB and Bank of England Policy and Real Rates 46

US Fed and Bank of Japan Policy and Real Rates 47

US and European Interbank Rates, Investment Grade and High Yield Bonds 48

Investment Grade and High Yield Bond Spreads 49

Emerging Market Debt and Index Weighting 50

TOC

41
 Government Fixed Income Market returns (EUR and Print
Local Currency)
Fixed Income

2001 2002 2003 2004 2005 2006 2007 2008 2009 YTD Q2 2010
Equities

Euro 12,4% 9,9% 4,0% 7,7% 18,6% 2,1% 1,8% 34,6% 7,8%
{ } { 26,0% } 19,4%
{ }

US EMU EMU EMU US UK EMU Japan UK Japan Japan

Local 6,5% 9,9% 4,0% 7,7% 2,9% 0,2% 1,8% 3,9% { -1,0% } { 2,2% } { 2,4% }

Euro 6,2% 2,4% -4,7% 6,1% 11,3% -0,3% -0,1% 20,2% 4,3%
{ }
24,2%
{ } 15,8%
{ }

UK UK Global UK UK EMU Global US EMU US US

Local 3,4% 9,1% 2,2% 6,6% 8,1% -0,3% 4,0% 14,3% { 4,3% }
{ 6,0% } { 4,8% }

Euro 5,9% 1,3% -5,6% 2,2% 7,7% -5,2% -1,2% 17,8% { -1,3% } 17,6%
{ } 14,1%
{ }

EMU Global UK Global Global Global Japan Global Global Global UK

Local 5,9% 8,5% 2,0% 4,9% 3,7% 0,8% 2,7% 9,2% { 0,7% } { 4,2% } { 4,7% }

Euro 4,6% -3,1% -8,6% -1,7% 5,3% -7,8% -1,5% 9,4% { -4,8% } 15,0%
{ }
{ 12,1% }

Global Japan Japan Japan EMU US US EMU Japan UK Global

Local 5,2% 3,4% -0,8% 1,3% 5,3% 3,1% 9,2% 9,4% { 0,9% } { 5,9% }
{ 3,0% }

Euro -4,8% -4,8% -14,8% -3,7% 0,9% -11,1% -3,6% -13,7% { -6,8% } 2,4%
{ }
0,1%
{ }

Japan US US US Japan Japan UK UK US EMU EMU

Local 3,6% 12,2% 2,4% 3,7% 0,8% 0,3% 5,1% 13,6% { -3,8% } { 2,4% }
{ 0,1% }
TOC

Source: J.P. Morgan Global Bond Index. Past performance is not indicative of future returns.

42
 US Deficit Trade Print

US Trade China Purchases of US Debt

Fixed Income

$bn $bn %
1.200 Imports from Europe
Imports from Asia 800 10
Chinese FX Reserves (300x, lhs)
900 Exports to Europe
Exports to Asia
600 US 10-Year Treasury Yield (rhs) 8
600

300 400 6

0
200 4
Chinese Purchases of US
-300
Debt (lhs)
-600 0 2
Dec 89 Dec 94 Dec 99 Dec 04 Dec 09
Dec 91 Dec 95 Dec 99 Dec 03 Dec 07
Source: US Census Bureau, J.P. Morgan. Annual total. Most recent observation is January Source: US Treasury Department, US Treasury, J.P. Morgan.
through to April annualised.

Current Account Balances as % of GDP Mortgage Debt Outstanding and 30 Year Mortgage Rates
First
% $bn %
Quarter 12 12
12 2010
30 Year Mortgage Rate (rhs)
8 9
China
4 Surplus
7,8% 6 8
0 US
Deficit 3
-4 -3,1%
Mortgage Debt Outstanding (lhs)
TOC

-8 0 4
Dec 89 Dec 92 Dec 95 Dec 98 Dec 01 Dec 04 Dec 07 Dec 89 Dec 93 Dec 97 Dec 01 Dec 05 Dec 09
Source: US Census Bureau, Bureau of Statistics of China, EIU, J.P. Morgan. Source: Federal Reserve, Freddie Mac, Danter Company, J.P. Morgan.

43
 US Deficit and Foreign Holders of Treasuries Print

Percentage of US Treasuries Owned by Foreigners Foreign Holders of US Treasuries

Fixed Income

% % Being 54% of the total US debt

65 65
Japan
60 60 All other $796bn
$1193bn 20%
55 55
30%
50 April 2010 50 China
45 54% 45 Russia $900bn
$113bn 23%
40 40 3%
35 35 Luxembourg
$77bn UK
30 30 2% Caribbean Brazil OPEC $312bn
$153bn $164bn $239bn
Dec 00 Dec 01 Dec 02 Dec 03 Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09 8%
4% 4% 6%
Source: J.P. Morgan, US Treasury, FactSet. Source: J.P. Morgan, US Treasury Department TIC. All Other includes Hong Kong,
Taiwan, Switzerland, Germany, Ireland and Singapore. Data as at 30/04/10.

US Government Budget Outlays Gvt. Estimates

$ as of February
6.000 2010
Deficit
Surplus
4.000 Fiscal 2009 Estimated Deficit $1.841bn
Receipts

2.000

Fiscal 2009 Estimated Receipts $2.157bn

0
TOC

1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Source: J.P. Morgan, OMB (Office of Management & Budget), US Government Budget. Fiscal 2009 year starts in October and ends in September 2010. Estimates from Budget of the US
Government, Fiscal year 2011.

44
 International Yield Curves Print

Government Yield Curves and 10 Year Yields

Fixed Income

5 5

4 4

UK 3,34 %
{ }

3 US 2,95 %
{ }
3
Yield %

EMU Generic 2,57 %

2 2
{ }

1 1
Japan 1,09 %
{ }

0 0
3 months 6 months 2 years 5 years 10 years 30 years
Maturity (years)
TOC

Source: Bloomberg, FactSet, J.P. Morgan. Data as at 30/06/10

{ }

45
 ECB and Bank of England Policy and Real Rates Print
Fixed Income

European Central Bank Bank of England

8 Forecast 8 Forecast
2010: 1,00% 2010: 0,50%
2011: 1,75% 2011: 2,50%

6 6
Repo rate Base rate
30 June 2010
{ }
30 June 2010
{ }

1,00% 0,50%
4 4
Interest rate %

Interest rate %
2 2

0 0

Real Interest Rate Real Interest Rate

-2 May 2010 -2 May 2010
0,16% -2,4%

Dec 99 Dec 01 Dec 03 Dec 05 Dec 07 Dec 09 Dec 99 Dec 01 Dec 03 Dec 05 Dec 07 Dec 09
TOC

Source: FactSet, ECB, J.P. Morgan. Source: FactSet, Bank of England, ONS, J.P. Morgan.
Real interest rates are calculated using Core CPI (FactSet definition) and Repo Rate. Real interest rates are calculated using Core CPI (FactSet definition) and Base Rate.

46
 US Fed and Bank of Japan Policy and Real Rates Print
Fixed Income

US Federal Reserve Bank Forecast Bank of Japan Forecast

8 2010: 0,25% 4 2010: 0,10%
2011: 1,00% 2011: 0,10%

6 3

Interest rate %
2
Interest rate %

4
Real Interest Rate
May 2010
1,71%

2 1
Fed Funds
30 June 2010
{ }

0,25%

0 0
Call rate
Real Interest Rate 30 June 2010
{ }

May 2010 0,10%

-0,69%
Dec 99 Dec 01 Dec 03 Dec 05 Dec 07 Dec 09 Dec 99 Dec 01 Dec 03 Dec 05 Dec 07 Dec 09
TOC

Source: FactSet, US Federal Reserve Bank, J.P. Morgan. Source: FactSet, Bank of Japan, J.P. Morgan.
Real interest rates are calculated using Core CPI (FactSet definition) and Fed Funds Rate. Real interest rates are calculated using Core CPI (FactSet definition) and Call Rate.

47
 US and European Interbank Rates, Investment Grade Print
and High Yield Bonds
% Europe interbank rates Investment Grade and High Yield Bond Returns
Fixed Income

10 October 2008
8 ECB Repo rate
5,4%
Equities

Spread over Repo rate

7 1,2%
Overnight Euribor
Fixed Income

6
Equities

3 month Euribor
5 Yields Total Returns in USD
4 Index { 30 June 2010} 2008 2009 YTD Q2 2010
3
JPMorgan Government 2,7% 12,0% 1,9% 0,4% 1,5%
2 Bond Index
1
JPMorgan Emerging Market 6,5% -9,7% 25,9% 5,4% 1,2%
Dec Dec Dec Dec Dec Dec Bond Index Plus (EMBI+)
04 05 06 07 08 09

BarCap Global Aggregate 2,5% 4,8% 6,9% -0,3% 0,0%

% US interbank rates
8 17 October 2008 BarCap Global 1-3 year 1,4% 3,8% 7,4% -3,1% -2,1%
US Fed Funds rate 4,6%
7 Aggregate
Overnight USD Libor Spread over Fed Funds rate
6 3 month USD
3,1%
BarCap Global Corp 4,8% -11,2% 23,7% 4,8% -1,2%
5 Libor
4
Merrill Lynch High Yield US 7,9% -28,8% 54,5% 7,4% -5,1%
3 B-BB Index
2
1
Dec Dec Dec Dec Dec Dec
04 05 06 07 08 09
TOC

Source: FactSet, J.P. Morgan. 3 month and overnight Libor and Euribor rates, 2 year US Treasury Source: Barclays Capital, Bank of America Merrill Lynch, FactSet, J.P. Morgan. Data as at
and German bund yields are all on a weekly frequency. Data as at 30/06/10 .
{ } 30/06/10 .
{ }

48
 Investment Grade and High Yield Bond Spreads Print
Fixed Income

Investment Grade and Emerging Markets US Corporate High Yield and Default Rate
bps bps %
1200 2400 12
Default Rate (rhs): 4,9%

1000 2000 Corporate High Yield (lhs): 701 10

800 1600 8
Emerging
Market
Sovereign
600 1200 6

400 800 4
323
Mortgages
213
200 202 400 2
US Investment
Grade
0 0 0
Dec 99 Dec 02 Dec 05 Dec 08 Dec 99 Dec 01 Dec 03 Dec 05 Dec 07 Dec 09
TOC

Source: Investment Grade is Merrill Lynch Investment Grade (C0A0), Mortgage Yield Source: FactSet, Merrill Lynch US High Yield Master Index II (H0A0), Par-weighted default rate
Securities is Mortgage Current Cpns FNMA 30 Year (MTGEFNCL) and Emerging Markets Bond of the JPM High Yield Bond Index J.P. Morgan. Data over 10 years to 30/06/10 .
{ }

is JPMorgan EMBI + spread over treasuries (JPEMSOSD) J.P. Morgan. Data over 10 years to
30/06/10 .
{ }

49
 Emerging Market Debt and Index Weighting Print

US and Emerging Market Sovereign Debt Yields EMBI weighting (dollar denominated debt)
Fixed Income

Africa 4% Brazil 12%

25 Other Asia 9%

Indonesia 6%
Mexico 12%
Asia Latin
Phillipines 7% 22% America
20
44% Venezuela 5%
Other Europe
Europe
8%
30%
Latin America
15 Emerging Turkey 10% Other*
Market Russia 12% 15%
Sovereign
EMBI weighting (local currency)
Other Asia
13% Africa 5%
10
10 year US Treasury Brazil 12%
Latin
India 16% America Mexico, 8%
Asia 25% Latin America
5
56% 5%
Fed Funds rate Europe
Poland 8%
14%
Turkey 3%
0
China 27%
TOC

Dec 89 Dec 92 Dec 95 Dec 98 Dec 01 Dec 04 Dec 07 Other Europe

3%
Source: FactSet, DataQuery, J.P. Morgan. Source: J.P. Morgan. EMBI+ for dollar denominated debt, GBI-EM Broad Composite for local
Emerging Markets Sovereign is the JPMorgan EMBI Index until March 2003 thereafter it is currency denominated debt.*Includes the Caribbean.
the EMBI+.

50
 OTHER ASSET CLASSES Print

Correlation of Returns over 7 years (EUR) 52

Property 53

Cumulative Returns on Global Assets 1900-2009 54

TOC

51
 Correlation of Returns over 7 years (EUR) Print

MSCI MSCI S&P MSCI Pan Europe Global 250 MSCI MSCI Asia High Yield
classes

Europe Japan 500 EM Bonds Property World ex Japan EM Debt Bonds

Equities

MSCI 1,00 0,57 0,83 0,87 -0,20 0,77 0,95 0,86 0,48 0,56
Europe
Other Asset

MSCI 1,00 0,60 0,63 -0,05 0,62 0,69 0,61 0,27 0,53
Japan

S&P 500 1,00 0,71 -0,13 0,77 0,94 0,74 0,29 0,71

MSCI EM 1,00 -0,18 0,68 0,88 0,98 0,53 0,52

Pan Europe 1,00 0,00 -0,18 -0,15 0,15 -0,12

Bonds

Global 250 1,00 0,81 0,70 0,54 0,61

Property

MSCI World 1,00 0,89 0,43 0,68

MSCI Asia 1,00 0,50 0,55

ex Japan

EM Debt 1,00 0,30

High Yield 1,00

Bonds
TOC

Source: FactSet, Bloomberg, MSCI, S&P, J.P. Morgan. Pan Europe Bonds is represented by the Citigroup Europe World Government Bond Index (WGBI). Global Property Securities is represented by the
GPR 250 Property Index, emerging market debt is represented by JPMorgan EMBI+, High Yield Bonds is represented by Merrill Lynch US High Yield Master. All correlation values are calculated on
monthly return data in euro for period 30/06/03 to 30/06/10. Correlation measures the direction and degree of linear association between two variables. A correlation of +1 means that two variables move
up and down together in proportion. A correlation of zero means that there is no pattern to the movement at all. A correlation of -1 means that the variables move in opposite directions. This chart is for
illustrative purposes only. All indices are price return only except emerging market debt.

52
 Property Print
classes

IPD Property Index

All Property Office Residential
Equities

Total Return Yield Date of Total Return Yield Date of Total Return Yield Date of
Other Asset

YoY % Change % Update YoY % Change % Update YoY % Change % Update

Australia 1,0 7,4 Mar 10 2,0 7,5 Dec 08 n/a n/a n/a

Canada 1,1 6,9 Mar 10 7,6 7,1 Dec 08 3,4 6,1 Mar 10

France -1,4 6,1 Dec 09 -1,9 6,5 Dec 09 0,1 3,7 Dec 09

Germany 2,5 5,2 Dec 09 2,0 5,1 Dec 09 5,3 4,2 Dec 09

Ireland 0,4 2,2 Mar 10 0,2 2,3 Mar 10 n/a n/a n/a

Italy 0,8 5,7 Dec 09 1,5 5,2 Dec 09 n/a n/a n/a

Japan -4,9 5,3 Feb 10 -8,2 5,1 Dec 09 -5,0 5,4 Dec 09

Korea 5,6 5,7 Dec 09 5,0 5,5 Dec 09 n/a n/a n/a
Netherlands -0,2 1,2 Dec 09 -0,2 1,7 Dec 09 -0,8 0,8 Dec 09
South Africa 8,7 8,4 Dec 09 8,0 9,3 Dec 09 n/a n/a n/a
Spain -9,4 4,6 Dec 09 -8,1 5,5 Dec 09 10,3 2,9 Dec 06

Sweden 1,4 5,4 Dec 09 -0,4 5,5 Dec 09 13,9 3,5 Dec 09
Switzerland 5,5 4,8 Dec 09 5,3 4,9 Dec 09 5,3 4,7 Dec 09
United Kingdom 1,1 0,6 May 10 1,2 0,6 May 10 n/a n/a n/a

United States 1,2 1,7 Mar 10 1,2 1,8 Mar 10 1,9 5,8 Mar 10
TOC

Source: IPD Index, includes residential and commercial, J.P. Morgan. Office and Residential are two categories within the IPD Property Index, other categories include Industrial, Retail and Retail
Warehouses.

53
 Cumulative Returns on Global Assets 1900-2009 Print
classes

The value of $1 invested, dividends reinvested in real terms, log scale

1000
Equities

2000 $509
Other Asset

Annualised Real Return 1900 – 2009 1972-1985 Equities $405

100 Equities 5,7%
Bonds 1,7%
Bills 1,1%

10
1929-1948 Bonds $6

1913-1925
Bills $3

0
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000
TOC

Source: Dimson, Marsh and Staunton ABN AMRO/LBS Global Investment Returns Yearbook 2008, J.P. Morgan. J.P. Morgan estimate from 2007: equities are represented by MSCI World, bonds by
BarCap Global Treasury GDP Weighted Unhedged USD Total Return Index and bills by BarCap US Treasury Bills Unhedged USD Total Return Index. Annualised real return calculations by J.P.
Morgan. Years of flat stock market performance also calculated by J.P. Morgan. Past performance is not indicative of future returns.

54
 Topical Charts Print

Debt and Market Stress 56

Earnings & Money Supply 57

Exports and Bond Yields 58

Banks & Employment 59

TOC

55
 Debt and Market Stress Print

Structural Balance vs. Expected GDP Growth TED Spread (3 Mo. Eurodollar Libor less 3 Mo. T-Bills)
Topical Charts

500
-1 Germany bps S&P 500
(indexed, rhs) 800

-3 400
Italy
Stuctural Balance (% GDP)

-5 France
TED
300 400
Spread
(lhs)
-7
Japan UK US Threshold
Portugal 200 for
-9 Spain
concern
200
Ireland
Low Growth
-11 + 100
Large Deficit

-13 Greece
1,0 1,5 2,0 2,5 3,0 0 100
GDP Growth 2012 (%, Est.) Dec 84 Dec 94 Dec 04

Note: The structural budget balance refers to the general government cyclically adjusted Source: Bloomberg, J.P. Morgan.
balance adjusted for nonstructural elements beyond the economic cycle. These include
TOC

temporary financial sector and asset price movements as well as one-off, or temporary,
revenue or expenditure items. The cyclically adjusted balance is the fiscal balance adjusted for
the effects of the economic cycle. As at 2009. Source: IMF, Bloomberg, J.P. Morgan.

56
 Earnings & Money Supply Print

Regional Earnings Growth and Valuation Country Earnings Growth and Valuation
-50% Positive Earnings Momentum -60%
Topical Charts

Japan Positive
Italy
& Cheap Valuation Earnings
UK

Relative Valuation*
-40% Europe Spain Germany
Relative Valuation*

-40% Momentum
Developed UK ex-UK
Markets US & Cheap
-30% Asia France
Emerging -20% Valuation
Asia Markets
-20% North China
America EMEA Latin 0%
-10% America Brazil

0% 20%
99,0 99,5 100,0 100,5 99,0 99,5 100,0 100,5 101,0
Earnings Revision Index Earnings Revision Index
Note: Earnings revisions are magnitude of changes over the last month. *Latest value of Note: Earnings revisions are magnitude of changes over the last month. *Latest value of
forward PE relative to long-run average. Source: I/B/E/S, J.P. Morgan. forward PE relative to long-run average. Source: I/B/E/S, J.P. Morgan.
Commodity Prices & China Quantitative Easing & US Money Supply
1,8 1.700
105 S&P GSCI Industrial Metals Money Supply, M1 (lhs) S&P 500 (rhs)
$tr Level

100 MSCI China 1,7 1.450

95
1,6 1.200
90
1,5 950
85

80 1,4 700
TOC

Jan 02 Jan 04 Jan 06 Jan 08 Jan 10 Dec 04 Dec 06 Dec 08

Source: MSCI, Standard & Poors, J.P. Morgan. Source: US Federal Reserve, J.P. Morgan.

57
 Exports and Bond Yields Print

Chinese and German Imports/Exports German Export Performance

Chinese Exports German Exports 100
Topical Charts

Chinese Imports German Imports € bn Total German Exports

90
YoY 75
% Chg.

45
50
Export Gap
0
25

German Exports to China

-45 0
Feb 08 Feb 09 Feb 10 Jan 93 Jan 99 Jan 05
Note : Chinese statistics in USD. Source: Bureau of Statistics of China, German Federal Source: Deutsche Bundesbank, J.P. Morgan.
Statistics Office, J.P. Morgan.
Generic Government 10-Year Bond Yields Bond Spreads (bps)
4,25 US UK Germany 1.800 High Yield
%
1.500 Emerging Markets
3,75
1.200 Investment Grade

3,25 900

600
2,75
300

2,25 0
TOC

Mar 10 Apr 10 May 10 Jun 10 Dec-99 Dec-02 Dec-05 Dec-08

Source: Bloomberg, J.P. Morgan. Source: Bloomberg, Merrill Lynch, J.P. Morgan.

58
 Banks & Employment Print

Credit Default Swaps on European Banks Growth in Greek Retail Bank Deposits
250 200 0 20
Topical Charts

Market Return vs Financials (lhs) Spread bps %

150
Financials CDS Index (rhs)
200 300 Bank Deposit 10
Growth (yoy, rhs)
100

150 600 Gov't Bond Spreads: 0

50 Greece less Germany
(10yr, lhs, reverse)
100 0 900 -10
Dec 03 Dec 06 Dec 09 Jul 06 Jul 07 Jul 08 Jul 09 Jul 10

Note: Stock return based on MSCI Europe. Source: Markit iTraxx, Royal Bank of Scotland, J.P. Source: Bank of Greece, Bloomberg, J.P. Morgan.
Morgan.
Indexed US Employment Levels
100
Employment Level

98
Recession
1957
96 1981
1990
94 2001
2008
92
0 12 24 36 48
TOC

Months Into Recession

Note: US Non-Farm Private Payrolls from beginning of recession. Source: BEA, J.P. Morgan.

59
 J.P. Morgan Asset Management Print

Zurich office Geneva office

J.P. Morgan (Suisse) SA, Zurich Branch J.P. Morgan (Suisse) SA

Dreikönigstrasse 21 8, rue de la Confédération
8002 Zurich 1204 Geneva

Tel No: +41 44 206 86 20 Tel No: +41 22 744 19 00

Fax No: +41 44 206 86 30 Fax No: +41 22 744 19 10
[email protected] [email protected]
www.jpmam.ch www.jpmam.ch

THIS MATERIAL IS INTENDED FOR USE SOLELY BY PROFESSIONAL ADVISERS AND INSTITUTIONAL INVESTORS. NOT FOR PUBLIC DISTRIBUTION.

The opinions expressed in this document are those held by the author at 9 July 2010. The views expressed herein are not to be taken as an advice or recommendation to support an investment
decision. The information included in this document has been taken from source considered as reliable; JPMorgan Asset Management (Europe) S.à r.l. cannot however guarantee its accuracy.
J.P. Morgan (Suisse) SA has been authorised by the Swiss Financial Market Supervisory Authority FINMA as Swiss representative and as paying agent of the funds. The latest FINMA approved
version of the prospectus and of the simplified prospectus, the articles, the annual and semi-annual reports of the funds as well as the list of the purchases and sales which the funds have
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Confédération, PO Box 5507, 1211 Geneva 11, Switzerland.

Unless otherwise stated, all data is as of 30 June 2010.

Issued by J.P. Morgan (Suisse) SA, Zurich Branch, Dreikönigstrasse 21, PO Box, CH-8022 Zurich.
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