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

December 22, 2014

"What if we have to prepare for [a] default? Maybe it's time to buy buckwheat"

— Irina Volkova, office worker at a Russian construction company, on the impact of the Russian financial crisis on the availability of food.

The week in review...

UNITED STATES

The Fed: Patience and clarity The FOMC added a new word – patient-- to its carefully-crafted December 17th press release. Janet Yellen, during the post-meeting press conference, issued detailed instructions on how it should be understood: any rate hike is unlikely to take place before "at least the next couple of meetings." Financial markets took it in stride; 10-year Treasury yields continued to shed some of their safe-haven premia, with yields moving from 2.0089% intra-day on Dec 16 to 2.2075% at 4:02 PM on Thurs Dec 18. The S&P 500 Index rose 3.5% since immediately before the meeting, making up much of its loss since the early days of the Russian crisis.

Oil prices: not my problem Yellen professed a lack of concern about inflation moving away from the Fed's 2% goal due to rapidly-falling oil prices. Attempting to pre-empt future concern about falling inflation, she said she expects it to fall in the near term before rebounding as the economy improves, rather than triggering a deflationary spiral.

Economy: Yet more good news The leading economic indicators index rose 0.6% in Nov, third consecutive monthly increase, above consensus expectations; consumer inflation, ex food and energy, rose at a 1.3% pace year-on-year (Y/y) in Nov; weekly initial jobless claims fell 5k to 289k, better than expectations; continuing claims fell 147k.

EUROPE

Russia: Bear pause The ruble appeared to be settling in at near 60 per US dollar (Fri, Dec 19, 9:55 AM), after its free fall to nearly 80. The central bank's now 22.0% rate for overnight, 1 week, 2 weeks and one month deposits may be helping. Retail sales accelerated 1.8% in Nov Y/y, as consumers rushed to buy hard goods, food and other supplies before inflation and the declining currency further eroded purchasing power. Inflation-adjusted disposable incomes fell 4.7%, the most in eight months.

UK: Workers pulling ahead Unemployment fell in the three months through October, with the jobless rate reaching 6%, lowest since 2008. Even better: basic pay grew faster than inflation for the first time since 2009, 1.6% Y/y vs 1% consumer inflation. The number of people in work rose 115k to a record 30.8 mn between Aug and Oct, and jobless claims fell for the 25th month in a row in Nov, the longest stretch since 1998.

Greece: Domino effect The parliamentary election of a new Greek President failed first time out, raising the chances of a new general election – which, in turn, could bring the increasingly-popular anti-austerity Syriza party to power. The prospect of a Syriza government abandoning the austerity budget behind its two €240 bn ($296 bn) bailouts has markets on edge; the Athens Stock Exchange Index fell over 21% between Dec 8 and 11.

CHINA

Housing prices: Cooling New home prices in 67 out of 70 major cities fell month-on-month in Nov; prices in Hefei, Nanjing and Shenzhen were flat. Existing home prices fell in 58 cities, vs. 64 in Oct.

Service sector: Growing The share of China's service sector businesses among all enterprises is up more than 5% from 2008. Wholesale and retail sectors comprised the largest proportion of companies, accounting for 25.9% of the total, according to government figures.

Signs of the times:

Abe's Pleas to Japan Inc. Unheeded as Firms Hoard Cash – Bloomberg

Clashes as protesters strike against labor reforms in Italy – Deutsche Welle News

Swiss National Bank Starts Negative Interest Rate of 0.25% to Stave Off Inflows – Bloomberg

Castro Deal With U.S. Fuels Shift Away From Venezuela – Bloomberg

Sources: Bloomberg, Wall Street Journal, Financial Times, New York Times, China Daily, Xinhua Online, Deutsche Welle, China Daily, Mainichi News

...And the week ahead:

GLOBAL ECONOMIC CALENDAR: Dec 21–27, 2014

 

U.S.

Other Americas

Europe, UK, Africa, Mideast

Japan, Asia Ex Japan & Pac Rim

Sun
Dec 21

 

 

 

 

Mon
Dec 22

Sales of previously owned homes

Brazil: total outstanding loans

 

China: commodity and energy trade data

Tue
Dec 23

GDP, personal spending, new home sales, durable goods orders

 

France, UK:  GDP

Taiwan: industrial production
Hong Kong:  Inflation

Wed
Dec 24

Jobless claims

 

 

S Korea: Consumer confidence

Thu
Dec 25

Christmas holiday

Christmas holiday

Christmas holiday

Christmas holiday

Fri
Dec 26

 

 

Bank holiday

Japan: Inflation, unemployment, industrial output, retail trade, wages

Sat
Dec 27

 

 

 

China: industrial profits


Definitions:

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

The Athens Stock Exchange General Index is a capitalization-weighted index of Greek stocks listed on the Athens Stock Exchange. Please note that an investor cannot invest directly in an index.

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 Conference Board is a US-based business membership and research association. The Leading Economic Index (LEI) for the US is designed to signal peaks and troughs in the business cycle. Please note that an investor cannot invest directly in an index.


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Previous Editions

Click on a date to view that week's edition of weekly snapshot.

Poll

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








Poll

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

Strong US corporate earnings validate US economic expansion
(34%)
Strength in the US dollar convinces the Fed to keep short rates low longer
(11%)
European Central Bank bond buying rekindles growth in European Union countries
(47%)
Growth in China strong enough to leave room for financial system and structural reform
(8%)



Previous month Poll

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

Japan, as Shinzo Abe's policy initiatives take hold
(17%)
India, as Narendra Modi's new government enacts changes
(45%)
China, as Xi Jinping's reforms promote a stronger financial sector
(17%)
South Korea, as President Park Geun-hye's plan to boost growth bears fruit
(21%)