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 15, 2016

"I'm not aware of anything that would prevent us from doing it"

— Fed Chair Janet Yellen, on the possibility of negative interest rates (Feb 11, 2016)

The week in review...


Bank shot The week's risk-asset fire sale was fed by uncertainty – this time, about the quality of European banks' balance sheets. The twist: the fear wasn't triggered by a missed payment, but by the prospect of a new disclosure requirement – itself prompted by future plans for EU-wide banking reform.  Concern focused on the creditworthiness of "CoCo bonds", created in the aftermath of the European banking crises of 2008-11, that could force bondholders to absorb losses in the event of a banking meltdown. Markets faded and CDS spreads spiked, despite an apparent absence of tangible evidence that trouble was in the offing.


The Fed and Congress: Well-timed Fed Chair Janet Yellen's two days of scheduled appearances before Congress coincided with roiling markets in the US and abroad, presenting the opportunity to send dovish signals to financial markets. Rising concern that the Fed might be on its way to tightening monetary policy in the face of unsteady markets was addressed directly by Yellen's assurance that Fed moves would take turbulent markets into account, whatever the cause. If financial markets were reassured, it wasn't reflected in price movements; global equites, as measured by the MSCI All Country World Index (ACWI) fell -1.41% during the two days of testimony, achieving status as a bear market due to its 20% drop since mid-May.

Jobs: You can't fire me... Strong results from the Labor Department's report on December's job openings (the JOLTS report) included the second highest number of unfilled positions on record (5.61mn, up 261k). Total dismissals, which exclude retirements and voluntary departures, decreased to 1.61mn from November's 1.69mn. Even better news: some 3.06mn people quit their jobs, up from November's 2.86mn. The quits rate, which shows the willingness of workers to leave their jobs voluntarily, is watched closely by the Fed as a measure of employee optimism, and possible future wage growth – both eagerly wished for by the FOMC.

Where the jobs are: Construction and manufacturing To the surprise of economic pessimists, the past three months have seen payroll growth at construction firms and factories increase by 176,000, the second-biggest gain over a similar period since March 2006 – well before the Great Recession. Both industries are considered to be highly sensitive to economic cycles; this growth could be a harbinger of improving economic growth not reflected yet in other figures.


Where's the beef Australian ranchers are benefitting from increased demand for Australian beef, even as iron ore exports to China are flagging. China's middle class is still growing and diets are improving along with income. As a result, the demand for beef is outpacing overall economic growth.  Australian beef sales to China surged six-fold in three years, ending 2015 at a record A$917mn ($651mn); the price received for beef exports rose some  37% over the past twelve months.

Signs of the times:

China's auto financing industry accelerates – Shanghai Daily

Price Growth Eats Into Russian Diets – Bloomberg

As Oil Profits Plunge, Gulf Regimes Weigh the Unmentionable: Taxes – Wall Street Journal

Fed Nods to Negative Rates, Hurdles and All – Wall Street Journal

...The week ahead:

GLOBAL ECONOMIC CALENDAR: February 14 – 21, 2016



Other Americas

Europe, UK, Africa, Mideast

Japan, Asia Ex Japan & Pac Rim

Feb 14

NBA All-Star Game (basketball)



China: trade data, new loans, money supply
S. Korea: household borrowing
Japan: GDP

Feb 15

ASEAN conference


UK: house prices


Feb 16

Home builder sentiment

Brazil: retail sales

UK: inflation

Taiwan: trade data

Feb 17

FOMC meeting minutes from 1/26-7, new home construction, industrial production, producer prices


UK: unemployment

S. Korea: unemployment
Taiwan: GDP

Feb 18

Jobless claims. Leading indicators


ECB: meeting notes
Brussels: EU summit

Australia: employment
China: consumer prices
Malaysia: GDP

Feb 19

Consumer  prices


UK: retail sales, budget


Feb 20





Sources: Bloomberg, Reuters, Wall Street Journal, Financial Times, New York Times, Shanghai Daily


Contingent capital securities, also known as "CoCo bonds", are convertible bonds issued by European banks in the aftermath of the 2008 financial crisis, to force holders of the bonds to absorb capital losses incurred by those banks in the event of rapid deterioration of their balance sheets.

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.

A credit default swap (CDS) is designed to transfer the credit exposure of fixed income products between parties.

The MSCI All Country World Index (ACWI) is a free-float adjusted index that is designed to measure the equity market performance of developed and emerging markets. The MSCI ACWI consists of 45 country indices comprising 24 developed and 21 emerging market country indices.

The Job Openings and Labor Turnover Survey (JOLTS) is conducted by the US Department of Labor, producing data on job openings, hires, and separations.

The Association of Southeast Asian Nations (ASEAN) is a political and economic organization of Southeast Asian countries. It was formed on 8 August 1967 by Indonesia, Malaysia, the Philippines, Singapore, and Thailand, and now comprises ten countries.

The Federal Open Market Committee (FOMC) is a policy-making body of the Federal Reserve System 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 European Central Bank (ECB) is responsible for the monetary system of the European Union (EU) and the euro currency.

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.

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How many times will the US Federal Reserve raise its benchmark interest rate in 2016?


How many times will the US Federal Reserve raise its benchmark interest rate in 2016?

More than four

Previous month Poll

Will China's official growth rate fall to 6 percent by the end of 2015?

Yes: Economic reform measures will take their toll on growth
Yes: Demographics and urban labor shortage will constrain demand
No: New monetary and fiscal stimulus will restore rapid growth
No: Recovery in the US, Europe and Japan will more than make up for slowing domestic demand