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Weekly commentary

Economy

The US economy grew at a 2.4% annual growth rate during the third quarter of 2000, its slowest since mid 1996. The US economy is now operating at well below its non-inflationary productive growth capacity of 4.0-4.5% per annum. The slowdown in growth if sustained is expected to lead to a decline in US official interest rates during the first half of 2001. Australia recorded a trade surplus of $324m in October as the benefits of the weak A$ continue to drive export growth. Exports are expected to be the key driver of economic growth in FY01.

Equities

The NASDAQ reaches its lowest level for the year of 2,523 points a decline of 51% from its peak, while funds continue to flow towards bonds and blue chip defensive stocks. We continue to favour defensive stocks such as Banks, Infrastructure & Utilities & Retailers. The resources sector is expected to be underpinned by the weak A$ and renewed corporate activity assuming the world economy achieves a “soft economic landing”.

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