12 Oct 2015

Week Ahead: US data in focus

Summary of key economic events

13 October China Trade Balance Germany CPI

UK CPI PPI

14 October Australia Consumer Confidence PPI China CPI PPI Eurozone Industrial Production

US Retail Sales

PPI

15 October Australia Unemployment Rate Japan Industrial Production

US FOMC Beige Book

16 October Eurozone CPI Trade Balance Source: Bloomberg

Performance of major stock market indices

End 2015 Daily Percent Change

Index 2014 Oct 8 Oct 9 Change Daily 2015 Yr/Yr North America United States Dow 16576.7 17050.8 17084.5 33.7 0.2 -4.1 3.3 NASDAQ 4176.6 4810.8 4830.5 19.7 0.4 2.0 13.0 S&P 500 1848.4 2013.4 2014.9 1.5 0.1 -2.1 5.7 13621.6 13978.7 13964.4 -14.3 -0.1 -4.6 -1.8 Canada S&P/TSX Comp**

Europe UK FTSE 100 6749.1 6374.8 6416.2 41.3 0.6 -2.3 1.2 France CAC 4296.0 4675.9 4701.4 25.5 0.5 10.0 15.4 Germany XETRA DAX 9552.2 9993.1 10096.6 103.5 1.0 3.0 14.9 Italy MIB 18967.7 22156.7 22257.9 101.1 0.5 17.1 15.9 Spain Ibex 35 9916.7 10181.2 10309.6 128.4 1.3 0.3 1.6 Sweden OMX Stockholm 30 1333.0 1464.5 1483.7 19.3 1.3 1.3 13.9 Switzerland SMI 8203.0 8674.2 8680.2 6.0 0.1 -3.4 3.6

Asia/Pacific Australia All Ordinaries 5353.1 5241.4 5309.2 67.8 1.3 -1.5 2.4 Japan 16291.3 18141.2 18438.7 297.5 1.6 5.7 20.5 Hang Seng 23306.4 22354.9 22458.8 103.9 0.5 -4.9 -2.7 S. Korea Kospi 2011.3 2019.5 * * * * * Singapore STI 3167.4 2947.0 2998.5 51.5 1.7 -10.9 -7.0 2116.0 3143.4 3183.2 39.8 1.3 -1.6 34.1 China Comp India Sensex 30 21170.7 26845.8 27079.5 233.7 0.9 -1.5 3.0

Data Source — Haver Analytics

US markets Following the rally the day before, stocks saw some further upside trading on Friday. While buying interest was somewhat subdued on the day, the Dow and the S&P reached their best closing levels in over a month. The major averages posted modest gains but closed off their highs for the session. The Dow Jones industrials edged up 0.2%, the Nasdaq added 0.4% and the S&P inched 0.1%. On the week, the Dow soared by 3.7%, while the S&P jumped by 3.3% and the Nasdaq gained 2.6%. Trading was light. The modest strength came as traders continued to react positively to yesterday's release of the minutes of the latest FOMC meeting.

Airline stocks also turned in a strong performance with United Continental helping to lead the sector higher after raising its third quarter profit margin forecast. Steel, biotechnology and trucking stocks also gained while brokerage and natural gas stocks moved to the downside. Apple was up for its best day in a month. Alcoa retreated after it reported earnings as did several other raw materials companies.

International Paper jumped after it said it is taking a step back from manufacturing in Asia as it exits a

Chinese joint venture and evaluates the sale of 18 other factories in the region. Packaging company

Westrock gained amid a report that it is idling some capacity in containerboard production. Marathon Oil and Chesapeake Energy slid but were still up for the week. Gap was down after a measure of September sales tumbled more than projected at its Banana Republic stores. Apollo Education Group dropped. The company said in a filing that its University of Phoenix was notified by the Defense Department that it has been placed on probationary status regarding tuition assistance for active duty military personnel.

Atlanta Fed President Dennis Lockhart said in prepared remarks Friday in New York that the first interest rate increase since 2006 will likely be warranted later this month or in December, as the economy “remains on a satisfactory track.”

Gold at the afternoon London fixing was up US$11.55 to US$1,251.55. Copper futures were up 3.0% to US$2.41. WTI spot crude was up 20 US cents to US$49.63. Dated Brent spot crude was down 40 US cents to US$52.65. The US dollar was up against the pound and the yen. However, it declined against the euro, Swiss franc and the Canadian and Australian dollars. The Dollar Index was virtually unchanged (down 0.04%). The yield on US Treasury 30 year bond was down 3 basis points to 2.92% while the yield on the 10 year note slipped 1 basis point to 2.09%.

European markets European markets advanced Friday, capping a strong weekly performance and enjoying the largest weekly gain since January. Solid performance by Asian markets provided an early boost and commodity strength continued to fuel the gains. Mining stocks were particularly strong after Glencore announced that it will cut its production. The FTSE was up 0.6%, the CAC gained 0.5%, the DAX advanced 1.0% and the SMI edged 0.1% higher. On the week the indices added 4.7%, 5.4% 5.7% and 1.9% respectively.

Investors had their first opportunity to react to the FOMC minutes which were released after the market here closed on Thursday. The minutes showed that Fed members were concerned about global growth risks and decided it was prudent to wait for additional information before raising interest rates.

Both RWE and E.ON gained. Deutsche Bank jumped after Thursday’s weak performance. Commerzbank also finished higher. Volkswagen, BMW, Daimler, Peugeot and Renault advanced. EDF and Schneider Electric gained. In London, SABMiller was up. The company raised its target annual run rate cost savings from its cost and efficiency program announced in May 2014, from US$500 million by 31 March 2018 to at least US$1,050 million by 31 March 2020. Glencore surged after announcing that it will cut zinc production by a third. Anglo American, Rio Tinto, Fresnillo, BHP Billiton and Antofagasta all advanced. Lloyds Banking Group shares gained after the UK government reduced its stake in the bank by another percentage point. Standard Chartered was up after the emerging-markets focused bank said is planning to cut up to 1,000 top jobs in a drive to reduce costs.

The Bank of England's monetary policy committee voted 8 to 1 to keep interest rates at a record low of 0.5%, saying labor costs aren't yet strong enough to push inflation back to its 2% target. The minutes of the European Central Bank's September meeting noted that downside risks to the outlook for inflation had increased and more time was needed to gauge the effect of financial market volatility and slower growth in China.

Asia Pacific Markets Stocks advance in Asia and commodities rebounded after the FOMC minutes indicated the Federal Reserve is no hurry to raise short term interest rates. Dovish comments from the Bank of England and the European Central Bank also reinforced the view that global market liquidity will remain ample for a long time.

The Shanghai Composite added 1.3% as investors turned their focus to third quarter earnings season. The Hang Seng was up 0.5% after succumbing to profit taking the previous day. For the week, the Shanghai Composite was up 4.3% and the Hang Seng, 4.4%.

The Nikkei was up 1.6% and 4.0% for the week. The weekly gain was the biggest since July. NTN, , Motor, Zinc and Obayashi climbed as did and JX Holdings. Corp rallied on talk it may be a prospective takeover target for Tsinghua Unisplendour. jumped on a Nikkei report that it will buy Nanbu Plastics for about ¥10 billion. shares plunged after it missed its profit targets in the wake of losses at its Uniqlo and J Brand businesses in the US.

Australian shares hit six-week high with buying seen across the board on expectations the Fed will not raise interest rates this year. Both the S&P/ASX and All Ordinaries gained 1.3%. The indices added 4.4% and 4.3% respectively on the week. The Sensex was up 0.9% on the day and 3.3% on the week.

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