Top Stories Last Week
• Global Stocks Slumped for the Second Week
Global stocks slumped for the second week on the concern about the possible tapering of bond purchases by the Fed this week. Last week, S&P index declined 1.4%, and MSCI EAFE index dropped 2.0%. The MSCI Emerging Market tumbled 2.4%. Gold price climbed 0.7%, while the SPGC commodity index dropped by 1.5%. The bond markets remained flat after the selloff the week earlier. Barclays US Treasury index and US high yield bonds were unchanged.
• The House Passed a Bipartisan Budget Plan
The House passed a plan to set the federal budget for the next two years, sending it to the Senate and bringing the Congress one step closer to avoiding a repeat of the October 2013 shutdown. The budget plan, proposed by House and Senate Budget Committee chairs, Rep. Paul Ryan and Sen. Patty Murray, was announced earlier this week. It ultimately passed with a sizeable bipartisan vote of 332-94, including 169 Republicans. It will replace mandatory, across-the-board cuts from sequestration with a different set of spending cuts and non-tax revenue, including new fees on airline tickets. The agreement sets spending for the 2014 fiscal year at $1.012 trillion, including $63 billion of sequester relief and $85 billion of total savings. The result is about $23 billion in net deficit reduction.
• US Retail Sales Rose 0.7% in November
U.S. retail sales rose solidly in November, adding to signs of a strengthening economy that could draw the Federal Reserve closer to reducing the pace of monetary stimulus. The Commerce Department said retail sales increased 0.7% last month as consumers stepped up spending on a wide range of goods from automobiles to electronics. So-called core sales, which excludes automobiles, food services, gasoline and building materials and correspond most closely with the consumer spending component of gross domestic product, rose 0.5% after gaining 0.7% in October.
• China Retail Sales Accelerated while Industrial Production Slowed
China’s retail sales unexpectedly accelerated in November while industrial output rose less than estimated, giving a mixed picture of growth as leaders gather in Beijing to set economic policies for the coming year. Factory production rose 10% from a year earlier, the National Bureau of Statistics said in Beijing yesterday, compared with analysts’ median projection of 10.1%. Retail sales advanced 13.7% and fixed-asset investment excluding rural households showed a slowdown.
However, China’s exports beat expectation in November adding to signs of a rebound in the world’s second-largest economy. Shipments rose 12.7% from a year ago, up from a 5.6% rise in October. The jump in exports was triggered by strong demand from important markets such as the US and European Union.
Top Stories to Watch This Week
• Fed Meeting
Some economists think the Fed may start tapering the bond purchases in this meeting.
• BOJ Meeting
Bank of Japan is likely to keep monetary policy unchanged.
• US Inflation Rate
US consumer price index is expected to rise 1.3% YOY, lower than the 2% Fed inflation target.
• European Inflation Rate
The consumer price index in the Euro zone may rise 1% YOY, much lower than the 2% ECB target.