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Prospects Daily: Euro Area manufacturing PMI falls in October, Brazil’s industrial production declines in September

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Financial Markets…Outstanding syndicated loans in Japan’s corporate sector rose 6% to a record high of 60.2 trillion yen ($750 billion) at the end of September from a year earlier as many companies preferred bank loans to bonds to pay for their overseas acquisitions. The nation’s outstanding corporate bonds fell to a 2-year low in June.

Asian and European equities advanced on Friday, with the MSCI Asia Pacific Index and the Stoxx 600 Index gaining 0.8% and 0.5%, respectively, after data show U.S. employment and manufacturing data exceeded expectations and American consumer confidence rose to a four-year high. U.S. equities also opened higher, with the S&P 500 Index edging up 0.2% in morning trade.

Poland issued 66 billion yen ($822 million) of Samurai bonds, double its planned size, as the government supplements financing for next year’s budget deficits. It was the nation’s first issuance of Samurai bonds in 3 years. Poland sold 56 billion yen of 5-year notes priced to yield 67 basis points (bps) over yen swap rates, and 10 billion yen of 15-year bonds at a spread of 117 bps.

High-income Economies…The Markit manufacturing Purchasing Managers’ Index (PMI) for the Euro Area fell to 45.4 in October from September's 46.1, indicating that factory output shrank at a faster pace. The index has remained below the 50 mark separating expansion from contraction for the 15th consecutive month. The manufacturing downturn was broad-based across both core and periphery Eurozone countries.

In Germany, Europe's largest economy, manufacturing PMI fell to 46.0 in October from 47.4 in September and remained below the 50 mark for the 8th month, as new orders from abroad fell at the second-sharpest rate since April 2009. In France, manufacturing slumped in all but one of the last 15 months, although the PMI rose to 43.7 from a three-year low of 42.7 in September indicating a slightly slower pace of contraction. 

Spain's
manufacturing PMI declined to 43.5 in October from 44.5, signaling a further deterioration of operating conditions in this sector. Italy’s manufacturing PMI edged down to 45.5 from 45.7, remaining below the 50 mark for the 15th month in a row.  

The US economy added 171,000 non-farm jobs in October, marking an acceleration from a upwardly revised 148,000 in September, in a sign of a steady recovery in the labor market and consistent with earlier positive economic data including rises in the ISM manufacturing index and in consumer confidence. The unemployment rate however edged up slightly to 7.9% from a three-year low of 7.8%. 

Developing EconomiesBrazil's industrial production continued to fall on a year-on-year basis, registering a 3.8% (y/y) drop in September (-1% m/m) led by a decline in production of capital goods.

India's HSBC Markit manufacturing purchasing managers' index (PMI) recorded 52.9 in October, slightly above 52.8 recorded in September, indicating that manufacturing sector expanded at a steady pace.

Indonesia's inflation accelerated in October to 4.6% on higher food prices from 4.3% in September. Core inflation also rose to 4.6% from 4.1%. Indonesia’s exports continue their downward trend with a 9.4% (y/y) decline in September, while imports grew 1.2%. Trade surplus rose to $550 million in September from $250 million in August.

The central bank of Romania kept its policy rate unchanged at 5.25%. The headline inflation rose to 5.3% (y/y) in September, the highest in 15 months, up from 3.4% in August and well above the national bank 3 and 2.5 percent targets (+/-) one percentage point) for 2012 and 2013 respectively.

Thailand's
inflation remained broadly unchanged in October at 3.3% - slightly above the central bank’s 3% inflation target.

The central bank of Uganda cut its policy rate by 50 basis points to 12.5% indicating that it may soon stop its aggressive rate-cutting cycle in which it cut its policy rate eight times this year for a total reduction of 1,050 basis points. The headline inflation fell to 4.5% (y/y) in October from 5.5% in September – below the Bank’s 7% annual inflation target.