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

September 1, 2014

"At least there you don't have to pay to park your money."

— Rabobank CFO Bert Bruggink, on its movement of €40 bn ($53 bn) from the European Central Bank (ECB) to other central banks in response to negative interest rates for reserve deposits. (Wall Street Journal, Aug 28 2014)

The week in review...

AMERICAS

US: Picking up speed The second estimate of GDP for 2Q2014 came in at a 4.2% annual rate, beating expectations and slightly above the first estimate. But just as important is how the economy got there: through upward revisions in industrial and information processing equipment, in commercial and health care structures, and in corporate research and development (R&D). These are capital expenditures –just the sort of spending that could ripple through the rest of the economy, promoting incomes, jobs and consumer confidence.

US: Banks get the message Lending and leasing increased in 2Q2014 by 2.3% over the previous quarter, the largest quarterly jump since 4Q2007. The rise was spread across business lines, including commercial and industrial as well as auto loans. Banks as a whole recorded second-quarter net income of $40.2 bn, a 5.3% increase from the year-ago quarter.

Argentina: Feeling the burn As its second sovereign debt default in almost 13 years drags on, foreign reserves are heading downward and the peso is feeling the pressure. While the official, regulated exchange rate as of Thu Aug 27 was measured at 8.4070 per US dollar, the black-market rate was seen at 14.4, over 40 percent lower.

EUROPE

France: Shuffling the deck chairs By dismissing industry minister Arnauld Montebourg from his cabinet, President Francois Hollande is in effect distancing his government from the argument that sluggish growth and unemployment is being prolonged by fiscal austerity. Montebourg's replacement, Emmanuel Macron, now holding both the industry and economy portfolios, is a former banker; it's hoped that his background in commerce will restore some of the lost confidence of the domestic and foreign business communities.

Eurozone: Magic words? As eurozone inflation continues to fall – in July it was measured at 0.4%, a four and a half year low – speculation is increasing that the ECB will enact the quantitative easing measures it's been considering for over a year. While ECB president Mario Draghi helped revive confidence in July 2012 by merely asserting that the ECB would do "whatever it takes" to restore growth, it remains to be seen if more concrete action is needed to turn the tide this time.

CHINA

Slowing, but still not slow Growth in tax revenue from the real estate sector grew 5.8% in the first seven months of 2014 – much slower than the 27.4% rate for the same period last year, according to the official State Council.

Signs of the times:

Japan firms hit by labor crunch, many see profits squeezed – Reuters

China M&A hits 3-year-high – Xinhua

Consumer Confidence in U.S. Rises to Almost Seven-Year High – Bloomberg

Pending Sales of US Existing Homes Increase More Than Forecast – Bloomberg

Sources: Bloomberg, Wall Street Journal, Financial Times, South China Morning Post, Xinhua, The Independent (UK)


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.


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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
(17%)
India, as Narendra Modi's new government enacts changes
(42%)
China, as Xi Jinping's reforms promote a stronger financial sector
(18%)
South Korea, as President Park Geun-hye's plan to boost growth bears fruit
(23%)



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%)