A quick review of the issues and events driving the markets this past week... and what's on tap for the week ahead.

Weekly Market Snapshot

August 25, 2014

"Political comfort is a substitute for economic comfort."

— Information technology manager at Russian automaker OAO Sollers, on the impact of trade sanctions on public opinion (Bloomberg, Aug 20, 2014)

The week in review...

Europe

Eurozone: Headwinds Manufacturing and services activity decreased in July, suggesting that the disappointing GDP figures for 2Q2014 may not be the last. Euro-area composite PMIs fell to 52.8 from 53.8, below expectations. While figures above 50 indicate growth, the pace has slowed. And with Russia’s trade embargo expected to reduce demand for Europe’s agricultural and manufacturing goods, the manufacturing PMI figure of 50.8, a 13-month low, suggests that any decrease in manufacturing demand from abroad could result in out-and-out contraction.

UK: Pay packet puzzle The Bank of England (BoE) cut in half its forecast for wage growth for the rest of 2014, despite decreasing unemployment. For June, 3-month average weekly earnings dropped 0.2%. One possible explanation: employment growth is focused on lower-wage jobs. If true, this also complicates the government’s attempt to curb borrowing; lower payroll tax rates at lower wage levels could postpose the hoped-for end of deficit spending.

Americas

US: Minutes count The release of the FOMC meeting minutes from July 29-30 reveal a growing belief that the labor market is improving, despite a continued “large gap” between current conditions and normal levels of labor utilization. That, combined with a growing consensus that inflation will no longer recede, lead some observers to believe that the Fed could hasten its exit from its years-long zero interest rate policy.

Mexico: Neighborhood improvement Economic growth improved in 2Q2014, with GDP climbing 1% from the previous quarter and 1.6% year-on-year, both better than expected. Export growth is driving some of the pickup, as US growth, especially demand for automobiles, generates growth in manufacturing. Vehicle output rose 8.2% from the year-ago quarter, after a 6.5% 1Q2014 increase. Agriculture expanded 2.6% from the year-ago quarter; demand from the US helped that sector as well.

Japan

Trade: Good news among the bad The trade deficit widened in July to ¥964 bn ($9.28 bn), the 25th straight monthly deficit and much wider than expected. But within that figure, imports climbed 2.3% year-on-year, most of which was due to fuel imports. And exports moved into the plus column for the first time in three months, rising 3.9% year-on-year after contracting 1.9% in June.

Signs of the times:

Prices for new homes in China drop in record 64 cities – South China Morning Post

Eurozone government borrowing costs hit record lows – Financial Times

Russian sanctions create surplus of European produce – Deutsche Welle

London Home Asking Prices Plunge Most in More Than Six Years – Bloomberg

Broad Gain in U.S. Factory Production Signals Strength – Bloomberg

Sources: Bloomberg, Wall Street Journal, Financial Times, South China Morning Post, Xinhua

...The week ahead:

GLOBAL ECONOMIC CALENDAR: August 24–30

 

U.S.

Other Americas

Europe, UK, Africa, Mideast

Japan, Asia Ex Japan & Pac Rim

Sun Aug 24

End, Little League World Series (baseball)

 

Belgium: Grand Prix Formula One (auto)

 

Mon
Aug 25

 Home sales

 

Germany: business confidence

HK: trade data

Tue
Aug 26

Durable goods orders, 20-city home prices

 

South Africa: GDP

 

Wed
Aug 27

 

 

Germany retail sales
France: business confidence, unemployment
Italy: consumer confidence

 

Thu
Aug 28

GDP, unemployment, personal consumption

 

Germany: unemployment
Spain: inflation, GDP
UK: retail sales

S. Korea: current account balance
China: industrial profits

Fri
Aug 29

Personal spending

Canada: GDP
Brazil: GDP

Ukraine: International Monetary Fund (IMF) rescue package decision
Eurozone: inflation, unemployment
France: producer prices
UK: house prices, consumer confidence
Italy: GDP, inflation
Greece: retail sales

Japan: inflation, industrial output

Sat
Aug 30

College football season

 

 

 


Definitions:

Gross Domestic Product (GDP) is an economic statistic which measures the market value of all final goods and services produced within a country in a given period of time.

The Federal Open Market Committee (FOMC) is the policy-making body of the Federal Reserve (Fed), the US central bank, responsible for the formulation of a policy designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments.

Consumer Price Index (CPI)  measures the average change in consumer prices over time in a fixed market basket of goods and services.


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Previous Editions

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Poll

Which Asian country will have the strongest growth in the coming year?








Poll

Which Asian country will have the strongest growth in the coming year?

Japan, as Shinzo Abe's policy initiatives take hold
(18%)
India, as Narendra Modi's new government enacts changes
(38%)
China, as Xi Jinping's reforms promote a stronger financial sector
(20%)
South Korea, as President Park Geun-hye's plan to boost growth bears fruit
(24%)



Previous month Poll

Go for growth: Where will a global recovery be strongest this year?

Europe, as countries emerge from bailouts
(43%)
US, as consumers regain optimism
(40%)
Japan, as stimulus programs begin to bear fruit
(7%)
China, as reform and pro-growth policies continue
(10%)