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Prospects Daily: EU approves second phase of Spanish banking bailout, US GDP growth revised up to 3.1% in third quarter, Georgia cuts policy rate

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Financial Markets…The European Union on Thursday approved the second phase of the Spanish banking-sector overhaul, signing off recapitalization aid of €1.87 billion ($2.47 billion) for four former saving banks. The country has already received €39.5 billion of recapitalization aid to support four other already-nationalized lenders and to set up a so-called “bad bank”.

Global equities were mixed on Thursday, with the benchmark MSCI world equity index ending a week-long rally, as investors turned more cautious amid growing uncertainty over the U.S. fiscal cliff. Both Asian and European shares have fluctuated between gains and losses, and developing-country shares dropped less than 1%, falling from an eight-month high level reached yesterday.

German government debt rose for the first time in four days, with the 10-year bund yields sliding 2 basis points to 1.42%, as the country cut its sovereign bond sales for 2013 to the lowest level in five years. Germany plans to issue €250 billion in bonds next year compared with €255 billion this year.

High-income Economies
US GDP growth in the third quarter of 2012 was revised up further to an annualized 3.1% (q/q), according to the US Bureau of Economic Analysis’ “third” estimate, from the previously reported 2.7%. The revisions now show a modest pick-up in personal consumption and a downturn in imports. The estimate for Q2 GDP growth was unchanged at 1.3%.

initial unemployment claims rose for the first time in five weeks to 361,000 in the week ending December 15 from 344,000 the previous week, in signs that the uncertainty related to protracted fiscal cliff negotiations may be starting to affect the labor market. 
The Bank of Japan said it would expand its Asset Purchase Program (APP) by 10 trillion yen (about $120 billion) to 101 trillion yen, easing monetary policy further. It held its policy interest rate steady at 0.1%, and said it would review its near-term inflation goal of 1% at its next meeting. 

UK retail sales were flat (m/m) in November, after declining 0.7% in October, reflecting still weak consumer confidence and raising the prospect of a weak fourth quarter.  Excluding automotive fuel, sales edged up 0.1%, after a 0.5% drop in October.

New Zealand’s GDP growth slowed to annualized 0.8% (q/q) in the third quarter, from an annualized 1.2% in the second quarter, amid a drop in manufacturing and farm output. The economy expanded 2% in the third quarter from the year-earlier period.  

Croatia’s GDP declined 1.9% from a year earlier, a slightly slower pace of decline than the 2.2% fall recorded in the second quarter, as personal consumption, investment and industrial production declined amid the Euro Area debt crisis.

core inflation (excluding food and energy prices) slowed to the 1.7% (y/y) in November, the weakest in 22 months, from 1.9% in October.

Hong Kong’s consumer price inflation edged down to 3.7% (y/y) in November from 3.8% in October, as food price and housing cost increases offset a slower pace of increase in transport costs.

Developing Economies
Colombia's industrial production rose 1.2% (y/y) in October reversing a 1.3% decline recorded in September.

Colombia’s retail sales declined 0.30% (y/y) in October compared with a 2.3% growth recorded in September.

Georgia's central bank cut its benchmark refinancing rate by 25 basis points to 5.25% as inflation remains below the bank's 6% annual target.