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Prospects Daily: Eurozone IP recovers, Brazil’s Petrobras sells the largest developing-country debt on record, India’s inflation eases in April

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Financial Markets… Japanese government bonds declined for a third day on Tuesday, sending 5-year yields to a near two-year high of 0.4%, as a rise in country’s stocks and U.S. Treasury yields damped demand for the country’s debt which carries one of the lowest yields in the world. The benchmark 10-year bond yield climbed as much as 61/2 basis points to 0.855%.

China’s stocks dropped the most in three weeks, with the benchmark Shanghai Composite Index sliding 1.1%, amid renewed concerns over the outlook for the country’s economy following yesterday’s disappointing industrial production report. The Shanghai index has declined 8.9% from this years’ high on February 6.

Pertrobras, Brazilian state-owned oil company, sold $11 billion of international bonds, the largest developing-country debt offering on record, as the company tried to finance the development of offshore oil fields that will cost $237 billion over the next 5 years. Petrobras offered fixed-rate bonds due in 3,5,10, and 30 years as well as 3-and 5-year floating-rate bonds.

High-income EconomiesEurozone industrial production rose 1.0% (m/m sa) in March from February, the strongest monthly increase since July 2011, reviving hopes of a recovery. The improvement was led by Germany (+1.7%) but also reflected strong monthly gains in Portugal (+5.3%), Greece (+1.4%) and Spain (+2.1%). Overall industrial production rose 0.7% (q/q saar) during Q1, rebounding from a 8.1% fall in the last three months of 2012 largely due to an increase in energy and capital goods production.

German investor confidence stabilized in May. The ZEW index of economic sentiment ticked up modestly by 0.1 points to 36.4 after falling sharply in April.  

Cyprus on Monday received the first installment (€2 billion) of a €10 billion emergency aid package agreed with the IMF, ECB and EU in March, aimed at buttressing the economy after the near-collapse of its banking sector. A second allocation of up to €1 billion is to be transferred by June 30.

Developing EconomiesEast Asia and the Pacific: Indonesia’s central bank maintained its benchmark interest rate at 5.75%. Inflation is on the upper end of the target range of 3.5 to 5.5% and likely to go up with planned reform of fuel-price subsidies.

Europe and Central Asia: Croatia’s retail sales growth continued to improve in March, decreasing by 2.1% (y/y), slower than the 3.2% (y/y) fall seen in February. In January, sales dropped by 6.6% (y/y). On monthly basis, retail trade increased 0.2% in March, down from 0.5% rise in the previous month.

South Asia: India’s inflation, as measured by the wholesale price index, slowed in April to 4.9% (y/y), down from 6% in March, and the lowest level in 41 months. A drop in fuel and power prices pulled down the headline number. Inflation measured by the consumer prices, eased as well in April to 9.4% (y/y), down from 10.4% in March.