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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October 20, 2014

"They may be just teaching the crowd in the U.S., the shale boys, a lesson"

— Oil investor T. Boone Pickens, on one possible motivation behind Saudi Arabia's contribution to the current oil glut (Bloomberg, October 16, 2014)

The week in review...

GLOBAL

Oil prices: Slippery slope The 27% drop in the price of Brent crude oil since the highs of mid-June has producers scrambling and consumers cheering. Some credit a slowing Europe and improving efficiency in the US auto fleet; others credit Saudi Arabia's very public disclosure that it had actually boosted production in September by 100,000 barrels per day (b/d), to 9.704 mm b/d. Central bankers might also be unhappy; disinflation will be that much harder to stop with the cost of energy falling. But one clear winner could be the US consumer; gas money now goes to other forms of spending, providing more fuel for the economy to move forward.

UNITED STATES

Growth: False alarm? When retail sales figures for Sept missed forecasts by a wide margin (0.1% vs. a 0.4% forecast), market reaction was immediate and negative – abetted by a drop in wholesale prices. But positive news abounds: housing starts rose 6.3% to 1 1.2 million annualized rate from a 957k rate in August; better-than-expected 2.3k drop in initial unemployment claims; upside surprises in overall industrial production (up 1%, better than the best forecast, the highest rise since Nov 2012) and capacity utilization (79.3%, above forecast).

EUROPE:

France: Non-starter France's 2015 budget was unveiled and presented to the European Union this week, and includes an economic stimulus plan in violation of European Union limits on deficit spending to 3% of GDP. The reception was chilly, especially from Germany, which has nearly no budget deficit and is continuing to rein in its spending.

Germany: Strongest but not strong The Economy Ministry cut its growth outlook for the full years 2014 and 2015, to 1.2% from 1.8%, and to 1.3% from 2.0%, respectively. This, after the IMF made its own forecast cuts. GDP shrank -0.2% in 2Q2014 quarter-over-quarter. At the recent annual IMF meeting, Finance Minister Wolfgang Schäuble said. "We don't have a recession in Germany," but economic pressure from the fighting in Ukraine, combined with a felt need for infrastructure investment, is prompting Economy Minister Sigmar Gabriel to cautiously promote increased government spending.

ASIA

India: Friendly competition Madhya Pradesh, larger than Italy and more populous than the UK, is also India's fastest growing large state, with GDP rising 10% in 2013. Prime Minister Modi's focus is on building on that success by attracting foreign investment. The theory: central government projects often founder on the central government's long-acknowledged bureaucratic and political barriers; going directly to the state could smooth the way. Another possible motivation: competition-driven reform by other states. At stake: a claimed $113 bn in pledged private investment, time period unspecified.

Signs of the times:

China Credit Growth Climbs as Targeted Easing Kicks In – Bloomberg

China's exports jump 15.3 pct in September – Xinhua

Draghi's 'Whatever It Takes' Plan on Trial at EU Court – Bloomberg

U.S. foreclosure activity falls to eight-year low – Reuters

Sources: Bloomberg, Wall Street Journal, Financial Times, New York Times, China Daily, Platts, France24.

...And the week ahead:

GLOBAL ECONOMIC CALENDAR: Oct 19 – Oct 25, 2014

 

U.S.

Other Americas

Europe, UK, Africa, Mideast

Japan, Asia Ex Japan & Pac Rim

Sun
Oct 19

 

 

 

 

Mon
Oct 20

 

 

 

China: Party Central Committee Plenum
Hong Kong: unemployment
S. Korea: producer prices

Tue
Oct 21

 

 

UK: budget balance

China: GDP
Japan: Gov't economic report

Wed
Oct 22

Consumer prices

Canada: rate decision
Mexico: retail sales

UK: Central bank meeting minutes

Australia: consumer prices
Japan: trade balance

Thu
Oct 23

Initial jobless claims, leading economic indicators

 

Eurozone: manufacturing, services PMI
UK: retail sales

China: private sector manufacturing PMI
Japan: manufacturing PMI

Fri
Oct 24

New home sales

 

UK: GDP

China: property prices
S. Korea: economic growth

Sat
Oct 25

 

 

 

 


Definitions:

The International Monetary Fund (IMF) is an international organization of various member countries, established to promote international monetary cooperation, exchange stability, and orderly exchange arrangements.

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.

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.

The European Union (EU) is an economic and political union established in 1993 after the ratification of the Maastricht Treaty by members of the European Community and since expanded to include numerous Central and Eastern European nations. Current membership includes 28 countries.


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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
(17%)
India, as Narendra Modi's new government enacts changes
(42%)
China, as Xi Jinping's reforms promote a stronger financial sector
(18%)
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%)