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Prospects Daily: Greece granted 2-year extension to reach deficit targets, Philippines exports expand at the fastest pace in two years

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Financial Markets…U.S. Treasuries advanced for a fourth consecutive day in Tuesday, pushing the benchmark 10-year yield down to as low as 1.57% (the lowest since Sept. 5), as investors remained concerned about the so-called U.S. fiscal cliff.

Spanish borrowing costs rose to a six-week high, with the benchmark 10-year bond yield rising as high as 6 basis points to 5.96%. The country’s 2-year rate also rose, climbing as much as 7 bps to 3.28%, the highest increase in a month.

Developing-country stock markets posted their longest losing streak since August, with the benchmark MSCI Emerging Market Index sliding to its fourth day and gearing for the lowest closing since mid-September. Russian share led the decline with the benchmark Micex Index losing 1.95% as oil prices continued to drop. Elsewhere, Brazil’s Bovespa index dropped 0.4%, while the Czech Republic’s PX index retreated 1.1%.

High-income EconomiesEuro Area finance ministers gave a Greece a two-year extension until 2016 to meet its deficit-reduction targets. However the finance ministers delayed a decision on releasing the latest 31.5bn euro tranche of bailout funds, with differences among lenders on how to make Greece’s debt sustainable into the next decade.

Japan’s industrial production declined at a faster pace of 4.1% (m/m) in September, according to revised data, compared to August’s 1.6% (m/m) fall, as a territorial dispute with China and waning global demand caused exports and output to decline.

Economic sentiment in Germany declined in November, with the forward-looking ZEW index of investor and analyst expectations falling to -15.7 from -11.5 in October. The gauge of current economic conditions eased to 5.4, the lowest since June 2010, from 10 in October, as the Euro Area debt crisis takes a toll on Eurozone’s largest economy. 
UK consumer price inflation accelerated to 2.7% (y/y) in October from a three-year low of 2.2% in September, with consumer prices rising 0.5% month-on-month as education costs rose sharply after the government removed its cap on tuition fees and food prices rose after wet weather earlier in the year affected crop yields.

Spain’s consumer price inflation rose to 3.5% (y/y) in October, its highest in more than a year, as prices surged 0.8% (m/m) (following a 1% m/m increase in September) from tax increases in September. 

Hungary’s consumer price inflation decelerated to 6.0% (y/y) in October from a four-year high of 6.6% in September, from a fall in fuel prices and base effects.

Developing Economies…Retail sales in Brazil rose for a fourth straight month in September at a modest pace of 0.3% (m/m), compared with a 0.2% monthly increase in August. On an annual basis retail sales growth slowed to 8.5% (y/y) in September compared to a 10% growth recorded in August. A broader measure of retail sales that includes car sales showed a 9.2% monthly contraction as the boost in car sales encouraged by the temporary tax breaks on automobiles started to fade (2% y/y in September from 15.7% y/y expansion in August).

Bulgaria's inflation eased to 4.4% (y/y) in October from 4.9% in September on declining prices for clothing and footwear due to weak domestic demand.

The Philippines’ exports rebound 22.8% (y/y) in September compared to a 9% contraction in August, which was the fastest pace in almost two years led by a strong recovery of electronics sector exports directed toward two lead markets - Japan and the U.S.