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

September 22, 2014

"It's the greatest, most empowering moment any of us will ever have."

— Scottish First Minister Alex Salmond, on the referendum on independence (Bloomberg, September 17, 2014)

The week in review...


Scotland: Sticking with the Union The 55.3% majority vote against independence brought relief to financial markets, as well as encouragement to Spanish Foreign Minister José Manuel Garcia-Margallo, concerned over Catalonia's own secessionist movement. The 84.59% voter turnout, the envy of voluntary democracies worldwide, reflected the high level of Scottish engagement on the issue.

ECB: Can't give it away The European Central Bank's first offer of low-cost four year loans under its Targeted Longer-Term Refinancing Operations (TLTRO) program disappointed; banks borrowed only €82.6 bn ($106.74 bn), a far cry from the forecast €174 bn – or the €400 bn maximum. It wasn't the price; the funds were lent at just above the ECB's main refinancing rate of 0.05% until late 2018, if the borrowers meet business lending targets. If they miss, the loans would be due in 2016.


China: Banking on growth China's central bank lent 100 bn yuan ($16.28 bn) to each of five Chinese banks, in the form of three-month low-interest loans. The context: slowing growth. China's industrial production for August rose by a fractional 0.2% from July – "an obvious drop", according to one official. Home prices overall fell 11% year to date in August; and thanks to tighter property lending by banks, prices were down in 68 of the 70 cities tracked by the government. Meanwhile, foreign direct investment (FDI) into China fell 14% year-on year in August after July's 17% drop.


The Fed: stealth downgrade?  Though not a highlight of the FOMC press conference, it's been noted that the Fed has pulled back from last September's median forecasts for both growth and inflation for the rest of 2014, and for the following two years. Example: for 2014, GDP growth from 3.0% to 2.1%; inflation, from 1.6% to 1.55%.  These clearly downward moves appear to support speculation that rates will rise later rather than sooner, and brought at least momentary cheer to both stock and bond markets.

Housing: Multifamily malaise August housing starts overall fell 14.4% in Aug, the most since Apr 2013, to a 956k annualized rate, after July's revised 1.12 mn rate, which was the strongest since Nov 2007. Construction of multifamily units, many intended as rentals, got hit hardest; apartment and condo starts, which tend to be more volatile, dropped 31.7%. Single family starts dropped 2.4% to a 643k annualized rate, also not a cause for cheer.

Signs of the times:

EU and Ukraine ratify trade agreement in historic vote – Financial Times

Euro-Area Inflation Stays at Five-Year Low Amid Stimulus – Bloomberg

Germany skids closer towards deflation – Financial Times

China May Boost Gold Reserves Amid Imbalances in Holdings – Bloomberg

South Korea Plans Record 2015 Budget as Spending Jumps – Bloomberg

US household incomes stagnate despite economic recovery – Financial Times

Sources: Bloomberg, Wall Street Journal, Financial Times, Xinhua English, Japan Times, EUObserver, Quartz, BBC

...And the week ahead:




Other Americas

Europe, UK, Africa, Mideast

Japan, Asia Ex Japan & Pac Rim

Sep 21

Football: Seattle Seahawks vs. Denver Broncos


Sep 22

Existing home sales


European Commission:  agriculture forecasts
Italy: industrial sales
Eurozone: consumer confidence

Taiwan: unemployment, GDP
Hong Kong: inflation

Sep 23


France: GDP, business confidence
Germany: manufacturing PMI
Eurozone: manufacturing, services PMI
UK: public finances
Latvia: GDP

China: manufacturing PMI
Taiwan: industrial production

Sep 24

New home sales
United Nations (UN) 69th General Assembly in New York (ends Sept 30)

Argentina: GDP

Italy: consumer confidence
Netherlands: GDP
France: jobless claims
Germany: business climate


Sep 25

Jobless claims

Brazil: unemployment


Hong Kong: exports

Sep 26

Baseball: Yankees v. Red Sox


France: consumer confidence
Germany: consumer confidence
UK: house prices

Japan: inflation
S Korea: consumer confidence

Sep 27


China: industrial profits


Targeted longer-term refinancing operations (TLTRO) is a program of the European Central Bank designed to provide liquidity to the financial sector to encourage commercial lending.

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

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.

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.

Unless otherwise specified, all uses of the symbol "$" refer to US dollars.

The opinions and views expressed herein, as well as references to individual companies or securities, are not intended to be relied upon as a prediction or forecast of actual future events or performance, or a guarantee of future results, or recommendations to buy, hold or sell, or investment advice.

Past performance is not a guarantee of future results.

All investments involve risk, including possible loss of principal.

International investments are subject to special risks including currency fluctuations, social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets.

Fixed income securities are subject to interest rate and credit risk, which is a possibility that the issuer of a security will be unable to make interest payments and repay the principal on its debt. As interest rates rise, the price of fixed income securities falls.

Yields and dividends represent past performance and there is no guarantee they will continue to be paid.

Commodities and currencies contain heightened risk that include market, political, regulatory, and natural conditions and may not be suitable for all investors.

This material is for information only and does not constitute an invitation to the public to invest in any funds, securities, strategies or other products. You should be aware that the investment opportunities described should normally be regarded as longer term investments and they may not be suitable for everyone. The value of investments and the income from them can go down as well as up and investors may not get back the amounts originally invested, and can be affected by changes in interest rates, in exchange rates, general market conditions, political, social and economic developments and other variable factors. Past performance is no guide to future returns and may not be repeated. Investment involves risks including but not limited to, possible delays in payments and loss of income or capital. Neither Legg Mason nor any of its affiliates guarantees any rate of return or the return of capital invested.

Please note that an investor cannot invest directly in an index. Forward-looking statements are subject to uncertainties that could cause actual developments and results to differ materially from the expectations expressed. This information has been prepared from sources believed reliable but the accuracy and completeness of the information cannot be guaranteed and is not a complete summary or statement of all available data. Individual securities mentioned are intended as examples of portfolio holdings and are not intended as buy or sell recommendations. Information and opinions expressed by either Legg Mason or its affiliates are current as at the date indicated, are subject to change without notice, and do not  take into account the particular investment objectives, financial situation or needs of individual investors.

The opinions and views expressed herein are not intended to be relied upon as a prediction or forecast of actual future events or performance, or a guarantee of future results, or investment advice. The information in this material is confidential and proprietary and may not be used other than by the intended user. Neither Legg Mason or its affiliates or any of their officer or employee of Legg Mason accepts any liability whatsoever for any loss arising from any use of this material or its contents. This material may not be reproduced, distributed or published without prior written permission from Legg Mason. Distribution of this material may be restricted in certain jurisdictions. Any persons coming into possession of this material should seek advice for details of, and observe such restrictions (if any).

This material may have been prepared by an advisor or entity affiliated with an entity mentioned below through common control and ownership by Legg Mason, Inc.

This material is only for distribution in those countries and to those recipients listed.

All investors in the UK, professional clients and eligible counterparties in EU and EEA countries ex UK and Qualified Investors in Switzerland:
Issued and approved by Legg Mason Investments (Europe) Limited, registered office 201 Bishopsgate, London EC2M 3AB. Registered in England and Wales, Company No. 1732037. Authorized and regulated by the Financial Conduct Authority. Client Services +44 (0)207 070 7444.

All Investors in Hong Kong and Singapore:
This material is provided by Legg Mason Asset Management Hong Kong Limited in Hong Kong and Legg Mason Asset Management Singapore Pte. Limited (Registration Number (UEN): 200007942R) in Singapore.

This material has not been reviewed by any regulatory authority in Hong Kong or Singapore.

Qualified domestic institutional investors in the People's Republic of China (PRC), Distributors and existing investors in Korea and Distributors in Taiwan:
This material is provided by Legg Mason Asset Management Hong Kong Limited to eligible recipients in the PRC and Korea and by Legg Mason Investments (Taiwan) Limited (Registration Number: (98) Jin Guan Tou Gu Xin Zi Di 001; Address: Suite E, 55F, Taipei 101 Tower, 7, Xin Yi Road, Section 5, Taipei 110, Taiwan, R.O.C.; Tel: (886) 2-8722 1666) in Taiwan. Legg Mason Investments (Taiwan) Limited operates and manages its business independently.

This material has not been reviewed by any regulatory authority in the PRC, Korea or Taiwan.

All Investors in the Americas:
This material is provided by Legg Mason Investor Services LLC, a U.S. registered Broker-Dealer, which may include Legg Mason International - Americas Offshore. Legg Mason Investor Services, LLC, Member FINRA/SIPC, and all entities mentioned are subsidiaries of Legg Mason, Inc.

All Investors in Canada:
This material is provided by Legg Mason Canada Inc. Address: 220 Bay Street, 4th Floor, Toronto, ON M5J 2W4. Legg Mason Canada Inc. is affiliated with the Legg Mason companies mentioned above through common control and ownership by Legg Mason, Inc.

All Investors in Australia:
This material is issued by Legg Mason Asset Management Australia Limited (ABN 76 004 835 839, AFSL 204827) ("Legg Mason"). The contents are proprietary and confidential and intended solely for the use of Legg Mason and the clients or prospective clients to whom it has been delivered. It is not to be reproduced or distributed to any other person except to the client's professional advisers.


Previous Editions

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


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


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

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

Previous month Poll

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

Europe, as countries emerge from bailouts
US, as consumers regain optimism
Japan, as stimulus programs begin to bear fruit
China, as reform and pro-growth policies continue