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

12 May, 2014

"I'm sometimes tempted to ask the French whether they would like a cheese tax."

– British Prime Minister David Cameron, on the French-German initiative to establish a financial transactions tax in the European Union (Financial Times, May 5, 2014)

The week in review...


UK: Growth beyond housing? Broad expansion was evident in April's composite PMI figures, rising to 59.2 from 57.8 in Mar, the highest level since Nov. The OECD picked up on the growth as well, raising its 2014 growth forecast for the UK to 3.2% from 2.4% in Nov. Employment in the services sector also accelerated in April as companies added to payrolls. The Bank of England (BoE) kept its benchmark borrowing rate at a record low 0.5% to encourage continued expansion, but has yet to find tools to bring surging housing prices under control without slowing the rest of the economy. Little wonder – the BoE reported that the cost of a two-year fixed-rate mortgage covering 75% of a home's value dipped to 2.37% in Mar, the lowest rate since at least 1994.

Eurozone: Comfortable with acting – next time The European Central Bank (ECB) kept its benchmark rate at 0.25% again this month, while annual inflation declined to a 0.7% annual rate. Admitting that the rapidly rising euro—reaching as high as $1.40—was making it harder to reverse the downward trend in prices, the ECB again declined to make good on its previous assurances that unorthodox policies would be put in place if current trends continued.


Consumers: Credit where it's due Consumer borrowing rose $17.5 bn in Mar, well above expectations and the biggest increase in more than a year. Non-revolving loans, including borrowing for cars and college tuition, rose by the most in six months, and revolving credit, which includes credit card balances, rose $1.1 bn, the most in three months. The increases are driven by lenders as much as by borrowers; the Fed's monthly survey of senior bank loan officers continued to show a growing willingness to lend. Consumer credit figures don't include mortgage lending, which has continued to slow as new housing starts and existing home sales decline year-over-year, despite what Fed Chair Janet Yellen described as "a rebound in spending and production".


Indonesia: Breaking the habit Presidential challenger Joko Widodo is using an unusual tactic to gain popularity before the July 9 election – suggesting that the long-standing subsidies for fuel be cut back.  This move might be popular with global financial markets unhappy with Indonesia's persistent government spending on the subsidy – budgeted for 210.74 tn rupiah ($18 bn), overshadowing infrastructure and health spending of 206.6 tn and 70.5 tn rupiah, respectively. Subsidized gasoline now costs 6,500 rupiah ($0.65) per liter; diesel is 5,500 rupiah. Surprisingly, Widodo is willing to spend political capital on the issue, positioning the subsidy as a gift to wealthier Indonesians.


Signs of the times:

China Manufacturing Gauge Signals Risk of Deeper Slowdown – Bloomberg

Growing Exports Shrink U.S. Trade Deficit as Global Demand Stirs – Bloomberg

Euro zone retail sales surprise with a month on month rise in March – Reuters

Drop in Jobless Claims Signals Firmer Labor Market – New York Times

Sources: Bloomberg, Reuters, Wall Street Journal, Financial Times, New York Times, xinhuanet, Deutsche Welle, The Guardian, New York Times.

...And the week ahead:




Other Americas

Europe, UK, Africa, Mideast

Japan, Asia Ex Japan & Pac Rim

May 11



Lithuania: presidential election


May 12

Monthly gov't budget


European Commission (EC): agriculture forecast
Estonia, Kazakhstan: GDP
Switzerland: retail sales

Japan: current account

May 13

Retail sales, business inventories,

Brazil: inflation

Germany: investor confidence
Portugal: inflation

Australia: budget
China: retail sales, industrial production

May 14

Producer prices


UK: inflation, unemployment
Germany: inflation
Spain: CPI
France: CPI

Korea: unemployment

May 15

Jobless claims, consumer prices, industrial production, capital flows,

Argentina: consumer prices
Brazil: retail sales

Turkey: unemployment
Russia: foreign exchange and gold reserves
Czech, Hungary, Poland, Germany, Italy, France: GDP


May 16

Housing starts, building permits



Malaysia: GDP
Hong Kong: GDP

May 17






The Organization for Economic Co-operation and Development (OECD) is an international organization that promotes policies to improve the economic and social well-being of people around the world.

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 US Federal Reserve ("Fed") is 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 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.

The Consumer Price Index (CPI) measures the average change in U.S. consumer prices over time in a fixed market basket of goods and services determined by the U.S. Bureau of Labor Statistics.

Unless otherwise specified, all uses of the symbol "$" refer to US dollars.

The opinions and views expressed herein, as well as references to individual companies or securities, are not intended to be relied upon as a prediction or forecast of actual future events or performance, or a guarantee of future results, or recommendations to buy, hold or sell, or investment advice.

Past performance is not a guarantee of future results.

All investments involve risk, including possible loss of principal.

Please note an investor cannot invest directly in an index, and unmanaged index returns do not reflect any fees, expenses or sales charges.

International investments are subject to special risks including currency fluctuations, social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets.

Fixed income securities are subject to interest rate and credit risk, which is a possibility that the issuer of a security will be unable to make interest payments and repay the principal on its debt. As interest rates rise, the price of fixed income securities falls.

Yields and dividends represent past performance and there is no guarantee they will continue.

Currencies contain heightened risk that include market, political, regulatory, and natural conditions and may not be suitable for all investors.

This material is for information only and does not constitute an invitation to the public to invest in any funds, securities, strategies or other products. You should be aware that the investment opportunities described should normally be regarded as longer term investments and they may not be suitable for everyone. The value of investments and the income from them can go down as well as up and investors may not get back the amounts originally invested, and can be affected by changes in interest rates, in exchange rates, general market conditions, political, social and economic developments and other variable factors. Past performance is no guide to future returns and may not be repeated. Investment involves risks including but not limited to, possible delays in payments and loss of income or capital. Neither Legg Mason nor any of its affiliates guarantees any rate of return or the return of capital invested.

Please note that an investor cannot invest directly in an index. Forward-looking statements are subject to uncertainties that could cause actual developments and results to differ materially from the expectations expressed. This information has been prepared from sources believed reliable but the accuracy and completeness of the information cannot be guaranteed and is not a complete summary or statement of all available data. Individual securities mentioned are intended as examples of portfolio holdings and are not intended as buy or sell recommendations. Information and opinions expressed by either Legg Mason or its affiliates are current as at the date indicated, are subject to change without notice, and do not  take into account the particular investment objectives, financial situation or needs of individual investors.

The opinions and views expressed herein are not intended to be relied upon as a prediction or forecast of actual future events or performance, or a guarantee of future results, or investment advice. The information in this material is confidential and proprietary and may not be used other than by the intended user. Neither Legg Mason or its affiliates or any of their officer or employee of Legg Mason accepts any liability whatsoever for any loss arising from any use of this material or its contents. This material may not be reproduced, distributed or published without prior written permission from Legg Mason. Distribution of this material may be restricted in certain jurisdictions. Any persons coming into possession of this material should seek advice for details of, and observe such restrictions (if any).

This material may have been prepared by an advisor or entity affiliated with an entity mentioned below through common control and ownership by Legg Mason, Inc.

This material is only for distribution in those countries and to those recipients listed.

All investors in the UK, professional clients and eligible counterparties in EU and EEA countries ex UK and Qualified Investors in Switzerland:
Issued and approved by Legg Mason Investments (Europe) Limited, registered office 201 Bishopsgate, London EC2M 3AB. Registered in England and Wales, Company No. 1732037. Authorized and regulated by the Financial Conduct Authority. Client Services +44 (0)207 070 7444.

All Investors in Hong Kong and Singapore:
This material is provided by Legg Mason Asset Management Hong Kong Limited in Hong Kong and Legg Mason Asset Management Singapore Pte. Limited (Registration Number (UEN): 200007942R) in Singapore

This material has not been reviewed by any regulatory authority in Hong Kong or Singapore.

Qualified domestic institutional investors in the People's Republic of China (PRC), Distributors and existing investors in Korea and Distributors in Taiwan:
This material is provided by Legg Mason Asset Management Hong Kong Limited to eligible recipients in the PRC and Korea and by Legg Mason Investments (Taiwan) Limited (Registration Number: (98) Jin Guan Tou Gu Xin Zi Di 001; Address: Suite E, 55F, Taipei 101 Tower, 7, Xin Yi Road, Section 5, Taipei 110, Taiwan, R.O.C.; Tel: (886) 2-8722 1666) in Taiwan. Legg Mason Investments (Taiwan) Limited operates and manages its business independently.

This material has not been reviewed by any regulatory authority in the PRC, Korea or Taiwan.

All Investors in the Americas:
This material is provided by Legg Mason Investor Services LLC, a U.S. registered Broker-Dealer, which may include Legg Mason International - Americas Offshore. Legg Mason Investor Services, LLC, Member FINRA/SIPC, and all entities mentioned are subsidiaries of Legg Mason, Inc.

All Investors in Canada:
This material is provided by Legg Mason Canada Inc. Address: 220 Bay Street, 4th Floor, Toronto, ON M5J 2W4. Legg Mason Canada Inc. is affiliated with the Legg Mason companies mentioned above through common control and ownership by Legg Mason, Inc.

All Investors in Australia:
This material is issued by Legg Mason Asset Management Australia Limited (ABN 76 004 835 839, AFSL 204827) ("Legg Mason"). The contents are proprietary and confidential and intended solely for the use of Legg Mason and the clients or prospective clients to whom it has been delivered. It is not to be reproduced or distributed to any other person except to the client's professional advisers.


Previous Editions

Click on a date to view that week's edition of weekly snapshot.


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