Global Economic Prospects 2015

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April 2015

Global Daily: Eurozone consumer prices remain flat in April

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Oil prices edged higher on Thursday, set for their biggest monthly gain in nearly six years, as a weekly drop in U.S. oil stockpiles for the first time in months reinforced expectations that U.S. crude supplies are near a peak. U.S. crude for June delivery rose 0.8% (or 48 cents) to $59.08 a barrel after touching this year’s high of $59.40. Meanwhile, Brent crude for June settlement, the global benchmark, gained 0.7% (or 47 cents) to trade at $66.29 a barrel. Despite recent rally, oil prices are still more than 40% below their June 2014 high

Global Weekly: Low Oil Prices And Monetary Policy In Developing

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The disinflationary impact of lower oil prices should be temporary, dissipating by the end of 2016, but the coincident fall in core inflation and relatively weak growth in some emerging economies have led a number of central banks to ease policy in advance of an expected tightening of U.S. monetary policy. These trends raise the question of how developing country central banks should respond to lower oil prices.

Global Daily: U.S. jobless claims edge up

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Crude prices climbed to their highest levels of this year on Thursday after Saudi Arabia and its allies renewed a bombing blitz in Yemen, heightening concerns that Middle East oil supplies may be disrupted. The oil rally was also helped by speculations among traders that U.S. crude output will drop further after two consecutive weeks of decline. Brent for June delivery rose 3% (or $2.14) to $64.93 a barrel, while West Texas Intermediate (WTI) for June settlement gained 2.4% (or $1.33) to $57.49 a barrel.
 

Global Daily: Japan’s Leading Economic Index revised down in February

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Sovereign debt in the euro area surged to the record levels last year, led by Greece, according to the European Union’s statistics office. Greek government debt jumped to a fresh high of 177.1 % of GDP in 2014, up from 175% a year before. For the euro area as a whole, sovereign debt climbed to a record 91.9% of GDP in 2014 compared to 90.9% in 2013. Italy remained the second highly-indebted country in the currency region after Greece, going up to 132.1% of GDP in 2014 from 128.5% the previous year. The high debt-levels underscore the challenges still confronting the currency bloc as it struggles with Greece over further bailout support.
 

Global Daily: China cuts bank’s reserve ratio by 1%

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The People’s Bank of China (PBOC) cut the level of cash lenders must set aside with the central bank (so-called the reserve requirement ratio) by the most since 2008 in a strong signal of intent to boost economic growth. The main reserve-requirement ratio was lowered by 1% to 18.5% effective Monday, which is still high by global standards, but the move will free up cash to lend by about 1.2 trillion yuan ($194 billion). China’s interest-rate swaps declined to the lowest level since 2012 after reserve-ratio cut signaled that the PBOC has entered an aggressive monetary easing cycle.
 

Global Daily: U.S. consumer sentiment rises more than expected in April

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Global equities tumbled on Friday as investors grappled with renewed worries over Greek finances, fears of a regulatory clampdown on stock trading in China, and a flurry of disappointing U.S. corporate earnings. Most Asian markets closed lower Friday with Japan's Nikkei index losing 1.2%, but China’s benchmark Shanghai Composite index rose 2.2% to the highest level since March 2008. However, just after market closing the China Securities Regulatory Commission announced that it has imposed sanctions on over-the-counter margin trading, which has been a major driver of China’s stock market rally. The Chinese stock-index futures slumped over 5% following the news, weighing on global investor sentiment. Europe’s Stoxx 600 index fell 1.8%, ending the week down 2.2%, the steepest weekly drop since December. U.S. equities slumped as well with the Dow Jones Industrial Average and the S&P 500 index falling 1.5% and 1.1%, respectively.
 

Global Daily: U.S. jobless claims rise more than expected

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The S&P Rating Services slashed its sovereign rating on Greece further into junk territory as pressure mounted on the country to secure funding or risk a possible default. The rating agency downgraded Greece’s rating to ‘CCC+’ from ‘B-‘ with negative outlook, and it warned that “without deep economic reform  or further relief”, it expects Greece’s debt obligations will be “unsustainable.” Greece’s 3-year and 10-year bond yields surged to their highest levels since 2012 on the back of the downgrade.

Global Daily: U.S. industrial production drops in March

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U.S. government bonds advanced on Wednesday, gaining for a fourth day, after a report showed industrial production fell more than expected in March, adding to signs that U.S. economic growth is lagging expectations as the Federal Reserve weighs raising interest rates for the first time since 2006. Yields on benchmark 10-year Treasury notes fell 3 basis points (bps) to 1.87%. Meanwhile, Germany’s 10-year note yields fell to a fresh record low of 0.12% amid renewed concerns about Greece’s threat of default and pressure from the European Central Bank’s ongoing €1.1 billion QE program.
 

Global Daily: Eurozone industrial production grows more than expected in February

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U.S. Treasuries rallied on Tuesday after a report showed retailed sales climbed less than analysts forecasted in March, bolstering speculation the Federal Reserve is unlikely to rush to raise interest rates. The yield on the benchmark 10-year Treasury note fell 7 basis points (bps) to 1.86%, while the 30-year bond yield dropped 8 bps to 2.51%. Along with the disappointing nonfarm payrolls data earlier this month, the decline in consumption was interpreted among traders as a sign that the Fed might push back the timing of monetary tightening.
 

Global Daily: U.S. dollar rise against euro on Fed hike speculations

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The dollar strengthened on Monday versus the euro on renewed optimism among investors that the U.S. Federal Reserve will raise interest rates in coming months. The greenback climbed 0.4% to $1.0565 per euro. It reached $1.0458 on March 16th, the strongest level since January 2003. Meanwhile, the dollar weakened against the Japanese yen amid uncertainty surrounding the Bank of Japan’s stimulus polices, slipping 0.1% to 120.08 yen.

Global Daily: India’s industrial production posts strongest growth in nine months

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World stocks markets remained robust on Friday as Asian and European shares posted their biggest weekly gains in months. China’s Shanghai Composite Index closed above the 4,000 level for the first time since 2008 with a weekly gain of 4.4% and Japan’s Nikkei index past 20,000 points for the first time in 15 years with an increase of 2.4% for the week. Europe’s Stoxx 600 index closed 0.9% higher to surpass its all-time closing high reached yesterday. U.S. equities traded higher as well with both the S&P 500 and the Dow gaining 0.4% in midday trading.

Global Daily: U.S. jobless claims rise less than expected last week

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Global stocks markets advanced on Thursday as Greece’s repayment of a €450 million loan installment to the International Monetary Fund lifted European stocks to a seven-year high. With recent weak data possibly pointing to less economic readiness for a rate hike, growing expectations that the Fed will delay the timing of monetary tightening until the latter part of the year also helped boost stocks. Meanwhile, U.S. Treasury yields rose as an auction of $13 billion in 30-year Treasury bonds saw weak demand and a smaller-than-expected jobless claims pointed to strengthening U.S. labor market.

Global Daily: Eurozone retail sales fall in February

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Mexico is issuing its first 100-year euro-denominated bonds and its third so-called century bond as the country seeks to take advantage of attracting pricing conditions in the single currency. The Latin American sovereign is offering €1.5 billion of debt due in April 11, 2115 at a yield of 4.2%. Emerging-market sovereign and corporate borrowers from Bulgaria to China sold €20 billion of euro-denominated bonds in the first quarter of 2015 as they seek to lock in lower borrowing costs in Europe.

Low oil prices and monetary policy in developing countries: Mind the gap!

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Excluding a handful of oil exporters or countries where sharply depreciating currencies or domestic factors caused inflation to soar, developing country inflation has fallen quite significantly over the past few months and is expected this year to be at its lowest level since 2009 (Figure 1). The broad-based pattern of slowing inflation has been largely driven by plunging oil prices, albeit to varying degrees reflecting in particular exchange rate developments, the extent of fuel subsidies and other price regulations.

Global Daily: ECB meets bond-buying target for quantitative easing

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The European Central Bank said it has reached its bond-purchasing target of some €60 billion in the first month of its quantitative easing program. The ECB purchased €47.4 billion of public-sector bonds in March, and settled the rest of the monthly quota with covered bonds and asset-backed securities. The central bank has committed to buy about €60 billion of government and corporate debt a month until at least September 2016, making the stimulus package’s total value about €1.1 trillion.

World Bank published latest commodity prices: April 2015

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In March 2015, energy prices declined by 3%, while the prices of non-energy commodities went down by 2.2%. Food prices were down by 2.6%. Beverages dropped by 5.5%. Raw materials decreased by 1.4%, and fertilizers dropped by 3.7%. Metals and minerals slipped slightly by 0.9%, and precious metals fell by 3.9%.
 
To access recent and long-term historical prices and other commodity-related information, please click here.
 

Global Daily: Dollar and Treasury yields slid after weak U.S. jobs report

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The U.S. dollar slumped against the euro and yen after the weaker-than-expected U.S. jobs data in March prompted investors to reassess the path of Fed’s monetary tightening this year. The greenback declined 1% to $1.0993 per euro, and fell 0.7% to 118.89 yen. The dollar index, which tracks the dollar against the basket of its biggest peers, dropped 0.7% to a two-week low of 96.72.

Global Daily: U.S. private-sector job growth at slower pace in March.

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U.S. stocks slid for a second day on Wednesday and the dollar fell after weaker-than-expected U.S. private-sector job growth in March. Both the S&P 500 and the Dow Jones Industrial Average lost 0.4% in afternoon trading. The dollar weakened 0.3% to $1.0763 per euro, and the greenback lost for the first time in three days against the yen. Meanwhile, U.S. Treasury prices rose, with the benchmark 10-year yield sliding below 1.9%.