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- CRB Fundamentals - 2008 Commodity Articles

Stock Indexes, Worldwide

World stocks - World stock markets in 2007 put in a decent performance, extending the rally to five consecutive years, following the 2000-02 bear market. The MSCI World Index, a benchmark for large companies based in 23 developed countries, rallied by +9.6% in 2007, staging its fifth consecutive year of positive returns (2003 +33.8%, 2004 +15.2%, 2005 +10.0%, 2006 +20.7%, 2007 +9.6%).

The MSCI World Index showed general strength in the first half of 2007 due to continued strong earnings growth, reasonable valuations, strong global GDP growth, and generally low interest rates. World GDP growth in 2007 remained strong at +5.2%, according to the IMF, near the levels seen in the previous several years (+5.1% in 2006, +4.9% in 2005, and +5.3% in 2004). The Chinese economy continued to be a key driver of global economic growth, putting in another year of growth for near or above 10%. India was also a major contributor to the global economy again with GDP growth near 8%.

The U.S. and global stock markets took a dive during August when the sub-prime mortgage crisis first emerged. However, the U.S. and global stock markets were able to recover through October when the U.S. Federal Reserve took aggressive action in injecting reserves and cutting interest rates, thus providing the market with hope that the situation was contained. The U.S. and global stock markets ended 2007 in a consolidation mode. Then in January 2008, the global stock markets fell sharply as the U.S. housing crisis became worse and the U.S. and European credit crunch dragged on.

Small-Capitalization Stocks - World small-cap stocks in 2007 closed slightly lower, failing to recover in late 2007 as much as large-cap stocks from the August swoon. The MSCI World Small-Cap Index, which tracks companies with market caps between $200 million and $1.5 billion, fell -0.5% in 2007, halting the string of four consecutive years of double-digit gains (2003 +55.5%, 2004 +22.6%, 2005 +14.2%, 2006 +15.8%). The MSCI World Small-Cap Index in 2007 lagged the large-cap MSCI World Index gain of +9.6% points by 10.1 points, chalking up the second consecutive year of underperformance relative to large caps (small-caps underperformed by 4.9 percentage points in 2006).

World Industry Groups - The MSCI Industry Sectors in 2007 produced the following ranked annual returns: Materials +31.2%, Energy +27.5%, Utilities +18.5%, Telecom +17.9%, Consumer Staples +16.3%, Technology +14.4%, Consumer Staples +16.3%, Information Technology +14.4%, Industrials +13.6%, Health Care +2.5%, Consumer Discretionary -4.5%, Financials -10.5%. The Financials were pummeled by the subprime mortgage debacle and the huge losses that banks were forced to absorb. Meanwhile, the Energy sector was very strong at +27.5% with the rally in oil prices during the year to $100 per barrel.

Emerging markets - Emerging stock markets did very well again in 2007 on strong GDP growth in those countries and on strong commodity prices and energy prices, which boosted developing countries that are big commodity or energy producers. The MSCI Emerging Markets Free Index, which tracks companies based in 26 emerging countries, rallied by +36.5% in 2007, beating the +9.6% gain in the MSCI World index by a hefty 26.9 percentage points and chalking up the fifth consecutive year of out-performance relative to the MSCI World index.

G7 - In 2007, five of the seven G7 stock markets saw gains and two showed losses. Of the G7 stock markets showing gains, the ranked gains are as follows: German DAX index +22.3%, Canada Toronto Composite +7.2%, UK FTSE 100 +3.8%, U.S. S&P 500 +3.5%, France CAC40 +1.3%. The two G7 stock markets showing losses were Japan's Nikkei 225 at -11.1% and Italy's MIB at -7.0%.

North America - In North America, Mexico's stock market beat both the U.S. and Canadian stock markets for an amazing seventh straight year. The Mexican Bolsa index closed 2007 up +11.7% (after big gains of +48.6% in 2006 +37.8% in 2005, +46.9% in 2004, and +43.5% in 2003), beating the S&P 500 gain in the U.S. of +3.5% and the Toronto Exchange Composite index gain of +7.2%.

Latin America - Latin America stock markets closed mostly higher in 2007 after the sharp gains seen in 2006: Brazil's Bovespa Index +43.6%, Peru's Lima General Index +36.0%, Costa Rica's Stock Market Index +22.6%, Chile's Stock Market Select Index +13.3%, Jamaica's Stock Exchange Index +7.2%, Argentina's Merval Index +2.9%, Columbia's General Index -4.2%, Ecuador's Guayaqui Bolsa Index -6.7%, Venezuela's Stock Market Index -27.4%.

Europe - European stocks in 2007 closed with a modest performance after the strong the double-digit percentage gains seen in 2006. The Dow Jones Stoxx 50 index closed -0.4%, breaking four consecutive years of gains (+10.4% in 2006, +20.7% in 2005, +4.3% in 2004 and +10.5% in 2003). European stocks were helped by a generally strong economy but were undercut by the U.S. and European banking crisis that emerged in August 2007. The five big European powers saw double-digit gains except for Italy (-7.0%): Germany +22.3%, Spain +7.3%, UK +3.8%, and France +1.3%.

Asia - Asia saw generally strong stock market gains in 2007 for the fifth consecutive year, as Asia continued to be boosted by torrid economic demand from China. Japan, however, closed with a disappointing -11.1% loss, dragging down the performance of the MSCI Far East Index, which showed a small +0.3% gain in 2007 after gains of +8.9% in 2006, +24.2% in 2005, +16.7% in 2004, and +36.3% in 2003. China's Shanghai Composite Index in 2007 soared by +96.7%, adding to the +130.4% gain in 2006 and ignoring the general consensus outside China of a bubble.

The ranked closes for the Asian stock markets are as follows: China's Shanghai Composite index +96.7%, Indonesia's Jakarta Composite Index +52.1%, India's Mumbai Sensex 30 index +47.1%, Pakistan's 100 Index +40.2%, Hong Kong Hang Seng +39.3%, South Korea Composite Index +32.3%, Malaysia's Kuala Lumpur Composite index +31.8%, Thailand's Stock Exchange index +26.2%, Vietnam Stock Index +23.3%, Philippines' Composite index +21.4%, Singapore's Straights Times index +16.6%, Australia's All-Ordinaries index +13.8%, Taiwan's TAIEX index of +8.7%, New Zealand's Exchange 50 index -0.3%, and Japan's Nikkei 225 -11.1%.




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