1. Rebuilding confidence Han de Jong Group Economics March 2012

2. 2 Six months ago: pessimism Contagion in euro crisis Sharp drop in economic activity & business confidence  Fear for another sharp downturn like ‘Lehman’

3. 3 Why did the global economy not ‘collapse’? Financial system did not dry up European leaders took positive steps

4. 44 Business confidence: PMI and ISM index Source: Bloomberg

5. 55 Business confidence: PMI Source : Bloomberg Index

6. 66 Divergence US and eurozone Unemployment, % Source: Bloomberg

7. 7 Money growth % yoy Source: Bloomberg

8. 88 Divergence Europe: car sales Portugal-48.8 Greece-45.2 Ireland -8.6 France-20.2 Italy-18.9 Netherlands-10.0 UK-2.5 Germany 0.0 Estonia+29.7 Iceland+148.5 % yoy, February 2012 Source: Bloomberg

9. 99 US: self sustaining growth

10. 10 China hard landing or soft landing: Car sales millions Source: Bloomberg

11. 11 Economic situation US moving to self-reinforcing recovery Europe improving gradually Emerging economies taking advantage of industrial recovery – and room to stimulate

12. 12 Euro crisis LTROs have eased pressure Greek tragedy no longer problem for financial markets – now purely political New Compact Likely increase bail-out funds Calm has returned to markets

13. 13 2yr government bond yields Source: Bloomberg %

14. 14 European banks tightening lending criteria until Q4 Net-tightening (%) Source: Thomson Reuters Datastream

15. 15 Risks to the ECB’s approach ECB balance sheet riskier Inflation Phenomenal distortion in markets, will lead to misallocation Reduced urgency other policymakers - Public finances - Structural reform

16. 16 Structural improvements? Deleverging continues Eurozone public finances much improved Structural reform

17. 17 Spain

18. 18 Italy

19. 19 Unemployment Source: Bloomberg

20. 20 US: Debt deleveraging households Source: Thomson Reuters Datastream % GDP

21. 21 Risks Escalation euro crisis - Austerity fatigue - Loss of patience Oil prices Rising interest rates China hard landing Too much austerity Too little austerity

22. 22 Price earning ratio S&P 500 Source: Bloomberg

23. 23 Investment portfolios – adding risk Equities: raised to neutral Equities: - more cyclical exposure - overweight Emerging Markets Bond:High yields, corporates, Emerging Markets

24. 24 Equities

25. 25 Bonds %

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