APRIL 13, 2012

All values in U.S. dollars unless otherwise noted.Priced as of April 13, 2012, market close

(unless otherwise stated).For Important Disclosures, see pages 5-6.

Equity Scorecard - April 13, 2012

» Equity market volatility increased and most major indices sold off during the

week, pressured mainly by the continued deterioration in Spanish sovereign

bonds. However, China bucked the trend and Canada held up fairly well.

» A number of markets have pulled back 5% or more from their recent peaks.

Could this ultimately morph into a more meaningful correction and drag down

U.S. stocks? (page 2)

» Global Roundup: Updates from the U.S., Canada, Europe, and Asia. (pages 3-4)

Global Insight WeeklyRBC Wealth Management

Author Kelly Bogdanov – San Francisco, USA kelly.bogdanov@rbc.com; RBC Capital Markets, LLC

ContributorsMaha Arshad, Adrian Brown & Jeff Musial – Toronto, Canada maha.arshad@rbc.com, adrian.brown@rbc.com, jeff.musial@rbc.com RBC Dominion Securities Inc.

Frédérique Carrier – London, UK frederique.carrier@rbc.com; Royal Bank of Canada Investment Management (U.K.) Ltd.

Index (local currency) Level Weekly MTD YTD

S&P 500 1,377.20 -2.0% -2.7% 9.0%S&P/TSX Comp 12,097.83 -0.5% -2.8% 0.8%FTSE 100 5,651.79 -1.3% -2.0% 1.4%Hang Seng 20,701.04 0.5% 0.7% 12.3%

Dow (DJIA) 12,917.90 -1.6% -2.7% 5.2%NASDAQ 3,011.33 -2.2% -2.6% 15.6%Russell 2000 796.29 -2.7% -4.1% 7.5%STOXX Europe 600 253.40 -2.2% -3.8% 3.6%German DAX 6,583.90 -2.8% -5.2% 11.6%Nikkei 225 9,637.99 -0.5% -4.4% 14.0%Straits Times 2,987.82 0.1% -0.8% 12.9%Shanghai Comp 2,359.16 2.3% 4.3% 7.3%Brazil Bovespa 62,105.42 -2.5% -3.7% 9.4%

2 GLOBAL INSIGHT WEEKLY – APRIL 13, 2012

Markets & the EconomyMarket Scorecard - April 13, 2012

Source: Bloomberg. Note: Page 1 equity returns do not include dividends. Bond yields in local currencies. Copper and Agriculture Index data as of Thursday’s close. Dollar Index measures USD vs. six major currencies. Currency rates reflect market convention (CAD/USD is the exception). Currency returns quoted in terms of the first currency in each pairing. Data as of 9:18 pm GMT 4/13/12.

Examples of how to interpret currency data: CAD/USD 1.00 means 1 Canadian dollar will buy 1.00 U.S. dollars. CAD/USD 2.3% return means the Canadian dol-lar rose 2.3% vs. the U.S. dollar year to date. USD/JPY 81.03 means 1 U.S. dollar will buy 81.03 yen. USD/JPY 5.4% return means the U.S. dollar rose 5.4% vs. the yen year to date.

Bond Yields 4/13/12 4/6/12 12/30/11 YTD ChgUS 2-Yr Tsy 0.266% 0.314% 0.239% 0.03%US 10-Yr Tsy 1.988% 2.055% 1.876% 0.11%Canada 2-Yr 1.205% 1.249% 0.956% 0.25%Canada 10-Yr 1.988% 2.126% 1.941% 0.05%UK 2-Yr 0.391% 0.419% 0.327% 0.06%UK 10-Yr 2.041% 2.157% 1.977% 0.06%Germany 2-Yr 0.126% 0.140% 0.144% -0.02%Germany 10-Yr 1.735% 1.735% 1.829% -0.09% Commodities (USD) Price Weekly MTD YTDGold (spot $/oz) 1,665.23 1.2% -0.7% 5.9%Silver (spot $/oz) 31.55 -1.2% -2.5% 13.0%Copper ($/ton) 8,265.75 -1.4% -2.5% 8.9%Oil (WTI spot/bbl) 102.83 -0.5% -0.2% 4.1%Oil (Brent spot/bbl) 121.88 -1.7% -2.4% 12.2%Natural Gas ($/mlnBtu) 1.87 -5.8% -6.9% -37.4%Agriculture Index 436.50 -1.3% -1.7% 0.5% Currencies Rate Weekly MTD YTD

US Dollar Index 79.89 0.02% 1.1% -0.3%CAD/USD 1.00 -0.13% 0.0% 2.3%USD/CAD 1.00 0.12% 0.0% -2.2%EUR/USD 1.31 -0.14% -2.0% 0.9%GBP/USD 1.58 -0.16% -1.0% 1.9%AUD/USD 1.04 0.56% 0.2% 1.5%USD/CHF 0.92 0.27% 1.9% -2.0%USD/JPY 81.03 -0.75% -2.2% 5.4%EUR/JPY 105.96 -0.83% -4.2% 6.3%EUR/GBP 0.83 0.04% -0.9% -1.0%EUR/CHF 1.20 0.15% -0.1% -1.1%USD/SGD 1.25 -1.08% -0.8% -3.8%USD/CNY 6.30 -0.05% 0.1% 0.1%USD/BRL 1.84 0.86% 0.6% -1.5%

Global equities traded lower during the week, led by 2%+ declines in many European indices as the Spanish 10-year sovereign debt yield approached 6% for the first time since last November.

The sell-off was initially sparked by disappointing U.S. employment data and then gained steam on Tuesday when the S&P 500 and other indices breached key technical levels.

Many markets snapped back on Wednesday and Thursday after European Central Bank (ECB) officials opened the door to potentially purchase Spanish sovereign debt in order to stem the rise in yields within that market. The ECB has a number of resources at its disposal. It’s unclear at this stage if German central bankers would bless such a move.

An important shift in China also contributed to the rebound. Chinese banks increased lending by 40% in March compared to February’s tepid pace. As a result, first-quarter lending rose 9% in 2012 versus the same period in 2011. Previously investors had feared policymakers would continue to constrain bank lending. To us, this shift signals Chinese officials are sensitive about stepping too hard on the brakes.

A better-than-expected kickoff of the U.S. corporate earnings season also contributed to the rebound. However, it’s far too early to draw conclusions. Only a handful of multi-national companies have reported.

As markets bounced, hedge fund short-covering dominated, and large institutional investors seemed to step to the sidelines or lighten up positions.

On Friday, most equity markets ended the week on a down note. China’s first-quarter GDP growth fell shy of expectations at 8.1%. However, March industrial production beat expectations and retail sales bounced so the quarter ended with positive momentum. Actually, the European sovereign debt situation seemed to weigh on markets more that session.

Exhibit 1: EM Currencies are Signaling a Pullback in Equities

Source: RBC Capital Markets Emerging Markets Research, Bloomberg

925

975

1025

1075

1125

1175

1225

Jan-11 Mar-11 May-11 Aug-11 Oct-11 Jan-12 Mar-12

8.0

8.5

9.0

9.5

10.0

MSCI G-7 Countries Index (left axis)Emerging Market Currencies vs. U.S. dollar (right axis, inverted)

EM Currencies Stronger

EM Currencies Weaker

EM currencies represent: BRL, MXN, TRY, ZAR, KRW.

Typically EM currencies are positively correlated with G-7 equity markets.

RBC’s Take on the Equity PullbackAfter accelerating at an impressive pace during the first quarter, global equities have hit a few speed bumps. While the S&P 500 is down only 3.4% from its recent high, other markets have pulled back to a greater degree including the STOXX Europe 600 (-7.0%), the U.K.’s FTSE 100 (-5.3%), and Canada’s S&P/TSX (-5.5%). The following factors contributed to the setback:

• Spain’s bond market sell-off amidst the country’s fiscal and economic stress are blunt reminders the sovereign debt crisis has not been resolved.

• Soft March U.S. employment data reinforces the likelihood sub-par growth could linger for some time. Also mild winter weather could have distorted other data and payback may be coming in the months ahead.

• Investors have become less confident about whether major central banks will ease further and how long they will maintain accommodative policies.

• Key technical levels for broad equity indices have been breached and cyclical sub-indices have weakened even more. Such breakdowns often provoke short-term oriented institutional investors to act so they should not be overlooked.

3 GLOBAL INSIGHT WEEKLY – APRIL 13, 2012

Markets & the Economy

Global RoundupUnited States• TheEnergy,Financials,andMaterialssectorsled

themarketlower for the week. The Technology sector held up the best, essentially flat-lining. Defensive sectors also outperformed.

• Alcoa kicked off earnings season with a better-than-expected report and constructive comments about Chinese demand. Google shares fell following its earnings report which revealed slower sales growth. However, the decline may have had more to do with an adjustment to its share structure. Google will create a new class of non-voting shares, which would help the company’s founders preserve control and limit voting power of other shareholders. That move drew criticism from some institutional investors. JPMorganChase and WellsFargo were the first major banks to report quarterly results. Our bank analysts at RBC Capital Markets view JPMorgan’s results as “very strong” and expect the 2012 consensus earnings forecast to rise. The Wells results were solid due to strong mortgage production.

• Treasuriesralliedandyieldsfellacrosstheyieldcurve. We suspect part of the move was a “flight to safety” trade due to heightened concerns about Spain, and to a lesser degree Italy and Portugal.

• Comingup: More earnings throughout the week; Retail Sales (Apr 16), Leading Indicators (Apr 19).

Canada• Canadianequities were modestlylower during

the week. WeaknessinHealthcare was partially offset by strength in the Materials sector.

• TELUSCorporation, one of Canada’s largest telecommunications companies, cameunderpressureafteraU.S.hedgefund, that owns roughly 19% of the company’s voting shares, announced it plans to voteagainstthecompany’sproposaltocollapseitsdual-classshare

It’s quite possible this pullback could transition into a correction of 10% or more for the S&P 500 in coming months, with commensurate losses likely for other major markets.

The types of developments the market is now reacting to have kept our global equities recommendation at “Neutral” for the past few months—a constructive but cautious view. Markets could retrace some portion of their recent gains due to lingering sovereign debt risks, global economic headwinds, or if it becomes more likely U.S. fiscal brinkmanship could occur. This “Neutral” recommendation equates to holding up to but no more than a benchmark, long-term allocation.

What would make us more cautious?

European conditions could worsen. The sovereign debt crisis and the recession winds already blowing on the continent could intensify because of fiscal belt tightening and a scarcity of new pro-growth economic policies.

Markets may not have fully discounted European economic risks and their potential to weigh on U.S. and Chinese growth and that of their trading partners. In particular, if first-quarter U.S. GDP growth comes

Source: RBC Capital Markets Emerging Markets Research, Bloomberg

in below 2%—essentially at “stall speed”—a deeper European contraction could once again raise recession risks for the world’s largest economy.

Additionally, a key indicator that has recently done a good job of forecasting changes in global economic momentum—or the lack thereof—is not out of the woods. The ratio of copper to oil deteriorated meaningfully, and then improved modestly, but not enough to give us comfort (see Exhibit 2).

This indicator can be useful because it reflects a commodity that is very sensitive to shifts in global economic activity (copper) and a commodity that is inelastic, or not as sensitive to growth swings (oil). When the price of copper rises faster than oil—i.e., when this ratio rises—then a few months later the economy tends to pick up steam and global equity prices usually follow suit. However, when the price of copper falls faster than oil, or when this ratio declines, the economy subsequently tends to lose momentum and equity prices become vulnerable to a correction.

Additionally, the “massive fiscal cliff” in front of the U.S. is a wild card. While it’s unlikely all of the tax provisions would expire January 1, 2013, and

all of the spending cuts would be implemented next year—in total cutting roughly 3.8% out of GDP growth by RBC Capital Markets’ calculations—enough of the provisions could be implemented to weigh down an already fragile economy (see the April Global Insight monthly report for additional analysis).

In conclusion, a deeper pullback may ultimately provide an opportunity to increase exposure to equities, possibly later this summer. Until we see convincing prospects for progress on some of these issues, we expect to maintain our “Neutral” stance.

Exhibit 2: The Copper/Oil Ratio is Signaling Weaker Global Growth

34

38

42

46

50

54

58

62

2008 2009 2010 2011 2012-40-34-28-22-16-10-42814202632

Global Purchasing Managers Index (left axis)

Copper-to-Oil Ratio year-over-year % Change,advanced 6 months (right axis)

4 GLOBAL INSIGHT WEEKLY – APRIL 13, 2012

Global Roundup

structure, possibly in an attempt to profit from the shares’ recent price movements. The consolidation of TELUS’ current share structure is viewed by many investors as being consistent with good corporate governance, aims to extend voting rights to all shareholders, and potentially enhance liquidity. The results of the vote will be announced on May 9 at TELUS’ annual meeting of shareholders.

• CanadianPacificRailway pre-released stronger-than-expected first-quarter 2012 results, with operating efficiency gains driving most of the upside.

• The BankofCanada’squarterlyBusinessOutlookSurvey was well received by market participants. There was a noticeable improvementinsalesexpectations for the next year. This reading rose to its highestlevelsincefirstquarter2010. Moreover, a number of respondents (27%) indicated their firm faces some labour shortages.

• Canadian government bondyieldsmovedloweracrossthecurve, with the largest price gains experienced in maturities greater than five years.

• Debtissuancewasrobust during the week. A varietyofcorporatebondofferings were launched with both investment grade and non-investment issuers coming to market. The provincial market was also active as both QuebecandOntario reopened their 10-and30-yearbonds, respectively.

Europe• Europeanequities markets continuedtheir

downtrendthis week. Concerns reappeared regarding the Spanishfiscalsituationand the outcomeoftheFrenchelection where no candidate seems to be facing up to the need of austerity and reforms.

• InSpain,the10-yearbondyieldsurgedtojustunder6% with the spread over German bunds at more than 400 bps. Clearly, such high borrowing costs will be a challenge if they are maintained, although the recent liquidity injections (LTROs) have helped reduce the funding pressure on the Spanish government somewhat. According to data released by the Bank of Spain, net purchases of government securities by Spanish banks amounted to €61bn in the three months to February. Thanks to this, the Spanish central government has now covered close to half of the bond issuance planned for this year—though the link between already fragile Spanish banks and their sovereign has been reinforced further.

• According to RBC Capital Markets, thebackupofperipheryyields is unlikelytospiralto levels seen in 2011. A precautionary programme by the European Financial Stability Facility (EFSF) has the power to intervene in the primary market—this was not available last year. Such facilities are increasingly likely to be used.

• InFrance, with round one of electionsapproachingonApril22, spreads over theGerman bunds have also increased as the French politicalriskpremium is coming into play (see Exhibit 3).

• Comingup: Euro-area & U.K. inflation (Apr 17), MPC minutes (Apr 18), U.K. retail sales (Apr 20).

Asia• BoursesinAsiafinishedtheweekwithmixed

results, as the Nikkei fell 1.2% and the Hang Seng declined 0.4%. Meanwhile in mainland China, the Shanghai Composite gained 2.3% on expectations of monetary easing.

• Chinareportedhigherthanexpectedinflation this week, as its Consumer Price Index rose 3.6% in March versus a consensus of 3.4% and a 3.2%

reading from the previous month. The drivingfactor behind the increase was a rise infoodinflation, which jumped 7.5% for the month.

• Q1GDPgrowthinChina came in at 8.1%, belowconsensusexpectations of 8.4% and down from 8.9% in the previous quarter. Despite the decrease in growth, the Shanghai Composite gained as investors speculated that the lower growth gives policy makers leeway to ease monetary policy; markets in Japan and Europe reacted negatively to the news.

• The BankofJapan pledgedtocontinuemonetaryeasingin order to stimulate economic growth, snapping an eight-day losing streak for the Nikkei.

• NorthKorea’slong-rangerocketlaunchfailed this week as the rocket exploded shortly after takeoff. The event has both flared tensions in the region and subdued perception of the North Korean military threat as marketsintheregiongained on the news of the failed launch.

• Comingup: Japan Industrial Production (Apr 17).

Exhibit 3: French vs. German Bond Yields - Widening Spread

French-German bond spreads widening ahead of French election as market prices in the risk of political uncertainty in the region.

Source: RBC Dominion Securities, Bloomberg

0.00.20.40.60.81.01.21.41.61.82.0

Apr-10 Aug-10 Dec-10 Apr-11 Aug-11 Dec-11 Apr-12

French-German 5-yr. Government Bond Spread

5 GLOBAL INSIGHT WEEKLY – APRIL 13, 2012

Important DisclosuresAnalyst Certification All of the views expressed in this report accurately reflect the personal views of the responsible analyst(s) about any and all of the subject securities or issuers. No part of the compensation of the responsible analyst(s) named herein is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the responsible analyst(s) in this report.

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Maha Arshad, Adrian Brown, and Jeff Musial, employees of RBC Wealth Management USA’s foreign affiliate RBC Dominion Securities Inc.; and Frédérique Carrier, an employee of RBC Wealth Management USA’s foreign affiliate Royal Bank of Canada Investment Management (U.K.) Limited; contributed to the preparation of this publication. These individuals are not registered with or qualified as research analysts with the U.S. Financial Industry Regulatory Authority (“FINRA”) and, since they are not associated persons of RBC Wealth Management, they may not be subject to NASD Rule 2711 and Incorporated NYSE Rule 472 governing communications with subject companies, the making of public appearances, and the trading of securities in accounts held by research analysts.

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References to a Recommended List in the recommendation history chart may include one or more recommended lists or model portfolios maintained by RBC Wealth Management or one of its affiliates. RBC Wealth Management recommended lists include a former list called the Prime Opportunity List (RL 3), a former list called the Private Client Prime Portfolio (RL 4), the Guided Portfolio: Prime Income (RL 6), the Guided Portfolio: Large Cap (RL 7), the Guided Portfolio: Dividend Growth (RL 8), the Guided Portfolio: Midcap 111 (RL9),

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Rating Count % Count %Buy (TP/O) 783 52.59 234 29.89Hold (SP) 644 43.25 150 23.29Sell (U) 62 4.16 3 4.84

Investment Banking Serv ices Prov ided During Past 12 Months

Risk Qualifiers:

Average Risk (Avg): Volatility and risk expected to be comparable to sector; average revenue and earnings predictability; no significant cash flow/financing concerns over coming 12-24 months; and/or fairly liquid.

Above Average Risk (AA): Volatility and risk expected to be above sector; below average revenue and earnings predictability; may not be suitable for a significant class of individual equity investors; may have negative cash flow; and/or low market cap or float.

Speculative (Spec): Risk consistent with venture capital; low public float; potential balance sheet concerns; and/or risk of being delisted.

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Definitions of Rating CategoriesAn analyst’s “sector” is the universe of companies for which the analyst provides research coverage. Accordingly, the rating assigned to a particular stock represents the analyst’s view of how that stock will perform over the next 12 months relative to the analyst’s sector, but does not attempt to provide the analyst’s view of how the stock will perform relative to: (i) all companies that may actually exist in the company’s sector, or (ii) any broader market index.

Ratings:

Top Pick (TP): Represents analyst’s best idea in the sector; expected to provide significant absolute total return over 12 months with a favorable risk-reward ratio, approximately 10% of analyst’s recommendations.

Outperform (O): Expected to materially outperform sector average over 12 months.

Sector Perform (SP): Returns expected to be in line with sector average over 12 months.

Underperform (U): Returns expected to be materially below sector average over 12 months.

6 GLOBAL INSIGHT WEEKLY – APRIL 13, 2012

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