Global Recovery: signs of stronger growth,
overshadowed by the European credit crisis

As Greece heads towards debt rescheduling, with Portugal, Ireland, Spain and Italy waiting in the firing line, markets reacted as if this were the start of round two of the global financial crisis. Greece is small, but so was the U.S. sub-prime mortgage market. Now, despite massive rescue plans, global markets are being forced to confront sovereign risk head-on.

Meanwhile, a surge in industrial output around the world has brought healthy growth across Asia, and sharply improved the prospects for a rapid turnaround in North America. Exports are rising everywhere, as business recovers and inventories are rebuilt. The inventory cycle may be a temporary shot in the arm, but this is how recoveries always begin, and it should be enough to start a sustainable global expansion. Lately, both jobs and consumer spending have been stronger than expected in North America.

However, a sustainable expansion requires a continued recovery in consumer and business confidence that supports hiring, spending and business investment. A renewed financial crisis could undermine confidence and derail this benign outlook. For the moment, we judge that the tribulations of the euro zone are limited and manageable, but the potential long-term losses and the ramifications of a weak and volatile euro certainly raise the risk temperature around the world.

MFC Global Investment Management
MFC Global Investment Management® (MFC GIM) is the asset management division of Manulife Financial. The MFC GIM diversied group of companies and affiliates provide comprehensive asset management solutions for institutional investors, investment funds and individuals in key markets around the world. This investment expertise extends across a full range of asset classes including equity, fixed income and alternative investments such as oil & gas, real estate, timber, farmland, as well as asset allocation strategies. MFC GIM has investment offices in the United States, Canada, the United Kingdom, Japan, Hong Kong, and throughout Asia.

The information contained herein is based on sources believed to be reliable, but it is neither all-inclusive nor guaranteed by MFC GIM. Opinions and forecasts reflect our judgment at the time of publication and are subject to change.

This commentary is provided for informational purposes only and the opinions expressed in this commentary of those of the author and MFC Global Investment Management and not necessarily those of John Hancock Funds, LLC. MFG Global Investment Management and John Hancock Funds, LLC are affiliated companies.