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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June 30, 2014

"Keep calm, everyone. This has been studied extensively."

– Axel Kicillof, economy minister of Argentina, on the government's plan to pay sovereign bondholders after an adverse ruling by a US court in a related lawsuit (Financial Times, June 18 2014)

The week in review...

AMERICAS

US: Two down, three up GDP for 1Q2014 declined by -2.9%; well below consensus, with the miss largely attributed to fresh information on the low level of non-farm inventory investment, the legacy of the quarter's bad weather and corporate caution. Consumer spending also disappointed, up 0.2% for May – the shortfall due to a drop in health care outlays. The good news: non-military capital goods orders ex aircraft rose 0.7%; early composite PMI figures showed robust expansion at 61.1 (61.2 for services, 57.5 for manufacturing); and new home sales reached an annual rate of 504k, up 18.6% from April, significantly ahead of forecasts and the highest rate since May 2008.

Brazil: Steady play Sporting events notwithstanding, the Brazilian real has been enjoying a welcome respite from its former crisis-driven swings in the currency markets, with 3-month volatility matching a one-year low at 10.68% on Jun 24. The pause could be related to the month's low -0.60% inflation rate and the above-expectation foreign direct investment of $5.963 bn for May, both of which may make it easier for the central bank to continue to support the currency as it trades in a narrow range between 2.4543 and 2.1523 to the US dollar over the past 12 months.

EUROPE

UK: Strategic obfuscation After the Bank of England (BoE) sent a clear message last week that a rate hike could come sooner rather than later, members of the policy-setting committee – including Governor Mark Carney – have gone on record with contradictory statements on the matter. With housing prices going one way (up) and the rest of the economy another (subdued), the BoE's policy of clear forward guidance may have been overtaken by events.

France: Dirigiste to a fault A new law cancels France's previous regulations, which allowed mid-season discounts by retailers. For now, discount seasons are a thing of the past. One reason: retailers found the pressure on profit margins difficult to endure. The French Federation of Retail Associations was clear on its discomfort: "We found ourselves with sales all year round, it didn't make any sense." Shoppers may have a different opinion on the matter. On a different scale, Economy Minister Arnaud Montebourg is now lobbying the European Union (EU) to loosen the zone's antitrust regulation, which he blames for the failure of Germany's Siemens to successfully bid for Alstom (which is being purchased by US company GE).

JAPAN

Signs of life: inflation and jobs: Stripping out the effect of Japan's April tax increase, consumer prices rose 1.4% in May, with core CPI rising 3.4% – in line with the Bank of Japan's forecast. The jobs-to-applicants ratio was 1.09 for May, the highest level in over twenty years, and the jobless rate fell to 3.5% from 3.6%, now standing at the lowest level since Dec 1997. But consumers are staying conservative; household spending fell 8.0% from a year ago in May on an inflation-adjusted basis.

 

Signs of the times:

Chinese economic confidence retreating: survey – Xinhua

EU becomes world's top food exporter – Deutsche Welle

Hungary Cuts Main Rate to Record on Negative Inflation – Bloomberg

Puerto Rico Moves to Restructure Debt – Wall Street Journal

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

...And the week ahead:

GLOBAL ECONOMIC CALENDAR: June 29 – July 5

 

U.S.

Other Americas

Europe, UK, Africa, Mideast

Japan, Asia Ex Japan & Pac Rim

Sun
Jun 29

 

Brazil: World Cup (all week)

 

 

Mon
Jun 30

Pending home sales, Chicago PMI

Argentina: bond payment on restructured debt comes due
Brazil: primary budget balance

UK: Wimbledon tennis(all week), mortgage approvals

 

Tue
Jul 1

ISM manufacturing, vehicle sales

 

UK: BoE meeting minutes, manufacturing PMI
Eurozone, Germany: unemployment
Eurozone: manufacturing PMI
Russia: GDP

China: manufacturing PMI
Japan: Tankan business confidence, wages
South Korea: trade data
Australia: rate decision

Wed
Jul 2

Job cuts, employment survey, factory orders

Brazil: industrial production

UK: construction PMI, nationwide house prices
Spain: unemployment
Poland: rate decision

Japan: monetary base, inflation expectations

Thu
Jul 3

Monthly jobs report, weekly unemployment, trade balance, ISM non-manufacturing

 

European Central Bank (ECB): rate decision

UK:
services PMI
Eurozone: services, composite PMI

China: non-manufacturing PMI, services PMI
Hong Kong: retail sales

Fri
Jul 4

Independence Day holiday

 

Germany: factory orders

Japan: domestic auto sales

Sat
Jul 5

 

 

Germany: Chancellor Merkel visits China, July 5-8

 


Definitions:

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

The Tankan Survey is an economic survey of Japanese business issued by the central Bank of Japan.


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Previous Editions

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

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
(19%)
India, as Narendra Modi's new government enacts changes
(33%)
China, as Xi Jinping's reforms promote a stronger financial sector
(15%)
South Korea, as President Park Geun-hye's plan to boost growth bears fruit
(33%)



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%)