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

January 26, 2015

"For growth… you need investment. For investment, you need confidence. And for confidence, you need structural reforms. It's now up to the governments."

— ECB President Mario Draghi, on the limits of monetary policy to kick-start Europe's economy (New York Times, Jan 22 2015)

The week in review...


ECB QE: Diving in, for as long as it takes The ECB's long-anticipated €1 trillion ($1.14 trillion) bond-buying program is big (about 10% of eurozone GDP), persistent (€60 bn/month until at least Sept 2016) and wide-ranging (it could include Greek sovereign debt). Most notably, it's open-ended; purchases may continue until the bank sees a "sustained adjustment" in the path of inflation below 2 percent, over the medium term. Overall, a much bolder commitment than many expected – the open-endedness is calculated to increase the odds of success by convincing financial markets that the ECB means business.

  • Currencies: The euro dropped 2.76% intra-day on the news, settling in at $1.1365 as of early Fri, Jan 23. The drop is viewed as good news, increasing the prospects of eurozone export-driven growth. It's an 11-year low, but still well within its long-term trading range of between $0.823 (Oct 26, 2000) and $1.6038 (Jul 15, 2008). The Swiss franc, recently released from its peg, stayed close to its free-market rate, near parity with the euro.
  • Bonds: The yield on German 10-year Bunds fell 13.6 bps, from 0.583% to a record low of 0.447%. Perhaps most telling, the financial markets' inflation expectations, as measured by the 5-year/5-year breakeven, have continued their climb over the past ten days, since word of the impending ECB action began to spread.

Greek fire extinguished? As this week's election looms, Syriza party opposition leader Alexis Tsipras moderated his stance on cooperation with EU fiscal rules, saying "a Syriza government will respect Greece's obligation, as a eurozone member, to maintain a balanced budget, and will commit to quantitative targets." While sounding conciliatory, Syriza is still seeking relief from its debt burden by way of "haircuts" to existing bonds – which German Finance Minister Wolfgang Schäuble has reiterated is not an option.


Signs of growth: Anecdotal and otherwise Hard data: home prices rose more than expected in November, up 0.8% from October. That's a 5.3% increase from a year ago. Anecdata: closely-watched advertising sales for Feb 1's Super Bowl feature a group of 15 brands advertising for the first time during what's become television's biggest event. That's the largest number of newbies at the Super Bowl since just before the collapse of the dot-com boom in 2000.


China: Muted growth, as expected GDP growth came in at 7.3% year-on-year for 4Q14. That's below the widely-promoted 7.5% long-term objective, but well within more recent government guidance.

Japan: Deflated expectations the Bank of Japan cut its inflation forecast for the next fiscal year due to the decline in oil prices, but raised its outlook for inflation-adjusted GDP growth to 2.1% from 1.5% for the upcoming fiscal year beginning in April 2015.

Signs of the times:

Central Banks Step Up Low-Inflation Fight as Canada Cuts Rate – Bloomberg

Putin Enlists Veteran of 'Much Tougher Times' to Help Contain Ruble Crisis – Bloomberg

Spain bags record borrowing costs in ten-year sale – Financial Times

Brazil Raises Taxes by $7.5 Billion in Quest for Confidence – Bloomberg

Sources: Bloomberg, Wall Street Journal, Financial Times, New York Times, Nikkei Asian Review, China Daily

...And the week ahead:




Other Americas

Europe, UK, Africa, Mideast

Japan, Asia Ex Japan & Pac Rim

Jan 25


Greece: parliamentary elections


Jan 26


Mexico: retail sales

Germany: business confidence
Russia: industrial production

Japan: trade data

Jan 27

Consumer confidence, new home sales, 20-city housing prices, durable goods orders


European Union: debate on €315 bn ($363 bn) investment stimulus program

China: industrial profits
Hong Kong: exports, imports, trade balance

Jan 28

Federal Reserve: FOMC policy announcement


Russia: retail sales, unemployment

Australia: consumer prices
ASEAN (10-nation Assn' of Southeast Asian Nations) meeting concludes

Jan 29

Jobless claims, pending home sales


Germany: unemployment
Spain: retail sales
Eurozone: economic confidence

Philippines: GDP
Japan: retail sales

Jan 30

GDP, consumer spending, consumer confidence


Eurozone: inflation
Spain: GDP
UK: mortgage approvals

Japan: consumer prices, household spending, unemployment, labor market data, industrial production
Hong Kong: money supply

Jan 31






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

Quantitative easing (QE) refers to a monetary policy implemented by a central bank in which it increases the excess reserves of the banking system through the direct purchase of debt securities.

Haircut refers to the percentage by which an asset's market value is reduced for the purpose of calculating capital requirement, margin and collateral levels.

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 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.

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.

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Previous Editions

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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