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Prospects Daily: US factory orders climb higher, Angola and Mongolia cut policy rates

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Financial Markets…U.S. Treasuries continued to decline on Monday, with the benchmark 10-year yields climbing to 2% for the first time since April, as better than expected durable goods figures for December added to signs that the U.S. economic recovery is gaining momentum. U.S. government bonds have lost 0.9% thus far this month, posting the worst monthly performance since March.

Oil prices extended their gains, with West Texas Intermediate crude for March settlement rising 89 cents (0.9%) to $96.77 a barrel in New York morning trade, amid speculation that economic optimism spreading through Europe and the U.S. will boost oil demand. Brent for March delivery gained 41 cents to $113.69 a barrel in London trading.

Vietnam’s shares jumped to the highest level in more than eight months on Monday, with the benchmark VN index gaining 2.5% after rising 3.5% last Friday, amid growing speculation the government will raise the foreign-ownership ceiling above the current 49% for some companies in the first quarter. Oversea investors have bought a net $90 million of Vietnam stocks month-to-date, gearing for the largest monthly foreign-inflows since December 2010.

High-income EconomiesUS durable goods orders jumped 4.6% (m/m) in December, the fourth consecutive monthly increase, after a 0.7% gain in November. Excluding the volatile transportation component, orders rose 1.3% (m/m) following a 1.2% gain in November. However, non-defense capital goods orders excluding aircraft - a proxy for future business investment and spending - rose a modest 0.2% (m/m) in December after a 3% increase in November.

Euro Area M3 money supply growth slowed to an annual pace of 3.3% (y/y) in December from 3.8% in November. Bank loans to the private sector fell 0.7% (y/y) in December after declining 0.8% in November, with lending contracting for the eighth consecutive month amid still weak real side activity.

Italian consumer confidence deteriorated to the lowest level in around seventeen years, with the consumer confidence index falling to 84.6 in January from 85.7 in December, after households became more pessimistic about the economy which contracted further in Q3 2012 and entered the second year of recession.

retail sales declined 1% (y/y) in December following a 0.2% fall in November. Sales registered the second consecutive monthly decline, falling 0.1% (m/m) in December after declining 1.2% (m/m) the previous month.

Sweden's retail sales growth, however, accelerated to an annual 2.5% (y/y) in December from 0.9% the previous month, after the central bank cut interest rates to support slowing economic growth.

South Korea's consumer confidence improved to its highest in eight months, with the central bank's consumer confidence index rising to 102 in January from 99 in December. The indicator reflecting consumers’ expectations about their living conditions six-month ahead improved to 96 in January from 93 in December. 

Developing Economies
Angola's central bank cut its base rate by 25 basis points to 10.0%, highlighting a record low inflation level. Angola's annual inflation rate fell to all-time low of 9% (y/y) in December, continuing to moderate and stabilizing at single digit levels.

Profits of Chinese industrial firms increased by 17.3% (y/y) in December compared with a 22.8% gain in November, and registering a fourth consecutive monthly increase. For 2012 as a whole, profits rose by 5.3% (y/y).

The central bank of Mongolia cut its policy rate by 75 basis points to 12.5% as inflation pressures show some moderation. Mongolia's inflation rate eased to 14% in December from 14.4% in November, but remained above the central bank’s annual target of below 10.0%.

received its first loan of $512 million from the Asian Development Bank in around thirty years. The World Bank approved a US$440 million Reengagement and Reform Support Credit to Myanmar.

Thailand's manufacturing production increased 23.4% (y/y) in December, slower than a 82.3% gain recorded in November. However, on a monthly basis, manufacturing output declined 6.3% in December. In 2012 as a whole, production increased 2.5% (y/y).