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...


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.


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.


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:




Other Americas

Europe, UK, Africa, Mideast

Japan, Asia Ex Japan & Pac Rim

Dec 21





Dec 22

Sales of previously owned homes

Brazil: total outstanding loans


China: commodity and energy trade data

Dec 23

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


France, UK:  GDP

Taiwan: industrial production
Hong Kong:  Inflation

Dec 24

Jobless claims



S Korea: Consumer confidence

Dec 25

Christmas holiday

Christmas holiday

Christmas holiday

Christmas holiday

Dec 26



Bank holiday

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

Dec 27




China: industrial profits


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.

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.

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

Fixed income securities involve interest rate, credit, inflation, and reinvestment risks; and possible loss of principal. As interest rates rise, the value of fixed income securities falls.

Dividends and yields represent past performance and there is no guarantee they will continue to be paid.

U.S. Treasuries are direct debt obligations issued and backed by the "full faith and credit" of the U.S. government. The U.S. government guarantees the principal and interest payments on U.S. Treasuries when the securities are held to maturity.

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. All investments involve risk, including possible loss of principal. 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. Unless otherwise noted the "$" (dollar sign) represents U.S. Dollars.

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 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.


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


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

Previous month Poll

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