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Prospects Daily: Investors retreat from global bond funds…US payroll employment improves…Venezuela’s inflation soars

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Financial Markets…Investors pulled a record $12.5 billion from global bond funds in the week ended June 5th, posting the first outflows in 24 weeks, amid growing concerns about the possible scaling back of the U.S. stimulus program. Global equity funds also posted outflows of $6.2 billion, with $5 billion of that coming from developing-country markets and $1.2 billion from mature markets.

Turkish shares advanced on Friday, paring some of the worst weekly losses since 2008 in the wake of anti-government protests, as cheap stock valuations attracted investors. The benchmark Borsa Istanbul Stock Exchange National 100 Index climbed 1.7%, rebounding from a six-month low. Turkish lira also gained for the first time in three days and 2-year bond yields fell 23 basis points to 6.55%.

High-income EconomiesUS non-farm payroll employment rose by 175,000 jobs in May following a downwardly revised increase of 149,000 jobs in April. The service sector added 179,999 jobs, while manufacturing employment fell by 8000. Despite the continued job growth, the unemployment rate edged up to 7.6% in May from 7.5% in April, reflecting an increase in the size of the labor force.

German industrial production recovered strongly in April, up 1.8% (m/m sa), the fastest in a year and the third consecutive monthly increase. Led by a strong recovery in the construction sector, output rose by 6.7% (3m/3m saar) in April versus a 0.8% annualized increase in the three months to March. Separately, export growth also strengthened (up 1.9% m/m sa) as did imports (up 2.3% m/m sa).

In Japan, a leading indicator of business conditions rose to its highest level in nearly six years in April, to 99.3 from an upwardly revised reading of 98 in March.  Separately, Japan’s finance minister indicated that the government would not intervene in foreign exchange markets after the yen rebounded about 2% overnight against the dollar after weakening in recent months.

Developing Economies…East Asia and the Pacific: Malaysia’s trade surplus shrank to $0.3bn in April—the lowest level in 16 years—down from $1.6bn in March. April exports slipped 3.3% (y/y), led by a sharp drop in shipments of crude petroleum and electronics. Shipments to China, a top trading partner, fell 13.5% (y/y). Imports rose 9.2% (y/y), reflecting robust domestic demand.

Latin America and the Caribbean: Venezuela’s inflation soared to 6.1% (m/m) in May, up from 4.3% (m/m) in April led by food and non-alcoholic drinks, which rose 10.0% (m/m). Annual inflation rate reached 35.2% (y/y) in May - 12.6 percentage points higher than last year. Currency and price controls are blamed for shortages of basics including flour, sugar, cooking oil and toilet paper.

Brazil's inflation stabilized in May at 6.5% (y/y), up slightly from April's figure of 6.49% (y/y). It still remains at the ceiling of the central bank’s inflation target range of 6.5%.