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Prospects Daily: International lenders postpone aid for Greece, South Africa's inflation rises to 5.6%

Financial Markets…European finance ministers, the International Monetary Fund, and the European Central Bank failed to clinch a debt-reduction deal for Greece after clashing over how to make the country’s fiscal health sustainable. The disagreement delays the disbursement of next aid payment to Greece further, at least until the next meeting on November 26.

The euro slid 0.4% to $.12765 on Wednesday, after a two-day gain of 0.6%, after Greek international lenders failed to strike debt deal. The single currency weakened against 13 of its 16 major counterparts, but it strengthened versus a struggling yen. 

Developing-country stocks rallied for a third day, with the benchmark MSCI Emerging Market Index climbing 0.2%, led by surging Chinese and Egyptian shares. China’s Shanghai index gained 1.1% amid speculation that the government will add stimulus measures. Egypt’s EGX 30 Index jumped as much as 2.2% after the nation reached a preliminary deal with the IMF for a $4.8 billion loan.

High-income EconomiesUS consumer sentiment remained broadly stable in November, but the final Thomson Reuters/University of Michigan consumer sentiment index was revised down to 82.7 from the preliminary 84.9, little changed compared with 82.6 in October, indicating that fiscal cliff concerns may be dampening sentiment. A surge in initial unemployment claims following Hurricane Sandy began to subside, with claims falling by 41,000 to 410,000 in the week ended November 17.

Japan
registered a trade deficit of 549 billion yen ($6.7 billion) in October, the fourth monthly deficit in a row, as a 6.5% (y/y) decline in exports in yen terms (-10.3% m/m) outpaced a 1.6% (y/y) fall in imports. The European debt crisis has reduced exports to Western Europe by 23.5% (y/y), while a territorial dispute with China sparked boycotts of Japanese products and caused exports to China to fall 11.6% (y/y), led by a steep 82% (y/y) fall in automobile exports.

Spain’s
trade deficit narrowed during October to 3.085 billion euros from 3.145 billion euros in September (-36.4% y/y), mainly due to a 7.4% (y/y) decline in imports compared with a 3.1% fall in September, reflecting weakening domestic demand as the country remains mired in recession, even though export growth slowed to 0.5% (y/y) from 7.4% (y/y) in September.  

The UK’s preferred measure of its budget deficit, public sector net borrowing excluding financial sector interventions, rose to 8.6bn pounds ($13.7bn) in October, compared with 5.9bn pounds in October 2011, mainly due to weaker than expected tax revenues.

Developing EconomiesNigeria's central bank kept its Monetary Policy Rate (MPR) steady at 12.0% stating that there were still inflationary pressures. Nigeria's inflation rate rose to 11.7% in October from 11.3% in September, while core inflation eased to 12.4% from 13.1%, well above the bank's 10% inflation target.

Mexican consumer confidence rebounded in October after slumping for two months, supported by cooling inflation and falling unemployment. Mexican retail sales rose 1.0% in September from August, slightly below the 1.1% (m/m) increase in August. Compared with September 2011, sales were up by 3.8%.

South Africa's consumer price inflation increased to 5.6% (y/y) in October, marking the largest price increase since May, when prices moved up 5.7%.