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

February 23, 2015

"It's very good to see France going through [this] first step..."

— Emanuel Babeau, CFO of French company Schneider Electric, on recently adopted economic reforms (FT, Feb 19 2015)

The week in review...


France: Good timing Taking advantage of low energy prices, a falling euro, and new gains in job creation – only 1,000 jobs, but the employer made a point of giving credit to recent deregulation – President François Hollande used an unusual move to bypass Parliament and put in place a set of economic reforms ranging from shortened labor arbitration procedures and deregulation of the legal profession to increased Sunday trading hours for some retailers. The reforms are also designed to impress the ECB; France's sluggish growth and high unemployment may force it to ask for more lenient terms on ECB-backed loans.

Greece and the EU: Return to sender Finance Minister Yanis Varoufakis's letter to the EU received a chilly reception from Germany's finance ministry; spokesman Martin Jäger called it "not a substantial proposal", setting a downbeat tone for this week's meetings of EU finance ministers in advance of the Feb 28 expiration of Greece's bailout program. In a clear warning, the ECB made it known it would ask Greek banks to reduce their holdings of Greek sovereign debt should the talks break down, a threat both to the banks' solvency and to the market for Greece's short-term debt now dominated by those banks.


US Fed: Too much good news? The rising dollar and falling crude oil prices were two of the reasons given in minutes of the January 27-28 FOMC meeting for a large majority of voting members to stay "patient" about raising short-term interest rates. Observers seeking more clues about the timing of the hike will be watching Chairman Yellen's Congressional testimony this week, then waiting for Wednesday, March 18, the date of the press conference which follows that month's FOMC meeting.

Venezuela: Currency relief valve Decade-old currency controls involve three different legal exchange rates, none of which can be described as free-market. But the country's shortage of US dollars, created by the halving of oil prices, has forced the government's hand in the one governing payments with foreign credit cards – which is switching to buyer- and seller-driven prices. The result: that market moved from 50 bolivars per US dollar to 172 as of a week ago – much closer to the reported black-market price of 189. The beneficiaries: the local economy—which could potentially see an influx of tourist dollars – and the tourists themselves, who will see dramatically lower prices until the hotel and airfare markets adjust.


India: Defending local industry Prime Minister Narendra Modi is actively promoting India's defense industry, and courting foreign manufacturers to set up shop there. India is already the largest export market for arms from the US and the world's biggest importer of weapons. According to the Prime Minister, "This is one area where we don't want to be No. 1". But with a plan to spend $8 bn on new warships, he may not get his wish anytime soon.

China: 恭禧發財, 紅包拿來 {Prosperous New Year – Red Envelope, Please} Governments and contractors throughout Asia could be looking for their own Lunar New Year traditional cash-bearing red envelopes – from the newly-formed government-backed Silk Road initiative, designed to promote trade and infrastructure development throughout China's trade sphere in Asia, Europe and Africa. Promoted by the People's Bank of China, the country's central bank, the initiative is funded to the tune of $40 bn so far, from the country's foreign exchange reserves and other sources – potentially including outside participants.

Signs of the times:

Household spending drop biggest in 8 yrs – The Japan News

Saudi's Crude Exports Fall as China Cuts Back Amid Price Rout – Bloomberg

Splits emerge on Bank of England's Monetary Policy Committee – Financial Times

Wholesale Prices in U.S. Fall in January on Plunge in Energy – Bloomberg

Sources: Bloomberg, Wall Street Journal, Financial Times, New York Times, MNI, Kathemarini (Greece), Shanghai Daily, Japan Times, Deutsche Welle

...And the week ahead:




Other Americas

Europe, UK, Africa, Mideast

Japan, Asia Ex Japan & Pac Rim

Feb 22

Academy Awards (Film); Daytona 500 (Auto racing)


Hungary: special election


Feb 23

Existing-home sales


Germany: business climate

Japan: central bank minutes

Feb 24

Fed Chair Yellen testimony to Senate Banking Committee; consumer confidence; 20-city home prices; Chicago mayoral election


Eurozone: consumer prices
Germany: GDP
France: manufacturing confidence


Feb 25

Fed Chair Yellen testimony to House Financial Services Committee; new home purchases

Brazil: total outstanding loans

France: consumer confidence

China: manufacturing PMI

Feb 26

Consumer prices; durable goods orders; jobless claims

Brazil: unemployment

Spain: GDP
Eurozone: economic confidence
Germany: unemployment
Italy: business confidence

China: Customs bureau commodity and energy trade data

Feb 27

GDP; pending home sales


Portugal: GDP
Germany, Italy, Spain, Czech: consumer inflation

Japan: inflation, unemployment, household spending, industrial output, retail sales

Feb 28






The European Central Bank (ECB) is responsible for the monetary system of the European Union (EU) and the euro currency.

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.

The Federal Open Market Committee (FOMC) is a policy-making body of the Federal Reserve System (the Fed) 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.

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. PMI greater than 50 indicated economic expansion; below 50, contraction.

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 Silk Road is a historically important international trade route between China, Europe, northwest Asia and Africa.

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


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
No - Deflation is already taking hold, making monetary policy changes ineffective
Yes - The US model shows that monetary easing can help economies heal in the medium term
Yes, but it will take even  longer than it did in the US, and the delay will have a negative political impact

Previous month Poll

What would be the best news for markets for the remainder of the year?

Strong US corporate earnings validate US economic expansion
Strength in the US dollar convinces the Fed to keep short rates low longer
European Central Bank bond buying rekindles growth in European Union countries
Growth in China strong enough to leave room for financial system and structural reform