J.P. Morgan he J.P. Morgan View EMU now more clearly in a liquidity crisis, affecting all • Economics — Q4 GDP growth in US raised to 3%, even as Q3 was probably only 2%. We reduce UK 2012 growth from 0.8% to 0.5%, with a mini-recession in HI. • Portfolio strategy — Near -term volatility as EMU plays poker. • Fixed Income — Economic momentum favours UK gilts overJGBs. • Equities — Continue to focus on country trades favouring Germany and BRICs. • Credit — Senior French bank bonds vs. OATS look attractive in very good, and very bad, states of the world. • Foreign exchange — We remain short EURIJPY through options to hedge adverse outcomes in Europe. • Commodities — We raise our WTI forecast to reflect our view that the Brent- WTI spread should narrow to only $4/bbl by the end of next year. • Markets remain extremely volatile and continue to react to the latest political statements out of Europe on who will or will not, or should or should not, do what to resolve the Euro sovereign debt crisis. Economic data in the rest of the world, and especially the US, were supportive for risk markets, but were outshouted by the political chaos in Europe, leaving riskier assets signifi- cantly down over the week. • US activity data continue to impress, relative to subdued expectations, and are bringing our forecast for Q4 up to 3%, even as we downside Q3 to only 2%. The average for H2 stays at 2.5%, much better than the 1% pace we projected only two months ago. This good news improves the glide path of the economy into 2012, but itself does not eliminate the downside risk due to the expiring of a number of fiscal stimulus measures at the end of this year. There remains no sign of compromise in Washington on the 2012 budget nor on the Supercommittee 's effort to reduce the 10-year out deficit by $1.5 trillion. One could hope that both sides know the nation needs clarity and will compromise at the last minute, but time is running out. Monday should bring