Hungary

Financial Markets…Year-to-date global corporate bond sales rose to $3.43 trillion, already surpassing 2011’s full year total of $3.29 trillion, as further stimulus from global central banks pushed yields to record lows. Funding costs for the riskiest to the most creditworthy corporates are plunging as the persistent low-yield environment spurred unprecedented investor demand.

Perceived default risk of US corporate debt climbed for a third consecutive day, with the benchmark Markit CDX North America Investment Grade Index rising 3.6 basis points to 108 bps, amid growing concerns that the so-called US fiscal cliff could push the world largest economy into deep recession.

Ghana’s 3-month borrowing costs, which fell to a five month low last week, are gearing for further decline today after the central bank issued record volume of domestic bonds, lowering its financing needs in near-terms. The 3-month yield on Ghana’s Treasury bills dropped 69 bps to 22.33% last week, but they are still the highest among African countries.

In its November update released earlier today, the US Department of Agriculture reported marginal increases in global grain supplies (compared to the October update) for the 2012/13 crop year ending in May 2013. Yet, stock-to-use ratio for corn—and less so for wheat—remain at historical low levels. The rice market is well-supplied with trade expected to surpass 38 million tons in 2012—a record high.

High-income Economies…France's industrial production posted the biggest monthly drop since December 2009, falling 2.7% (m/m) in September (-2.1% y/y), with both manufacturing production and construction contracting. The Bank of France said the economy may shrink in the fourth quarter.

Italy’s industrial production fell by 1.5% (m/m) in September (-4.8% y/y), the most in five months, suggesting the country remained in recession in the third quarter.

Greece’s industrial production fell 7.3% (y/y) in September, resuming its downward trend after rising temporarily by 2.5% in August.

Sweden’s industrial production fell 5% (y/y) in September, following a 2.7% increase the previous month.

Germany’s annual consumer price inflation on a EU-harmonized basis remained at 2.1% (y/y) in October, the same rate as September (+0.1% m/m). A 5.5% (y/y) increase in domestic gas and diesel prices and increases in some food items prevented inflation from falling.

UK’s goods trade deficit fell to 8.4bn pounds in September from 10bn pounds in August, as exports rose 1.1% (m/m), while imports fell a larger 3.9% (m/m) because of lower imports of fuel and manufactured goods.

US consumer confidence continued to improve for the fourth month in November, with the Thomson Reuters/University of Michigan consumer sentiment index climbing to 84.9 (a five-year high) from 82.6 in October as the labor market showed signs of improvement.

Hungary’s industrial output rose 0.6% (m/m) in September, following 1.8% increase in August. Despite the monthly increases, industrial output in September was 3.8% lower than the same month the previous year.

Developing Economies…China’s retail sales rose 14.5% (y/y) in October slightly faster than 14.2% in September, while consumer price inflation dropped to its weakest level in nearly three years to 1.7% (y/y) in October from 1.9% in September on declining food inflation.

Growth in China's industrial production accelerated to 9.6% (y/y) in October from 9.2% in September China’s producer prices fell at a slower pace of 2.8% (y/y) in October compared to a 3.6% fall in September. China's total fixed asset investments were 20.7% higher during the January-October period compared to the same period last year.

Malaysia's exports grew 2.6% (y/y) in September, recovering from a 4.5% contraction in August on strong demand from ASEAN, the US, India and Taiwan, while exports to the European Union decreased 12.5%. Import growth accelerated to 9.6% (y/y) in September from 2.8% in August.

The central bank of Peru held its benchmark interest steady at 4.25%. Peru's inflation rate fell to 3.25% (y/y) in October from 3.74% in September, but remains above the central bank's targets inflation of 2.0% (+/- 1). An acceleration of inflation in September was related to a weather conditions-related temporary supply side factor.

Russia's central bank held its benchmark refinancing rate steady in October. Inflation declined in October slightly to 6.5% (y/y) from 6.6% in September, but remains above the Bank of Russia's target of 5-6 percent inflation range. The bank noted that inflation is stabilizing due to a moderation in food prices which had experienced a temporary upswing related to a supply shock associated with a bad harvest.

Important developments today:

1.  European government bonds climb on speculation Fed may resume debt buyback

2.  Euro area industrial orders slump in July

European government bonds climb on speculation Fed may resume debt buyback. European government debts rallied on Wednesday, driving the yield on German 30-year bond to lower than 3% for the first time in a week, amid speculation the Federal Reserve may resume another wave of asset purchases (or so-called quantitative easing) to provide more cash into the economy. The benchmark German 10-year bund yield slid the most in a month to 2.34%, with the yield on the equivalent French bond dropping 10 basis points (bps) to 2.7%. The U.K. 10-year gilt fell 15 bps to 2.97% on speculation the Bank of England would also ease monetary policy, while the yield on 10-year U.S. Treasury slid 4 basis points to 2.54% after falling 14 bps yesterday. Notably, the yield on Portuguese bond fell in line with other European securities, after the country sold €750 million ($ billion) of government debt maturing in 2014 and 2010.

Euro area industrial orders slump in July. New industrial orders across the euro area dropped sharply in July (-2.4%), the largest monthly drop in 19 months. The momentum growth picked up since the beginning of this year now appears to be trending down. Capital good orders, which had helped power the growth in industrial orders, slumped to a fall of 5.1% in July in contrast with the 3.8% rise in June.

These figures lend support to the expected slow down in euro area growth in H2 2010. As the global economy slows down, export orders which had contributed to the rapid recovery in industrial orders among euro area countries, including Germany [see Chart at http://gem or http://www.worldbank.org/gem] is also slowing down. Other euro area specific concerns contributing to this slowdown include lingering concerns on sovereign debts in the euro area, planned cuts in fiscal deficits and high unemployment levels which is holding back purchases of consumer durables. Indeed, orders of durable consumer goods which fell by 3.2% (m/m) is the only order category to have dropped on an annual basis in July, highlighting the difficult spending environment for consumers.

Source:  World Bank DEC Prospects Group and Thomson Reuters.

Among emerging markets:

In Central and Eastern Europe and the CIS, Hungary’s retail sales climbed 1.7% y/y in July compared to June’s decline of 4.6% y/y, in a release by the Statistics Office. This is the first time in 41 months that retail sales rose.

In Middle East and North Africa, Kuwait’s Central Bank indicated that the country’s M1 money supply growth reached 12.1% y/y in August from July’s 17.9% y/y whilst M2 money supply growth was 2.3% y/y and 1.2% y/y for the same periods.

In Sub-Saharan Africa, South Africa’s current account deficit decreased from 4.6% of GDP in Q1 to 2.5% in Q2, led by a recovery in the exports of commodities, automobiles and tourism receipts as stated in the Reserve Bank’s Quarterly bulletin.  During the 2010 World Cup, retails sales increased 7.9% in July and consumer spending reached an annualized 4.8% growth in Q2.