Financial Markets…Credit-default swaps on Spanish government bonds tightened 9 basis points to 393 bps today, gearing for their biggest monthly and quarterly drop. They are down sharply compared with 518 in August 31 and peak level of 640 reached in July 24.
Global corporate bond sale posted $949 billion in Q3 of 2012, bringing year-to-date volume to $2.9 trillion, the fastest pace since 2009. Borrowers have been taking advantage of record low borrowing costs amid unprecedented investor demand.
Loans to Euro Area households and companies contracted at the fastest pace in more than two years, amid an economic recession. Lending to the private sector slid 0.6% (y/y) in August, the steepest drop since January 2010, after falling 0.4% (y/y) in July.
High-income Economies…Euro Area economic confidence fell in September, with an index of executive and consumer sentiment falling to 85 from 86.1 in August, as weakening economic outturns weighed on sentiment. [see Chart at http://prospects or http://www.worldbank.org/prospects].
US GDP growth was revised down to 1.3% (y/y) in the second quarter of 2012 from an initial estimate of 1.7%, as drought in the Midwest cut back on farm inventories and due to weaker rates of consumer spending and exports.
US durable goods orders fell 13.2% (m/m) in August following a 3.3% increase in July (1.6% drop after excluding transportation after 1.3% fall in July). Unemployment claims however decreased by 26,000 to 359,000 in the week ended September 22 suggesting a gradually improving labor market.
UK GDP contracted by 0.4% (q/q) in the second quarter of 2012 (-0.5% y/y), less than the initial estimate of a 0.5% (q/q) drop. Real household disposable income however rose 1.9% (q/q) in the second quarter, the biggest jump for three years.
German unemployment rose by 9,000 in September, the sixth monthly increase, as the eurozone crisis weighed on exports and companies held back investment; the unemployment rate however held at 6.8%.
Czech Republic’s central bank cut its key interest rate by 25 basis points to a record-low 0.25% to help support growth in an economy hit by a slowdown in trading partners, although inflation (3.3% y/y in August) is above the target range of 1-3%.
Developing Economies…The central bank of Albania kept its benchmark refinancing rate unchanged at 4.0%. CPI inflation rose to 2.8% (y/y) in August, approaching the target rate of 3.0% in 2012. The Bank of Albania has cut its rates three times this year, for a total cut of 75 basis points.
The National Bank of Georgia kept its main policy rate, the refinancing rate, unchanged at 5.75% as inflation is expected to reach the bank's 6% target. The central bank has cut its policy rate four times this year for a total reduction of 100 basis points.
Chinese industrial companies’ profits dropped for a fifth month in August with net income falling 6.2% (y/y), following a 5.4% decline in July and a 1.7% drop in June.
The central bank of Romania held its monetary policy rate unchanged at 5.25%, and said it would also ensure adequate liquidity in the banking system and maintain existing levels of minimum reserve requirements. Romania's central bank cut its policy rate twice earlier this year for a cumulative reduction of 50 basis points. The inflation rate in August rose to 3.9% (y/y) approaching the upper bound of the target range of 2-4%.