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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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...

EUROPE

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.

ASIA

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.

UNITED STATES

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:

GLOBAL ECONOMIC CALENDAR: Sep 21 – 27

 

U.S.

Other Americas

Europe, UK, Africa, Mideast

Japan, Asia Ex Japan & Pac Rim

Sun
Sep 21

Football: Seattle Seahawks vs. Denver Broncos

     

Mon
Sep 22

Existing home sales

 

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

Taiwan: unemployment, GDP
Hong Kong: inflation

Tue
Sep 23

   

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

China: manufacturing PMI
Taiwan: industrial production

Wed
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

 

Thu
Sep 25

Jobless claims

Brazil: unemployment

 

Hong Kong: exports

Fri
Sep 26

2Q GDP
Baseball: Yankees v. Red Sox

 

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

Japan: inflation
S Korea: consumer confidence

Sat
Sep 27

     

China: industrial profits


Definitions:

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.


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Previous Editions

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Poll

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








Poll

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

Japan, as Shinzo Abe's policy initiatives take hold
(18%)
India, as Narendra Modi's new government enacts changes
(38%)
China, as Xi Jinping's reforms promote a stronger financial sector
(21%)
South Korea, as President Park Geun-hye's plan to boost growth bears fruit
(23%)



Previous month Poll

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

Europe, as countries emerge from bailouts
(43%)
US, as consumers regain optimism
(40%)
Japan, as stimulus programs begin to bear fruit
(7%)
China, as reform and pro-growth policies continue
(10%)