From: Thomas Schiersch
Date: 2008 Jan 07 at 07:18:18 PM
Database: SRS Rates and Values
Folder: FUNDS-Market.Update
Financial Markets Update - January 7, 2008

FINANCIAL MARKETS UPDATE
January 7, 2008
Information provided by Manulife Bank of Canada

Highlights (Jan 1 to Jan 4)

Data out of US points to a slow down in the economy; Fed to cut rates by at least 25 basis points this month
Economic data beginning to show signs of fatigue; Bank of Canada interest rate cuts sure to follow shortly
Dollar trades weaker to US on signs of global economic slow down

Key Interest Rates / Index Levels

	Current	One Month Ago	YTD Performance

S&P / TSX Index	13,778	13,850	-0.39%
DJIA	12,800	13,620	-3.50%
S&P 500 Index	1,411	1,507	-3.86%
NASDAQ	2,504	2,709	-5.57%


	Current	One Week Ago	Change

Canada - Prime	6.00%	6.00%	0.00%
Canada - 3 month T-Bill	3.77%	3.85%	-0.08%
Canada - 5 year bond	3.72%	3.93%	-0.21%

U.S. - Prime	7.25%	7.25%	0.00%
U.S. - 3 month T-Bill	3.21%	3.10%	0.11%
U.S. - 5 year bond	3.15%	3.56%	-0.41%

USD/CAD Exchange Gold Oil * oil/gold change is year to date	1.0132 $860 US $97.91 US	1.0225 $834 US $95.98 US	-0.0093 11.0% 2.01%

*contact Manulife Bank Treasury for any historical data inquiries

Week Ahead - Key Economic Releases

CANADA	.	.
Wednesday Friday	Housing Starts (Dec) Employment (Dec) Unemployment Rate (Dec)	223,000 to 224,000 (227,900) 15,000 to 15,500 (prev 42,000) 5.9% to 6.0% (previous 5.9%)
UNITED STATES
Tuesday Thursday Friday	Home Sales (Nov) Wholesale Inventories (Nov) Trade Balance (Nov)	-0.7% to -0.6% (previous 0.6%) 0.3% to 0.4% (previous 0.0%) -$59.9 bn (previous -$57.8 bn)

Commentary

United States: Economic data out of the US suggests the economy is slowing down faster than originally anticipated. The economy only added 18,000 jobs in December while the unemployment rate increase to a two year high. 2007 was the worst year since 2003 for job growth in the US. Economists had forecasted a gain of approximately 70,000 jobs for December. This is the biggest increase in the jobless rate since 1995. The discouraging employment data raising the possibility that the US economy is headed for recession. Manufacturing decreased 31,000 jobs in December while the housing sector continues to correct itself with a high degree of suddenness. US manufacturing shrank the most in almost five years as the December ISM index decreased to 47.7 (the lowest reading since April 2003). The Fed meets next on January 30. Futures pricing suggests that a cut in interest rates is all but guaranteed - the only question is whether it will be 25 or 50 basis points.

Canada: Economic data released the past few weeks suggest the economy is still okay but there are warnings of a slow down ahead. Retail sales rose 0.1% (expectations of a 0.4% decrease) on stronger than expected automotive purchases. Gross domestic product in the month of October increased 0.2% (expectations of a 0.1% increase) with consumer spending powering the way. The consumer in Canada remains supported by a continued commodities and energy boom as well as three decade unemployment lows. While the numbers were stronger than expected, the outlook for growth is decreasing. The strength of the Canadian dollar is hurting many core industries in Canada and an overall global slow down will no doubt impact our fastest growing industries to date - specifically energy and commodities. The Bank of Canada meets next on January 22 and it looks as if they may cut interest rates by 25 basis points to help provide support to the consumers.

The Canadian dollar continued to trade near under par to the US dollar this past week. Expectations are for the dollar to weaken against the US dollar in 2008. A slowing US and global economy will lead to reduced demand for commodities such as nickel, copper and lead. Energy consumption will also decrease due to the slowdown. Canada has been impacted by the strength of the currency in many sectors including: tourism, manufacturing and exports. It is also expected that the growth of the Canadian economy will slow down as well which will result in a weakening dollar.

Although every effort has been made to ensure that the information contained in this document is accurate, Manulife Bank does not assume liability for errors, omissions and /or damages that may result from using the above information. This update is provided as a general source of information and should not be considered as legal, tax or personal investment advice and is intended for internal use only.

Sources:

Royal Bank of Canada, Financial Markets Weekly, January 4, 2008, Economics Department
Bank of Montreal, The Weekly, January 4, 2008, Laurie Peterson