Global Economic Prospects 2014

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July 2014

Prospects Daily: China’s stocks post biggest monthly gain since 2012, Eurozone’s consumer price inflation slows to near 5-year low, Philippines’ central bank hikes key policy rates

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Financial Markets

China’s stocks rose on Thursday, sending benchmark indexes to their highest monthly gain since December 2012, amid optimism government stimulus will boost economic growth. The Shanghai Composite Index rose 0.9% to 2,201.56 at the close, the highest level since December 2012, for a monthly gain of 7.5%. Meanwhile the CSI 300 Index advanced 1.2% for a July gain of 8.6%, and the Hang Seng China Enterprises Index, or H-shares gauge, rose 0.2%, extending a rebound since a March low to a 21.0% monthly gain.

Prospects Daily: Argentine bonds surge to 3-year high on prospect of a deal to avoid the country’s second default, U.S. GDP rebounds more strongly-than-expected in Q2, China’s consumer sentiment rises in July

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Financial Markets

Argentine bonds surged to a three-year high Wednesday on speculation that government officials and holdout creditors are nearing a deal to avert the country’s second default in 13 years. Argentine dollar bonds maturing in 2033 rose 10 cents on the dollar to 95.5 Wednesday morning in New York, the highest since November 2010. The yield fell to 8.8% from 10.1%. Argentine stocks traded in the U.S. also rose, gaining as much as 31%, while the country’s benchmark Merval stock index advanced 4.8% in Buenos Aires.

Prospects Daily: Dollar rises to highest level in seven weeks on optimism about the U.S. recovery…OECD area consumer price inflation steady at 2.1% in June…South Africa’s jobless rate rises further to 25.5% in Q2

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Financial Markets

Emerging-market stocks advanced to an 18-month high as investors waited for the start of a meeting of the Federal Reserve today. The MSCI Emerging Markets Index gained 0.2% to reach 1,081.64 in mid-afternoon trading in London, heading for its highest close since January 2013. The gauge has gained 7.9% this year; in comparison, the MSCI World Index has risen 5.4% in 2014.

Prospects Daily: Brazil real extends losses on turmoil in Middle East and Ukraine, U.S. durable goods orders rise more-than-expected in June, Mexico’s trade surplus declines

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Financial Markets

The U.S. dollar extended gains, rising to a fresh 8-month high against the euro on Friday as durable goods orders rose more-than-expected and a gauge of German business confidence fell more than economists’ forecast hurt by geo-political tensions. The dollar rose 0.2% to $1.3433 per euro after advancing to $1.3428 the strongest since November 21.

Prospects Daily: India’s stocks rally for 8th day to record high, U.S.’s Markit flash Manufacturing PMI falls in July, China’s flash Manufacturing PMI rises strongly

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Financial Markets

U.S.’s Treasuries dropped on Thursday as reports showed that U.S. jobless claims unexpectedly fell to an 8-year low in July. The 10-year yield rose by 4.0 basis points to 2.51% in afternoon trading in New York. The 30-year yield also rose by 4.0 basis points to 3.30% after falling to 3.24% on July 21, its lowest level since June 7, 2013. Year-to-date, Treasuries have gained 3.6%, compared to a loss of 3.4% last year.

 

Prospects Daily: European stocks advance while dollar gains on higher U.S. yields, U.S. June consumer price inflation in line with estimates, South Africa’s leading index rises slightly

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Financial Markets

European stocks rose on Tuesday, rebounding from three consecutive days of losses, amid a global rebound in risk appetite, helped by signs of reduced tensions over the downed Malaysian Airlines plane. The Stoxx Europe 600 Index rose 1.3% in mid-afternoon trading in London after falling 1.5% in the past three days amid tensions over the Ukraine crisis and as intense fighting in Gaza unsettled investors.

Prospects Daily: Global stock market indexes fall amid Gaza and Ukraine concerns, U.K.’s consumer confidence falls for first time in 2014, China signs currency swap agreement with Switzerland

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Financial Markets

Major global stock market indexes fell while bond prices rallied on Monday amid worries over the Gaza strip and Ukraine. The Stoxx Europe 600 Index fell 0.5% to 337.95 at the close in London following a 0.8% gain last week. U.K.’s FTSE 100 declined 0.3%, France’s CAC40 lost 0.7%, and Germany Dax fell 1.1% to its lowest level since May 9. In the U.S., the Dow Jones Industrial Average fell 115 points, or 0.7% to below 17,000 and the S&P 500 index retreated 12 points or 0.6% in mid-afternoon.

Prospects Weekly: Growth in China was 7.5 percent in the second quarter of 2014, Weak activity in the Euro Area and strengthening growth in the US, Steady stock-to-use ratios suggest that grain markets are adequately supplied

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Second quarter growth in China was broadly stable at 7.5 percent in line with expectations, with little indication thus far of a rebalancing away from investment towards consumption. Weak activity in the Euro Area and strengthening growth in the US have led to the widest level of the long-term yield spread in fifteen years. Steady stock-to-use ratios suggest a broadly stable outlook for most grain prices.
 

Commodity Markets Outlook July 2014

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The World Bank just published the Commodity Market Outlook report for the second quarter of 2014.

Geopolitical concerns in Iraq and Ukraine/Russia earlier in the year put upward pressure on oil prices during the second quarter. Yet, as tensions moderate, oil prices are expected to ease to $104/barrel in 2015 from $106/barrel in 2014.

Prospects Daily: U.K. unemployment lowest since 2008, China’s GDP growth at 7.5% in Q2

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High Income Economies

With energy prices showing a significant rebound, U.S. producer prices increased by more than expected in June. The producer price index for final demand rose by 0.4% (m/m) following a 0.2% drop in May. Economists had expected prices to increase by about 0.2%. Excluding food and energy prices, core producer prices edged up by 0.2% in June after dipping by 0.1% in May.

Prospects Daily: U.K. leading economic index improves, Mexico’s central bank keeps key interest rate unchanged in July

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High Income Economies
 
Canada lost 9400 jobs in June and the jobless rate rose by 0.1 percentage points to 7.1% percent, as more people were searching for work.  Employment increased by 72,000 annually or 0.4% (y/y), the lowest since February 2010.  Employment fell in business, building and other support services as well as agriculture. At the same time, there were more people working in construction and other services.
 

Prospects Daily: Safe-haven government bonds rally on Portugal bank worries, U.S. weekly jobless claims unexpectedly fall, Malaysia’s central bank raises policy rate for first time in 3 years

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Financial Markets

U.S. Treasuries and German bunds advanced on Thursday, pushing their yields lower, as renewed concerns over European financial markets amid Portuguese banking woes boosted demand for safe-haven government securities. The benchmark 10-year yield declined as much as 6 basis points (bps) to a one-month low of 2.49%, while German 10-year yield slid 6 bps to a 14-month low of 1.17%. In contrast, Italian, Portuguese, and Spanish government bond extended their losses.

Prospects Daily: U.S. Treasuries gain for the first time in four trading sessions, U.S. unemployment rate falls to 6.1%, HSBC Emerging Markets Index rises further in June

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Financial Markets

U.S. Treasury prices gained on Monday as investors took advantage of bargain-priced bonds after three sessions of selling. Further, the fact that U.S. Treasuries are relatively cheaper than other safe-haven government bonds also boosted oversea demand. The additional yield investors demand to hold U.S. notes over German 10-year bunds is currently at 137 basis points, the widest since 1999.

Prospects Weekly: For the first time in four decades, the US Department of Commerce has authorized exports of minimally processed crude oil

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The US Department of Commerce has authorized exports of minimally processed crude oil, which could help reduce unprecedented levels of crude oil stocks in the U.S. and may narrow the 7 percent discount that U.S. oil trades to international (Brent) prices. In South Asia, weak economic growth has taken a toll on corporate and bank balance sheets. Tighter monetary and regulatory policies in the larger economies in East Asia have contributed to the slowdown in credit growth.
 

World Bank published latest commodity prices: July 2014

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In June of 2014, energy prices increased by 1.9% and the prices of non-energy commodities decreased by 1.6%. Food prices were down by 2.7%. Beverages went down by 2%. Raw materials remained unchanged while fertilizers were down by 0.1%. Metals decreased by 0.6%, while precious metals decreased by 0.1%

To access recent and long-term historical prices and other commodity-related information, please click here

Prospects Daily: U.S. Treasuries fall on strong jobs data, U.S. private sector monthly job growth at 20-month high, Brazil’s industrial production falls again in May

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Financial Markets

U.S.Treasuries prices dropped for a second day on Wednesday after a private report showed stronger-than-expected private-sector jobs figures in June. Robust U.S. private-sector employment report increased expectations for tomorrow’s nonfarm payrolls report from the U.S. government. The benchmark 10-year yield climbed 5 basis points (bps) to 2.61%, the highest level since June 24, while the 30-year bond yield traded flat at 3.44%.