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

March 23, 2015

"Just because we removed the word 'patient'...doesn't mean we are going to be impatient"

— Fed Chair Janet Yellen, on the timing of future rate hikes

The week in review...


US: The Fed gets its groove back The FOMC's concern about flagging US growth showed up clearly in the dialing back of its famed "dot plot" forecasts, which reflect its members' individual—but anonymous—opinions about future interest rates. Most markets reacted with relief that the Fed's assessment had shifted lower, bringing its forecast closer to market expectations. After an initial post-meeting downward lurch in yields of 14.3 basis points (bps) for 10-year Treasuries, yields recovered somewhat later in the day. The stock market treated this as good news: the VIX ended trading on March 19th at 14.07, well away from levels normally associated with heightened concern.

In effect, the FOMC succeeded in escaping the handcuffs it placed on itself through the prominent use of "patient" about the timing of a rate rise, successfully abandoning the word without provoking alarm in the financial markets. By getting most of the way out of the forward guidance business, the Fed refocuses attention on its assessment of economic conditions rather than future policy pronouncements. The ironic, but apparently intended, effect: increased room for maneuver with respect to rate-setting in future meetings.

Brazil: Taking it to the streets Austerity is no more popular in Brazil than in Greece, and recent scandals about the management of Petrobras, the country's state-owned oil company have fed the fire; last week, more than a million Brazilians marched to protest government corruption, rising taxes and President Dilma Rousseff's attempts to bring the economy under control. Perhaps most telling: the Finance Ministry's reference to a March 13 report in which its own Joaquim Levy and his team were said to "have no plans to leave the government".


Japan: Trade turnaround February's trade deficit shrank 47.3% from the year-ago month to ¥424.6 bn ($3.5 bn), reflecting both a yen-driven recovery in exports and the impact of the declining price of crude oil imports. The value of exports rose 2.4% to ¥5,941 ($49.2 bn), up for the sixth straight month due to larger automobile and semiconductor shipments; imports dropped 3.6% to ¥6,365.7 bn ($52.7 bn).

China: Capital inflow Foreign direct investment (FDI) into China jumped 17% year-on-year (Y/y) in the first two months of 2015, settling at $22.48 bn, according to the Ministry of Commerce. Service industry FDI totaled $13.73 bn, up 30% Y/y, 61% of all FDI for the period. The top five countries: Hong Kong, Taiwan, the Republic of Korea (South Korea), Singapore and Japan.


Greece: Strained relationship Prime Minister Alexis Tsipras and German Chancellor Angela Merkel are scheduled to meet in Berlin on Monday in the hope of defusing growing tension within the EU as Greece looks for better bailout conditions and EU creditors look to get paid. On Thursday, Merkel told Germany's lower house of parliament "I'm very aware the world is watching us" and the ECB openly debated whether to formally restrict Greece's ability to use short-term government debt to fund its current deficit; neither move helped reduce tensions.

The World Bank, Europe, China: Looking both ways France, Germany and Italy are joining Britain in signing up with the Asian Infrastructure Investment Bank (AIIB), China's alternative to the World Bank in funding Asian regional development.

Signs of the times:

PBoC Helps Shares Hit Fresh High – Shanghai Daily

China faces pressure on exports – Xinhua

Does India Have to Worry About its Record Deflation? – Wall Street Journal

German Investor Confidence Increases Less Than Forecast – Bloomberg

Sources: Bloomberg, Wall Street Journal, Financial Times,.net, New York Times, China Daily, Xinhua, Deutsche Welle, Business Times (Singapore), Shanghai Daily

...And the week ahead:




Other Americas

Europe, UK, Africa, Mideast

Japan, Asia Ex Japan & Pac Rim

Mar 22

Arnold Palmer Invitational (Golf)


France: local elections
Spain: Andalusia regional ballot


Mar 23

Existing home sales


Germany, Greece: Chancellor Merkel, Prime Minister Tsipras confer in Berlin
Slovenia: industrial production
Croatia: employment


Mar 24

New home sales, consumer prices


France: Central bank annual accounts
Eurozone: PMIs
UK: inflation


Mar 25

Durable goods orders,
Congressional address (both houses) by Afghan President Ashraf Ghani

Brazil: current account balances

Germany: business confidence
France: business confidence


Mar 26


Brazil: unemployment

France: GDP
UK: retail sales, Bank of England statement from March 24 meeting


Mar 27

GDP, consumer confidence


Nigeria: elections

China: industrial profits
Japan: jobless rate, job-to-applicant ratio, household spending

Mar 28

NCAA regional finals (collegiate basketball)





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 Chicago Board Options Exchange (CBOE) Volatility Index (VIX) is a measure of market expectations of near-term volatility as conveyed by S&P 500 stock index option prices. Please note that an investor cannot invest directly in an index.

A basis point (bps) is one one-hundredth of one percent (1/100% or 0.01%).

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

The European Union (EU) is an economic and political union established in 1993 by members of the European Community. The EU now comprises 28 countries after its expansion to include numerous Central and Eastern European nations.

The People's Bank of China (PBC or PBOC) is the central bank of the People's Republic of China with the power to control monetary policy and regulate financial institutions in mainland China.

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.

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.

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.

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Will the current wave of central bank easing jump-start the world's economies?


Will the current wave of central bank easing jump-start the world's economies?

No - The real issues are structural - real progress on labor reform and regulatory excess will have more impact
No - Deflation is already taking hold, making monetary policy changes ineffective
Yes - The US model shows that monetary easing can help economies heal in the medium term
Yes, but it will take even  longer than it did in the US, and the delay will have a negative political impact

Previous month Poll

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