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

June 2, 2014

"We want strong and stable partnerships but must avoid falling victim to political and commercial blackmail"

— European Union (EU) Energy Commissioner Günther Oettinger, on the need for strengthening the security of the supply of gas and oil to the 28-country region (Deutsche Welle, May 28 2014)

The week in review...


Ukraine: Fast starter Billionaire President-elect Petro Poroshenko won't be sworn in until Jun 7, but financial markets are already reacting positively: the spread for the 3-year sovereign bond is down nearly 600 bps since its peak of 1424.28 on Feb 19 (as of May 29). However, with separatists in Donetsk still battling Ukrainian troops, there is potential for continued unrest. That, combined with memories of Russia's 2006 and 2009 shutoff of gas to the Ukraine, prompted the EU to announce plans to diversify away from the 40% of its natural gas supplied by Russia, half of which flows through Ukraine.

Spain: Virtuous circle The 4th largest economy in the eurozone, Spain's progress matters. GDP rose 0.4% in 1Q2014 from 0.2% in 4Q2013, with household spending also growing 0.4%, after 4Q2013's 0.5% rise. One possible reason: less austerity. Public spending rose 4.4% in 1Q, after a 3.9% decline. Spain's bond market has responded, with 10-year sovereign yields coming in at 2.82% at 8:55 AM on May 29.

European Parliament: Warning shot The success of anti-EU parties in last week's election changed the calculus of politics within its 28 countries, suggesting that austerity policies may have overstayed their welcome. The European Central Bank (ECB) will likely take this into consideration when making its much-awaited rate decision on June 5.


US growth: Step back, leap ahead? GDP for 1Q2014 declined at an annualized -1.0% rate, roughly in line with expectations and confirming earlier estimates. But other figures tell a story of pent-up growth: consumer purchases, about 70% of the economy, rose at a 3.1% annualized rate, contributing 2.1 percentage points to GDP for the quarter. And inflation ex food and energy rose at a 1.2% annualized rate, roughly in line with the previous quarter's 1.3% rate. Initial jobless claims came in at 300k, down 27k from the previous week; the closely-followed four-week average reached 311.5k, the lowest level since Aug 11 2007, well before the beginning of the 2008 financial crisis.


Thailand: Understatement A "credit negative" is how rating agency Moody's described Thailand's most recent coup in the wake of several months of political upheaval. GDP shrank -2.2% in 1Q2014 from the previous quarter, and is only growing at a 0.4% year-on-year rate. With other economies in the region eager to compete for Thailand's regional manufacturing contracts, future growth is clearly being challenged.

India: Beginner's luck Newly-elected Prime Minister Narendra Modi is off to a solid start: the current-account deficit dropped to a fresh four-year low, with higher gold tariffs still restraining imports; the shortfall for 1Q2014 was $1.2 bn, vs. $4.2 bn for the prior quarter, with the gap as a percentage of GDP dropping to 1.7% for the current fiscal year from 4.7% the previous year. The rupee is up over 16% since its 68.825 low vs. the US dollar; the currency now trades at 59.035; it's been better than the psychologically important 60 level for over two weeks, the longest stretch since Jun 2013.

Signs of the times:

Abe Corporate Tax Cut Bid Gains Ground With Ruling Party Support – Bloomberg

China's Jan – April industrial profits up 10 pct – Xinhua

German Unemployment Unexpectedly Rises as Growth to Slow – Bloomberg

Home Prices' Climb Loses Momentum, Case-Shiller Index Says – Wall Street Journal

Sources: Bloomberg, Reuters, Wall Street Journal, Financial Times, New York Times, Xinhua, Deutsche Welle, European Commission.

...The week ahead:




Other Americas

Europe, UK, Africa, Mideast

Japan, Asia Ex Japan & Pac Rim

Jun 1




China: mfg PMI

Jun 2

ISM manufacturing PMI


Euro area: PMIs
Germany: CPI
UK: mfg PMI, mortgage approvals
Switzerland: mfg PMI
South Africa: mfg PMI
Turkey: mfg PMI

Japan: capital spending, mfg PMI

Jun 3

President visits Poland, Belgium, France
Auto sales, factory orders


Europe: NATO meeting
Eurozone: unemployment, inflation
Italy: unemployment
UK: nationwide housing prices, construction PMI
Turkey: CPI
Lithuania, Latvia, Estonia: central bank meetings
Poland: rate decision

China: mfg and non-mfg PMI
Japan: wages, monetary base
Korea: inflation
Hong Kong: retail sales
Australia: rate decision

Jun 4

ISM services PMI
Fed “Beige Book”,
ADP employment,
trade balance,

Canada: rate decision

ECB: Lithuania readiness for the euro
Eurozone: services PMI, GDP breakdown, PPI
UK: services PMI
Czech, Romania, Hungary: GDP
Russia: CPI
Uganda: rate decision

Korea: election
Australia: GDP

Jun 5

Unemployment claims, job cuts


ECB: rate decision
Eurozone: retail sales
Germany: factory orders
France: unemployment
UK: rate decision
Russia: gold, foreign reserves

Taiwan: inflation
China: services PMI

Jun 6

Jobs report, consumer credit

Chile: inflation

France: budget, trade balance
UK: trade balance
Switzerland: foreign currency reserves, consumer prices
Europe (France): Normandy: D-Day 70th anniversary
Poland: GDP
South Africa: gross, net reserves
Czech: industrial output
Ukraine: CPI

Japan: consumer prices, industrial output, unemployment
Korea: industrial production

May 31



UK: Epsom Derby



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

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.

Consumer Price Indexes (CPI) measure the average change in consumer prices over time in a fixed market basket of goods and services.

Moody's Investors Service is a leading provider of credit ratings, research, and risk analysis.

The S&P/Case-Shiller Home Price Indices are the leading measures for the US residential housing market, tracking changes in the value of residential real estate both nationally as well as in 20 metropolitan regions.

The ADP National Employment Report provides a monthly snapshot of U.S. nonfarm private sector employment based on actual transactional payroll data.

The Beige Book is a commonly used name for the Federal Reserve report, "Summary of Commentary on Current Economic Conditions by Federal Reserve District". It is published eight times each year, just before the Federal Open Market

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Previous Editions

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Which Asian country will have the strongest growth in the coming year?


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

Previous month Poll

Go for growth: Where will a global recovery be strongest this year?

Europe, as countries emerge from bailouts
US, as consumers regain optimism
Japan, as stimulus programs begin to bear fruit
China, as reform and pro-growth policies continue