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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July 21, 2014

"The ECB is the only central bank in the world where the balance sheet has been going down"

– European Central Bank (ECB) President Mario Draghi, rebutting criticism that eurozone monetary policy has been too generous to the region's banks (Wall Street Journal, July 9 2014)

The week in review...

UNITED STATES

Housing: Rain, rain, go away... Home construction fell 9.3% in Jun vs. May, much worse than expected. But heavy winter and spring rainfall in the South was partly to blame, rendering home lots unfit for construction; the region's starts declined nearly 30%, vs. a 28% rise on the Midwest and 14% in the Northeast. But the industry remains upbeat; the National Association of Home Builders, a trade group, reports builder optimism reaching a six-month high in July.

Industrial production, Part 1: Resurgence June saw a 0.2% increase in output vs. May. Though slightly shy of forecasts, the full Apr-Jun quarter saw 5.5% annualized growth overall, the most since 3Q2010. Car sales were the fastest in eight years, so the slight sag in auto production in the month may have been temporary. For the full quarter, factory production rose at a 6.7% annualized rate.

Industrial Production, Part 2: Importing progress One apparent source of industrial growth: Non-US machinery companies which are investing in expanded production capacity in the US, to follow their US customers as they move their own manufacturing back home. The advantage: shorter supply lines and improved responsiveness to their key US customers. One major Japanese manufacturer announced plans to enlarge a California plant by 30% by 2016 to serve the auto and construction industries; others have announced similar plans.

ASIA

China growth: The old-fashioned way With official GDP growth coming in at 7.5% for 2Q14, beating forecasts, the effect of stronger fixed-asset investment (fed by credit expansion and monetary easing) are clearly being felt. June's 1.97 tn yuan ($317 bn) aggregate financing, significantly above the median estimate of 1.425 bn yuan, reflected the drive for growth – the financing measure was the highest June figure since 2009. Fixed asset investment has benefited, growing 17.3% year on year in the first six months of 2014, to 21.28 tn yuan ($3.43 tn). Investment in the agriculture sector rose 24.1%.

Japan: Growth milestone For the first time in six years, economic demand exceeded supply, according to the Bank of Japan (BoJ) – potentially providing more upward pressure on prices. BoJ Governor Haruhiko Kuroda has a stated goal of helping to increase the country's overall inflation expectations, as well as actual consumer prices, to a target level of 2%.

EUROPE

Germany: Investor caution Sports success notwithstanding, German investors are growing increasingly concerned about the pace of growth, as well as geopolitical risk, according to a carefully-followed survey. But though industrial production fell for a third month running in May, the Bundesbank, the German central bank, forecasts 1.9%, 2% and 1.8% economic growth for 2014, 2015 and 2016 respectively – rates that could generate envy in the rest of Europe.

 

Signs of the times:

Foreign Demand for Euro-Based Debt, Equity Rose in 2013 –Wall Street Journal

UK Inflation Accelerates More Than Forecast to 1.9% – Bloomberg

China Unveils Measures to Regulate Banks' Wealth-Management Products – Wall Street Journal

Retail Sales in U.S. Showed Broad-Based Increase in June – Bloomberg

Sources: Bloomberg, Reuters, Wall Street Journal, Financial Times, New York Times, Spiegel Online, Xinhua

...And the week ahead:

GLOBAL ECONOMIC CALENDAR: July 20 – July 26

 

U.S.

Other Americas

Europe, UK, Africa, Mideast

Japan, Asia Ex Japan & Pac Rim

Sun
Jul 20

 

 

UK: British Open (golf)

 

Mon
Jul 21

Detroit employees vote on city bankruptcy plan, Chicago national activity

 

UK: housing prices

China: crude oil, gas data

Tue
Jul 22

Existing home sales, consumer prices

Brazil: inflation
Mexico: retail sales

UK: public finances data
Hungary: rate decision

Indonesia: presidential election results (official)

Wed
Jul 23

Money market rules vote by Securities and Exchange Commission (SEC)

 

UK: Bank of England (BoE) meeting minutes, mortgage data
Eurozone: consumer confidence
Lithuania: approval by European Union to adopt the euro in 2015

Australia: consumer prices

Thu
Jul 24

New home sales, initial jobless claims

 

Global: World economic outlook (International Monetary Fund)
UK: retail sales
Eurozone: composite PMI

Japan: trade figures
China: manufacturing PMI, Trustee Association (investment funds) report

Fri
Jul 25

Durable goods orders

 

UK: 2Q14 GDP, house price data
Germany: business confidence, consumer confidence

S. Korea: consumer confidence
Japan: Prime Minister Shinzo Abe visits Mexico, Trinidad and Tobago, Colombia, Chile, Brazil

Sat
Jul 26

 

 

 

 


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, services and overall 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.


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Previous Editions

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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
(18%)
India, as Narendra Modi's new government enacts changes
(38%)
China, as Xi Jinping's reforms promote a stronger financial sector
(20%)
South Korea, as President Park Geun-hye's plan to boost growth bears fruit
(24%)



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%)