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

November 17, 2014

"As you know, I have never mentioned dissolving parliament"

— Shinzo Abe, Japan's Prime Minister, on the possibility of a snap election in advance of an unpopular sales tax hike (Bloomberg, Nov 11, 2014)

The week in review...

UNITED STATES

Employment: Take this job and… The most notable feature of September's Job Openings ("JOLTS") report – after the mildly positive headline figure of 4.7 mn openings at the end of the month – was the change in "separations" from jobs. The "quits" rate increased (to 2.0%), while the "discharges" rate remained the same (at 1.2%). Quits are generally voluntary and initiated by the employee, so the increase from 2.5 mn in Aug to 2.8 mn in Sept (the highest level since April 2008), is seen as a possible sign of employees' improving optimism about finding work.

Wages: Supply and demand As the demand for employees rises, so do the prospects for improving wages. In September, the number of unemployed looking for work was about twice the number of available jobs – less than thrilling for job seekers, but still a distinct improvement from July 2009, when the figure was close to seven. Manufacturing is still showing a ratio of greater than two to one, but the gap is closing in the retail and leisure/hospitality sectors. And in professional and business services, the ratio was just one unemployed worker per opening. A year ago, the ratio was two to one. Wages in this last category: up 2.4% in 3Q14 vs. the year-ago quarter.

ASIA

Japan: Taxing politics Hoping to muster parliamentary support for a second increase in consumption taxes scheduled for October 2015, Prime Minister Abe is gently raising the subject of a snap election. The economy took a big hit after the first tax increase last April – annualized GDP for 2Q dropped -7.1%. Public unhappiness over the tax has become a major political liability for Abe's party, despite a 25% rise in Japan's Nikkei stock index this year(as of 11/13/2014), highs not seen for seven years. Etsuro Honda, a member of Abe's inner circle, appears to agree, saying, "Next time we raise the tax, we need to be more careful".

India: Perfect timing on fuel policy Prime Minister Narendra Modi's economic reform program included a promise to curb the government subsidy of fuel prices which cost taxpayers 1.6 trillion rupees ($23 bn) over the last fiscal year. After a move last month to deregulate diesel prices entirely, Modi this week raised taxes on both gasoline (petrol) and diesel – perhaps counting on this year's record drop in oil prices to soften the blow.

EUROPE

Russia: Tough sledding ahead GDP growth slowed in 3Q, to a 0.7% annual rate from 0.8% in 2Q according to a preliminary government estimate. Still, that was enough to beat the more pessimistic 0.3% consensus, largely due to stronger-than-expected results in agriculture; September's 17% rise in production vs. the year-ago month is seen as a harbinger of a record harvest season. But the Central Bank of Russia estimates next year's overall growth at close to zero as sanctions, a plummeting ruble (down 29.5% since the beginning of 2014), and declining oil prices take their toll.

Signs of the times:

Retail Sales in U.S. Showed Broad-Based Gain in October – Bloomberg

Spain Outshines Euro Area as Draghi Morality Tale Echoes – Bloomberg

Japan Consumer Mood Worsens to Six-month Low in October – Reuters

US set to export more oil condensate – Financial Times

Sources: Bloomberg, Wall Street Journal, Financial Times, New York Times.

...And the week ahead:

GLOBAL ECONOMIC CALENDAR: Nov 16–22, 2014

 

U.S.

Other Americas

Europe, UK, Africa, Mideast

Japan, Asia Ex Japan & Pac Rim

Sun
Nov 16

 

 

Poland: local elections

 

Mon
Nov 17

Industrial production

 

ECB: settled covered bond purchases

Japan: GDP
China/HK: stock exchange link opens
Philippines: overseas remittances
Thailand: GDP

Tue
Nov 18

Producer prices, capital flows

 

UK: inflation
Germany: investor confidence
Ukraine: industrial production

China: property prices

Wed
Nov 19

Fed minutes of Oct 28-29 meeting, housing starts, building permits

Brazil: inflation, unemployment

Russia: industrial production

Japan: parliamentary elections called (tentative), Bank of Japan monetary policy statement

Thu
Nov 20

Existing home sales, jobless claims, leading indicators

 

Eurozone: mfg, services PMIs
UK: retail sales

China: mfg PMI
HK: inflation
Japan: trade balance

Fri
Nov 21

 

Mexico: GDP

UK: public finances
Russia: retail sales, unemployment

 

Sat
Nov 22

 

 

 

 


Definitions:

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

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 Nikkei-225 Stock Average Index (Nikkei) is a price-weighted average of 225 top-rated Japanese companies listed in the First Section of the Tokyo Stock Exchange. Please note an investor cannot invest directly in an index, and unmanaged index returns do not reflect any fees, expenses or sales charges.

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

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
(45%)
Strength in the US dollar convinces the Fed to keep short rates low longer
(0%)
European Central Bank bond buying rekindles growth in European Union countries
(55%)
Growth in China strong enough to leave room for financial system and structural reform
(0%)



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%)