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Prospects Daily: Jamaica sovereign debt rating lowered, German factory orders weaken, Greece unemployment falls, Brazil’s industrial production accelerates

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Financial Markets…European shares pared some their recent gains and the euro gained versus the dollar after the European Central Bank and the Bank of England left their key interest rates unchanged. The benchmark Stoxx Europe 600 Index gained less than 0.1% in afternoon trading after the gauge climbed to the highest level since June 2008 this week. Meanwhile, the 17-nation currency inched up 0.9% yesterday after hitting a three-month low.

Spanish government bonds rose for a 7th day on Thursday, with the benchmark 10-year yields sliding 9 basis points to 4.91% (the lowest level since January 14), as borrowing costs declined at a new bond auction today, which received strong demand. Portuguese bonds advanced as well, with 5-year yields dropping 16 bps to a more than 2-year low of 4.67%, after S&P upgraded the country’s credit-rating outlook to stable from negative.

Moody’s on Wednesday lowered Jamaica’s sovereign credit rating to ‘Caa3’ from ‘B3’, citing the country’s high debt burden despite a $9.1 billion domestic debt exchange last month. It estimated that Jamaica’s 2013 debt figures, at 119% of GDP and 470% of fiscal revenues, are among the highest of all countries rated by the rating agency.

High-income Economies…The Euro Area’s second GDP estimate confirmed that recession there deepened in Q4, with output falling 0.6% (q/q) after a 0.1% drop in Q3. This was the steepest rate of contraction since the Q1 2009. Over 2012, GDP fell 0.6%.

US factory orders excluding orders for transport equipment rose 1.3% (m/m, sa) in January after a 0.1% drop in December. Separately, the 4-week moving average of first-time claims for unemployment benefits dipped to 348,750, a decrease of 7,000 from the previous week's revised average of 355,750, and its lowest level since March 2008. Meanwhile the trade deficit widened to $44.4 billion in January from $38.1 billion in December, led by a jump in oil imports.

German factory orders decreased 1.9% (m/m seasonally and inflation adjusted) in January following a 1.1% gain in December. The drop mainly reflected a sharp fall in new orders from the Euro Area of 4.1% in January after a 4.1% increase in December.

Greece’s unemployment rate fell for the first time since May 2008 to 26.4% from a record 26.6% a month earlier. It nevertheless remains the highest in the Euro Area.

France’s unemployment rate rose for the 6th consecutive quarter, climbing to a 13-year high of 10.6% in Q4 2012. Up 0.3 points q/q, it was the sharpest increase since the onset of the crisis in 2009, and the highest rate in 13 years. Meanwhile, sluggish aeronautic and auto sales widened the trade deficit to EUR5.86 billion in January from EUR5.42 billion in December.

Developing EconomiesEurope and Central Asia: Romania’s GDP picked up slightly in Q4 2012 to 0.8% (q/q, saar) from -1.6 (q/q, saar) in the previous quarter. For the entire year, GDP grew by 0.2%, down from 2.2% in 2011 on account of a weak harvest and the effects of the eurozone crisis.

Latin America and the Caribbean: Colombia’s inflation continued to ease in February to 1.83% (y/y) from 2% in the previous month. That is the slowest annual pace since 1955 and breaching the lower end of the central bank’s 2-4% inflation target range.

Mexico’s inflation accelerated in February to 3.55% (y/y) after touching a 15-month low of 3.25% in January. Inflation is within the central bank’s target range of 2-4%.

Brazil’s industrial production accelerated in January by growing 5.7% (y/y) compared to a decline of 2% (y/y) in December. Industrial production was boosted by surging output of capital goods and durable consumer goods.

South Asia: Pakistan’s inflation eased in February to 7.4% (y/y), down from 8.1% in the previous month driven by moderation in food inflation. Core inflation excluding volatile food and fuel prices, also marginally retreated, rising 9.6% (y/y), down from January's 9.9%. The government’s inflation target for the fiscal year ending June 30, 2013, is 9.5% (y/y, average).