Financial Markets…European stocks (STOXX 600 index) advanced 0.2% to a 23-month high and the euro gained 0.6% against the dollar to 11-month high of $1.3470 on Friday as the region’s financial and economic outlook has improved. The European Central Bank said 278 banks will repay next week €137.2 billion 3-year loans provided just over a year ago. Positive news on improved business confidence in Germany also supported the positive outlook.
U.S. treasuries lost for a second day, with the benchmark 10-year yields climbing 7 basis points to a 2-week high of 1.92% as positive economic news from Europe and strong U.S. new-home sales in December damped demand for safe-haven government securities. The 30-year bond yield rose 6 bps to 3.1%, while 2-year yield climbed 2 bps to 0.26%.
Foreign investors bought $411 million of the local Turkish bonds in the week ending January 18th, bringing January’s total to $1.9 billion, the best start to a year since 2011. The yield on Turkey’s benchmark government securities dropped 34 basis points to 5.84% this year. Turkey received a record $16 billion foreign investment flow into the local debt market in 2012 as inflation concerns diminished and country received its first investment-grade credit rating in 18 years.
High-income Economies…The British economy contracted 0.3% (q/q) in the fourth quarter of 2012 following a 0.9% growth in the third quarter. Industrial production fell 1.8% (q/q) in 12Q4 after expending 0.7% in the third quarter. On an annual basis, GDP remained unchanged, after a 0.1% increase in the third quarter. For the whole of 2012, GDP is estimated to have been flat.
The Danish central bank, has raised its key interest rates by 10 basis points to 0.30% and changed the rate on certificates of deposit to minus 0.10% from minus 0.20% to keep the krone stable against the euro as investors' optimism over the prospects for the Euro Zone have improved and demand for safe-haven in Scandinavia has diminished. The Danish National Bank targets the krone within a band of plus/minus 2.25% of a central rate of 7.46 krone per euro.
Sentiment among German businesses continued to improve reaching its highest level in January since June 2012. According to the survey by the Ifo Institute the headline business climate index rose to a seven-month high of 104.2 in January from 102.4 in December.
The pace of disinflation slowed in Japan with the consumer prices showing a 0.1% (y/y) decline in December compared with 0.2% decline in November. On a monthly basis, consumer prices were flat in December compared with a 0.4% (m/m) decline in November.
Singapore's industrial production growth has accelerated to 5.4% (m/m) in December from 1.9% in November. On an annual basis however, industrial production contracted by 0.6% (y/y) in December following a 2.9% gain in November.
Prices of private residential properties in Singapore increased 1.8% (q/q) in the fourth quarter, faster than 0.6% increase in the third quarter. For the 2012 as whole, prices of private residential properties increased by 2.8% compared with a 5.9% increase in 2011.
Hong Kong's merchandise export growth continued to accelerate in December with the overall shipments growing by 14.4% (y/y), following November 10.5% expansion. On a monthly basis, exports increased 1% (m/m) in December. Imports grew by 11.9% (y/y) in December following a 9% increase in November. On a sequential basis, imports grew by 2% (m/m) in December.
Developing Economies…Argentina’s industrial production fell in December by 0.6% (m/m) or 3.4% (y/y). Declines in automotive and basic metals industries led the decline. Industrial production declined 1.2% for the entire year, a first contraction seen in Argentina since the 2002 sovereign debt crisis.
Russia’s retail sales increased by 5% (y/y) December after a 4.4% (y/y) jump in November. Unemployment fell to near record lows of 5.3% in the same month, suggesting that consumer spending is boosting domestic demand as sluggish external demand continues to negatively affect industrial output.
Turkey’s industrial capacity utilization declined for the third straight month in January to 72.4%. Manufacturing confidence, however, improved as the index rose to 102.1 from 97.9 in December.
Vietnam's inflation accelerated to 7.07% (y/y) in January from 6.8% in December. On a monthly basis consumer prices gained 1.25% in January.