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
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June 29, 2015

"There has to be a deal. The EU has to save us, right?"

— Athens banker on bailout negotiations ahead of the June 30 due date for Greece's next payment to the IMF

The week in review...

GREECE

The meetings will continue; morale unchanged Thursday's failed Eurozone finance ministers' negotiation spawned yet another gathering, scheduled for Saturday June 27. The next payment to the IMF of €1.54 bn ($1.73 bn) is due on June 30; the EU portion of the €245 bn bailout program expires the same day. Successful negotiations would unlock €7.2 bn in bailout aid, making Tuesday's IMF payment possible. The creditors' requirements now come down to hikes in Greece's tax rates and collection efforts, as well as further cuts and reforms in the complex, generous and politically sensitive pension system. Prime Minister Tsipras faces potential collapse of his Syriza coalition government if he accedes to creditors' demands.

AMERICAS

US GDP: Consumers to the rescue Previous estimates for 1Q2015 growth had to be revised upward, with improved consumer spending the key upside factor: new data showed, a 2.1% annualized increase in household consumption, revised upward from the previous 1.8% estimate. The hike is consistent with 1Q2015's 5.3% annualized increase in inflation-adjusted after-tax income, the biggest gain since the end of 2012. With earnings rising faster than spending at the end of 2014, increased savings may have been the impetus for greater consumption.

Argentina: China to the rescue Foreign currency reserved rose for the first time in five years, up $2.4 bn to $33.8 bn in the first half – despite declining exports. China's central bank made all the difference; Argentina has some $2.6 bn in currency swaps available to boost the supply of dollars, according to one estimate. The arrangement greatly improves the odds that payments of $6.3 bn on bonds, due in October, will be made – despite Argentina's longstanding avoidance of borrowing in international debt markets since its 2001 default.

ASIA

China banks: Unreserved lending? Monetary easing continues, with the State Council's proposed removal of the requirement that banks cap loans at 75% of their deposits. The idea is to remove the incentive to offer extravagant rates to depositors in order to boost banks' capacity to lend, or to add strain to the interbank market. One remaining challenge is to boost underlying demand for new loans. With borrowers struggling to make payments in a slowing economy, the move could have a more positive impact on interbank rate volatility than on economic growth.

Japan: Prices begin to move Consumer prices ex fresh food rose 0.1% year-on-year in May, higher than expected. While the hike was welcomed by the central bank as evidence that its record-breaking stimulus is having a positive impact, it's unclear how households will react. If consumer spending drops in response to rising prices, the impact of the price rise on future growth could be dampened.

Signs of the times:

Euro-Area Bank Lending Grows at Fastest Pace Since February 2012 – Bloomberg

China's maritime economy outpaces GDP growth – Xinhua

Russia takes over as top oil supplier to China – Financial Times

More Builders See First-Time Home Buyers Returning - Developments – Wall Street Journal

Orders for U.S. Capital Equipment Rise as Investment Stabilizes – Bloomberg

Sources: Bloomberg, Wall Street Journal, Financial Times, New York Times, Xinhua, Mainichi News, Japan Today, Market News International. Quartz

...And the week ahead:

GLOBAL ECONOMIC CALENDAR: June 28 – July 4, 2015

 

U.S.

Other Americas

Europe, UK, Africa, Mideast

Japan, Asia Ex Japan & Pac Rim

Sun
Jun 28

 

 

 

 

Mon
Jun 29

Pending home sales

 

UK: mortgage approvals
Germany: inflation Eurozone: economic confidence

Japan: industrial output
Japan, Hong Kong: retail sales

Tue
Jun 30

Home prices in 20 key cities, consumer confidence

 

Greece: IMF payment due;
European Union bailout expires
Eurozone: consumer prices, unemployment
UK: GDP

Japan: wages

Wed
Jul 1

Vehicle sales, manufacturing output, job cuts, employment, construction spending

 

 

China: PMIs
S. Korea: consumer prices, trade

Thu
Jul 2

Monthly employment figures, weekly jobless claims, factory orders

Brazil: industrial production

UK: housing prices, construction PMI
Spain: unemployment
Russia: GDP, gold & currency reserves

 

Fri
Jul 3

Holiday

 

Eurozone, UK: services PMIs

Australia: retail sales

Sat
Jul 4

 

 

 

 


Definitions:

The International Monetary Fund (IMF) is an international organization of member countries, established to promote international monetary cooperation, exchange stability, and orderly exchange arrangements.

The European Union (EU) is an economic and political union established in 1993 by members of the European Community. The EU now comprises 28 countries after its expansion to include numerous Central and Eastern European nations.

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.

Purchasing Managers Indexes (PMI) measure the manufacturing and services sectors in an economy, based on survey data collected from a representative panel of manufacturing and services firms.


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Poll

When will the Fed raise the Fed Funds target rate?








Poll

When will the Fed raise the Fed Funds target rate?

June
(3%)
September
(35%)
November
(23%)
Not until 2016
(39%)



Previous month Poll

Will the current wave of central bank easing jump-start the world's economies?

No - The real issues are structural - real progress on labor reform and regulatory excess will have more impact
(32%)
No - Deflation is already taking hold, making monetary policy changes ineffective
(5%)
Yes - The US model shows that monetary easing can help economies heal in the medium term
(19%)
Yes, but it will take even  longer than it did in the US, and the delay will have a negative political impact
(44%)