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February 2013

Prospects Daily: Safe haven flows boost US Treasuries, Eurozone economic confidence improves, India’s FDI down sharply

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Financial Markets… U.S. Treasuries edged higher on Wednesday, with the benchmark 10-year yield posting a month-to-date decline of 13 basis points, as growing concerns over the U.S. budget sequester and Italy’s political uncertainty boosted investor appetite for safe-haven assets.

Prospects Daily: Euro weakens, Singapore’s economy rebounds, Chinese stocks continue to fall

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Financial Markets…The European Central Bank said on Friday that some 356 regional banks will pay back €61.1 billion ($80.5 billion) of its second three-year loan borrowed under the second Longer Term Refinancing Operation (LTOR) a year ago as the first opportunity for early repayment opens on February 27. The reported amount represents just under 12% of a total €529 billion borrowed by 800 euro-zone banks last February from the ECB, and it is far smaller than consensus market expectations (around €130 billion).

Prospects Daily: US dollar strengthens, Germany’s manufacturing business confidence improves, Malaysia’s GDP growth accelerates

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Financial Markets… Global stock markets tumbled on Thursday, with the MSCI Emerging Market index posting its biggest decline since July, extending losses spurred by growing concerns over the U.S. Federal Reserve’s future monetary policy. Declining commodity prices also weighted negatively on share prices. Notably, China’s benchmark Shanghai index slid 3%, the largest one-day decline since August 2011, extending the weekly loss to 4.4%.

Prospects Daily: Japan’s trade deficit rises to record levels…Italian industrial orders contract, UK employment highest since records began, Chinese FDI falls

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Financial Markets… Japanese shares advanced on Wednesday, with the Nikkei 225 Stock Average rising 0.8% to a 52-month high closing, as the yen’s lingering weakness pushed exporters’ shares higher. The Nikkei index has risen 10% thus far this year, fueled mostly by the yen’s depreciation, after gaining 22.9% last year. The Japanese currency has dropped some 15% versus the dollar since November.

Prospects Daily: Spanish and Italian bonds advance…Investor confidence in Germany rises strongly..

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Financial Markets…Spanish and Italian government bonds bounced back from their earlier losses, with their benchmark 10-year yields dropping 6 basis points to 5.17% and 4 bps to 4.36%, as a report showed German investor confidence surged to the highest level in nearly three years this month, boosting risk-appetite for the region’s high-yielding debt. Notably, Spain sold €4 billion ($5.35 billion) of 3- and 9-month bills with an average yield of 0.421%, down from 0.441% in January auction.

Prospects Daily: German bonds advance, Poland’s inflation eases,The Philippines register record high remittances,Tanzania’s inflation eases

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Financial Markets…Inflows to emerging market bond funds totaled $2.6 billion in the week ending February 13, while equity funds received inflows of $1.8 billion. Bond fund drew more investment than equity funds for the first time in 10 weeks. Meanwhile Asian equity funds attracted $535 million, marking a 23rd consecutive week of inflows. 

Prospects Daily: Japan’s GDP contraction slowed in Q4 while Euro Zone’s GDP contraction in Q4 accelerated and deepened, India’s wholesale price inflation eased, Romania narrowly avoided recession in Q4

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Financial Markets…European stocks (Stoxx 600 Index) retreated 0.4% and the euro weakened 0.9% to a three-week low of 1.3324 against the dollar reacting to data release on the Euro Zone economic outcome for the fourth quarter. German bunds advanced as Europe’s deepening recession stimulated demand for traditional safe-haven assets.

Prospects Daily: Euro Zone’s industrial production registers growth, Current account deficit widens in Indonesia, narrows in Turkey, Moody’s downgrades Egypt’s sovereign rating

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Financial Markets…U.S. Treasuries fell for a third day on Wednesday, with the benchmark 10-year yield climbing 3 basis points to 2.01% (nearing a 10-month high of 2.06% reached on Feb.4) reacting to the positive news on U.S. retail sales. The Treasury is scheduled to sell $24 billion of 10-year notes today and $16 billion of 30-year bond tomorrow.

Prospects Daily: G-7 reaffirms commitment to market determined exchange rates, Indonesia and Russia keep policy rates unchanged, India’s inflation accelerates

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Financial Markets…The yen strengthened 0.7% to 93.69 per dollar on Tuesday, bouncing back from an earlier drop, after a group of seven officials stated that G-7 statement on market-determined exchange rates was misinterpreted by investors. The Japanese currency dropped to a 33-month low of 94.46 yesterday. The dollar has risen more than 8% versus the yen year-to-date.

Prospects Daily: Estonia and Latvia recorded slower growth in Q4, Azerbaijan cuts policy rates, Mexico’s industrial production drops, Venezuela devalues its currency

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Financial Markets…Yields on Spanish 10-year government bonds increased by 6 basis points to 5.42%, after dropping 9 bps in the past two days and Italian 10-year bond yields also climbed by 7 bps reaching an eight week high 4.63%, in expectation of the European Union (EU) ministers’ meeting on Cyprus and Greece aid.

Prospects Weekly: Capital flows to developing countries remained robust in January, Prices of crude oil and other industrial commodities have firmed in recent months, Growth of international tourist arrivals decelerated

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Capital flows to developing countries remained robust in January, led by record bond issuance, reflecting declining risk perceptions and stronger developing country growth. Prices of crude oil and other industrial commodities have firmed in recent months, providing additional evidence of a cyclical recovery in global economic activity.

Prospects Daily: EU seals a seven-year budget package, China reports inflation moderation and strong export growth

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Financial Markets…Global corporate bond sales dropped to about $48 billion in the first week of February, the lowest level since the first week of 2013 and less than half of $97.7 billion sold in the same period in 2012. This drop was due to the rising borrowing costs, which dented investor demand. Yields on global corporate bonds have been rising sharply since late January after dropping to their record low levels of 3.24% toward the end of 2012.

Prospects Daily: ECB holds interest rates at 0.75%, Germany’s industrial production increased, Brazil’s inflation accelerated

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Financial MarketsSpanish borrowing costs climbed with an average yield on the €2 billion 3-year bonds rising to 2.823% at a new bond auction on Thursday, up from 2.476% in January auction, amid political corruption scandal. The Spanish Treasury also sold a 2019 bond with a yield of 4.123%, up from 3.770% a month ago, and it auctioned a 2029 bond at the yield of 5.787%, compared with 5.555% at its previous auction.

World Bank published latest commodity prices: February 2013

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In January 2013, energy and non-energy prices rose by 3.5% and 0.4%, respectively.  Food prices are down by 1.0%, beverages declined by 1.2%, raw materials increased by 1.1%, metals rose sharply by 4.1% and fertilizers eased by -1.4%. The US dollar depreciated 1% against the euro and 0.1% against a broad index of currencies.

 

Prospects Daily: Factory orders up in Germany, Poland cuts policy rates, China boosts minimum wages to narrow disparities, Colombia’s inflation eases

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Financial Markets…European equities (the Stoxx 600) fell 0.5% from their biggest gains in nearly four weeks and the euro weakened against the dollar and yen, slipping 0.5% to $1.35 and 0.6% to 126.4 yen, as fresh signs of political and banking turmoil in the Euro Zone dented investors' sentiment and a string of disappointing earnings’ reports weighted negatively on the region’s shares.

Prospects Daily: Economic activity in Euro Area strengthens led by Germany, British services sector gains strength, Pace of Indonesia’s growth slows, Russia’s inflation up

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Financial Markets…The euro appreciated 1.4% against the yen to 126.56 as Germany’s January service sector PMI posted its largest monthly increase since August 2009. A 17 nation currency also strengthened versus the dollar, gaining 0.2% to $1.354. Meanwhile, the Japanese yen fell 1.1% against the dollar to 93.43.

Prospects Daily: European stocks decline, U.S. factory orders up, Turkey’s inflation accelerates

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Financial Markets…Spanish and Italian government bonds retreated for a second day, with their 10-year yields climbing by 17 basis points and 10 bps respectively, amid signs of political turmoil in both countries. Spain’s 10-year rates rose to 5.42% - their highest level since December 18th, while Italian yields climbed to a one-month high of 4.43%.

Prospects Daily: Euro Area and US manufacturing PMIs rise in January, inflation eases in Thailand and Peru, but accelerates in Indonesia

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Financial Markets…The yen depreciated to its weakest level since June 2010 versus the dollar, sliding to 92.30 per dollar in earlier trading, as a report showed the Japan’s unemployment rate climbed and household spending declined. Japan’s currency also fell 1% to 125.74 per euro, after being as low as 126.16, the weakest level since April 2010.