U.S.Week in Review

Equity Research | U.S. Week in Review PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 55. November 1, 2010 Economics & Strategy U.S. Economics November FOMC: Fed to Launch Asset Purchases Michael Gapen 3 The Potential Gains from Resolving Uncertainty Troy Davig 5 Global Economics Perhaps a Sea Change, but Not a Shift Simon Hayes 10 New Coverage Clean Energy Fuels Corp. (CLNE - $14.76; 2-Equal Weight/2-Neutral) Vishal Shah 12 Codexis, Inc. (CDXS - $9.24; 2-Equal Weight/2-Neutral) Vishal Shah 12 Digital Relaty Trust Inc. (DLR - $59.35; 1-Overweight/2-Neutral) Ross Smotrich 13 Heartware International (HTWR – $66.22; 2-Equal Weight/2-Neutral) Douglas D. Tsao 14 Rating Change CommScope (CTV - $30.16; 2-Equal Weight/2-Neutral) Amir Razwadowski 15 F5 Networks, Inc. (FFIV - $92.82; 2-Equal Weight/2-Neutral) Jeff Kvall 16 Leisure (2-Neutral) Felicia R. Hendrix 17 Carnival Corp. (CCL - $40.14; 1-Overweight/2-Neutral) Felicia R. Hendrix 17 Royal Caribbean (RCL - $34.87; 1-Overweight/2-Neutral) Felicia R. Hendrix 17 Western Digital Corp. (WDC - $31.59; 1-Overweight/1-Positive) Ben A. Reitzes 18 The Big Picture Cable & Satellite Communications (2-Neutral) James M. Ratcliffe 19 Highlights From The Week Featured Notes 21 Statistical Summaries Universe Changes 42 Earnings Estimate Changes 43 Reports and Notes for the Week 50 Barclays Capital Events Inside Back Cover Calendar of Economic Releases Back Cover Barclays Capital does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. This research report has been prepared in whole or in part by research analysts based outside the US who are not registered/qualified as research analysts with FINRA. ECONOMICS & STRATEGY PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 55. November 1, 2010 3 U.S. ECONOMICS Michael Gapen 1.212.526.8536 michael.gapen@barcap.com Troy Davig 1.212.526.3714 troy.davig@barcap.comNovember FOMC: Fed to Launch Asset Purchases „ We view the FOMC as dissatisfied with the pace of recovery and expect it to initiate a new Treasury purchase program at next week’s meeting. „ We believe the committee will favor an incremental approach and the pace and duration of purchases will be tied to achieving the Fed’s dual mandate. „ The advance release of Q3 GDP revealed growth of 2.0%, driven by an increase in final sales growth and a larger-than-expected drag from trade. The advance release of Q3 10 GDP revealed growth of 2.0% q/q (saar), up slightly from 1.7% in Q2. The data revealed better growth of final sales, but this was offset by weakness from housing and a larger-than-expected drag from net trade. Real consumer spending accelerated to 2.6% and business spending on equipment and software moderated to 12.0%, in line with our expectations and consistent with the behavior of retail sales and core capital goods orders and shipments (Figure 1). Elsewhere, we view incoming housing data as pointing toward a stabilization in activity, albeit at historically low levels. Since bottoming out in July, existing home sales have retraced about one-third of their early-summer decline. New home sales also show signs of stabilization, although we see the pace of sales as only gradually reducing the level of inventories, leaving builders cautious about undertaking additional starts (Figure 2). If the housing market continues to stabilize, this should benefit residential investment in Q4 10 versus the 29.1% decline observed in Q3. We see the committee as favoring an “incremental” approach We see the committee as dissatisfied with the pace of recovery and the speed with which inflation and unemployment are forecasted to return to levels the FOMC sees as consistent with its dual mandate. We therefore see the FOMC as initiating a new Treasury asset purchase program at next week’s meeting. As we stated in Market Strategy Americas: Michael Gapen Figure 1: Core capital goods continue to signal moderating equipment and software investment Figure 2: New home sales are expected to only gradually reduce inventory -50-40-30-20-10010203040020304050607080910Core capital goods shipmentsEquipment and software investmentCore capital goods orders% 3m/3m (saar) 02004006008001,0001,2001,4001,60000020406081002468101214New home sales, lhsMonths' supply at cur