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July 2013

Prospects Daily: US treasury yields at 2-year high on Q2 GDP outturns, China’s current account strengthens, capital account in deficit, Albania cuts interest rates

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Financial Markets…U.S. Treasuries extended losses on Wednesday, pushing 30-year yields to nearly a two-year high, after reports showed the U.S. economy grew stronger-than-expected in the second quarter and private sector added jobs more-than-expected in July. Robust U.S. economic data fueled speculation the Federal Reserve may start to scale back its stimulus program sooner than expected. The benchmark 10-year yield widened 6 basis points to 2.67%, while 30-year bond yields touched 3.74%, the highest level since August 2011.

Prospects Daily: China injects liquidity, Japan IP falls, South Africa’s unemployment rate rises

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Financial Markets…Global equities moved higher on Tuesday amid promising earnings reports from Asian, European, and U.S. companies and a rise in Euro-zone consumer and business confidence in July. Investors are currently turning their focus to this week’s three central bank meetings (the U.S. Federal Reserve, European Central Bank, and Bank of England). The MSCI Asia Pacific Index gained 0.5% with the index gearing for a monthly gain of 2.5%, while the Stoxx Europe 600 Index added 0.2%, extending its July gain to 5.1%. U.S.

Prospects Daily: Yen strengthens, Spanish unemployment falls, Turkish consumer confidence improves

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Financial Markets… The yen rose for a third day against the dollar on Monday, helped by solid Japanese retail sales and growing speculation of steady monetary stimulus by the Federal Reserve. Japan’s currency strengthened 0.3% versus the dollar to 97.93 after reaching a one-month high of 97.64 earlier, while it advanced 0.4% against the euro to 129.85 after touching 128.77, the strongest level since July 15.

Prospects Daily: Developing country stocks fall, UK GDP growth increases, China unveils new stimulus

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Financial Markets…U.S. Treasuries and German bunds fell as positive news on U.S. durable goods orders in June and German business confidence dampened demand for the safe-haven government debt. Treasury 10-year yields rose for a third day to 2.603%, while comparable German bund yields climbed 4 basis points to 1.68%, after touching nearly 3-week highs of 1.69% earlier. Meanwhile, the U.S. Treasury will auction $29 billion of 7-year notes today after selling of 2-and 5-year securities this week.

Prospects Daily: Global stocks edge higher on better Euro Area and US PMI data, China manufacturing slows further

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Financial Markets…Global stock markets edged higher on Wednesday as gains in European and U.S. equities offset a retreat in Asia shares. Europe’s benchmark stock index rose to the highest level since May 31 amid sign of growth in the region’s manufacturing, while U.S. stocks opened higher this morning  on strong earnings results from technology giant Apple and positive Euro-area economic data. In contrast, most Asian shares retreated amid renewed concerns over Chinas’ economic outlook in the wake faster-than-expected slowdown in the country’s manufacturing activity.

Prospects Daily: Indonesian rupiah falls, Euro Area consumer confidence at near 2-year high, Brazil current account deficit narrows

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Financial and Commodity Markets…Global equities advanced on Tuesday, with the benchmark index gearing for a five-year high, as investors speculated that Chinese government will increase spending in an effort to maintain annual economic growth of at least 7%. Robust earnings reports from major U.S. companies also propelled the S&P 500 index to a fresh record high in morning trade.  The MSCI world stock index is up 0.3%, within reaching distance of five-year high reached in May.

Prospects Daily: US oil prices at par with global crude prices, European government debt at historic high, Brazil industrial confidence weakens further

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Financial and Commodity Markets…US oil prices have reached parity with the global crude benchmark Brent for the first time in almost three years. WTI, the US benchmark, whose September contract reached the same level as September Brent, was last at parity with the North Sea contract in October 2010. WTI has traded at a discount to Brent over the past few years as a surge in US oil production – due to the shale boom – led to a glut at Cushing, Oklahoma, the delivery point for the US benchmark.

Prospects Daily: European government bonds rally…US part-time employment climbs…China liberalizes interest rates

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Financial MarketsAll European government bonds are gearing for weekly gains on Friday amid growing speculation that global central banks will maintain their stimulus program for some time. German 10-year yield fell to 1.5% earlier, the lowest since June 7, while comparable Italian yield touched 4.36%, the lowest level since July11. Notably, Portuguese bonds headed for the first weekly gain in more than 2 months despite ongoing country political unrest.

Prospects Daily: US dollar up after Bernanke’s testimony…Spanish bad bank loans near record high…South Africa’s central bank keep rates on hold

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Financial MarketsThe dollar strengthened versus global major currencies after Federal Reserve Chairman Ben Bernanke confirmed that gradual scaling back of the central bank’s monetary stimulus program could begin this year. The greenback gained 0.7% against the yen to 100.32, while it appreciated 0.4% against the euro to $1.3077. The dollar also gained considerably against developing-country currencies.

Prospects Daily: US treasuries advance on Fed Chairman’s statements…South African retail spending rises

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Financial MarketsU.S. Treasuries advanced for a for third day on Wednesday, with the benchmark 10-year yield sliding as much as 7 basis points to a two-week low of 2.46%, after Federal Reserve Chairman Ben Bernanke said in congressional testimony the timing of an eventual tapering off of quantitative easing is not on a “preset course.” Weak U.S. housing starts data in June, which fell to the lowest level in nearly a year, also weighted positively on U.S. government debt.

Prospects Daily: Indian rupee recovers as rates are raised…US homebuilders confidence at 7-year high…Turkish current account deficit widens

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Financial Markets…The net outflow of U.S. long-term securities rose to $27.2 billion in May, up from $21.8 billion in April, as foreign private investors sold a record amount of U.S. Treasuries. China remained the biggest foreign owner of U.S. government securities in the month as their holdings increased by $25 billion to a record $1.316 trillion. Japan stayed the second-largest holder, even after reducing its holding to $1.11 trillion.

Prospects Daily: Chinese stocks advance as growth picks up… US retail sales growth improves

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Financial MarketsEuropean stocks advanced on Monday amid better-than-expected Chinese economic growth, extending gains after the biggest weekly rally in 2 months. But European shares trimmed their gains in afternoon trading after U.S. retail sales increased less than previously reported in June. The benchmark Stoxx Europe 600 Index rose 0.3%, after earlier climbing as much as 0.7%. The index surged 2.7% last week in the wake of Federal Reserve Chairman Bernanke reassured the market that the U.S. central bank will maintain its stimulus program for some time.

Commodity Market Outlook - July 2013

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The World Bank just published the July edition of the commodity markets outlook. The report notes that most commodity prices continue to remain weak. However, there is a resurgence of short term risks to the upside in energy markets, as geopolitical tensions in the Middle East resurface, as well as renewed weather-related concerns in the grain markets. In contrast, there has been a sharp decline in prices of precious metals in the last one month.

Prospects Daily: US equities reach new highs, Singapore’s economy grows strongly, India’s inflation accelerates while IP contracts

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Financial Markets…Global equities are heaving for their best week in 8 months after Federal Reserve Chairman Ben Bernanke reassured that the U.S. central bank will maintain the current stimulus program for some time. The benchmark MSCI world stock index is gearing for the biggest weekly gain since November with European and Asian shares extending their gains on Friday. The S&P and the Dow Jones Average closed at new record highs yesterday in the wake of Bernanke’s comment after the market’s close on Wednesday.

Prospects Daily: Developing-country equities, bonds and currencies improve, Eurozone housing correction continues, Brazil raises interest rates

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Financial MarketsItalian and Spanish government bonds fell on Thursday, with the benchmark 10-year yields climbing 7 basis points to 4.52% and 8 bps to 4.89% respectively, amid speculation that both countries are likely to struggle to find eager investors for their new debt auctions this year as the economic outlook for the nations deteriorates. The rate on similar-maturity Portuguese bonds also increased 12 bps to 6.89%.

Prospects Daily: Italy credit rating cut, Greek IP momentum builds, China exports and imports fall

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Financial MarketsItaly’s sovereign credit rating was cut to ‘BBB’ from ‘BBB+’ by Standard and Poor’s due to a weakening of the country’s economic prospects and financial system. S&P also said in a statement the outlook on the rating, two levels above junk status, remains negative. Italy’s benchmark 10-year yield rose 5 basis points to 4.45%, the most since July 3.

Prospects Daily: Greek bonds advance, Australian business conditions deteriorate, Chinese inflation picks up

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Financial MarketsGreek government bonds advanced for a third day on Tuesday after the European Union agreed to release additional aid to the country yesterday—€2.5 billion this month and €500 million in October if the government delivers on economic reforms and budget cuts. The Greek 10-year bond yield fell 14 basis points to 10.79%, extending its three-day declines to 90 bps.

Prospects Daily: Japan sold record US treasures in May, German IP, export and factory orders data weaken, Turkey’s IP growth slows

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Financial Markets…Japan unloaded record amounts of U.S. Treasuries in May amid the steepest monthly loss for the securities in more than three years. Japanese investors reduced a net 3 trillion yen ($30 billion) of their holdings of U.S. government bonds in a fifth consecutive monthly of overall sales that were the biggest on record. Meanwhile, the country’s investors were also net sellers of foreign debt at a record volume of 2.96 trillion yen, pushing year-to-date total to 10.6 trillion yen.

Prospects Daily: Portuguese bonds tumble...Eurozone PMIs signal easing downturn…China PMI indicates contraction

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Financial MarketsPortuguese government bonds tumbled on Wednesday, with the benchmark 10-year yield jumping as much as 139 basis points to an eight month high of 8.11% in morning trading, after two ministers resigned from the coalition government, putting at risk the country’s attempts to implement austerity measures to meet the terms of its bailout program. The cost of insuring Portugal’s bonds against default also surged to the highest level in eight months, rising as much as 105 bps to 507 bps.

Prospects Daily: Egypt’s equities rally, US factory orders rise, Brazil’s industrial output slows

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Financial Markets…Japanese stocks advanced for a fourth day on Tuesday as the country’s exporters gained on a weaker yen. Positive U.S. manufacturing and construction data also boosted overall investor sentiment. The benchmark Nikkei 225 index gained 1.8% to close above 14,000 levels for the first time in five weeks, while the broader Topix index climbed 1.8% to extend its four-day gains to 9.6%.