Global Economic Prospects 2014

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Prospects Daily: Equities firmer, but worries about Syria persist, U.S. jobless claims near five-year low, IMF approves a loan to Pakistan

Financial Markets…Optimism about the global economy is helping to nudge many growth-focused assets higher, but the bullishness is contained by worrying over the potential geopolitical fallout of the crisis in Syria and monetary policy uncertainty as bond yields move to fresh highs. Europe’s Stoxx 600 index is up 0.3% after the FTSE Asia Pacific index rose 0.2%. The S&P 500 advanced just 2 points to 1,655 at the open.

The benchmark 10-year US Treasury yield is up 5bp to 2.95%, the most in two years, and equivalent-duration Bunds are climbing 10bp to 2.04%, the most since December 2011.

The US dollar index is up 0.2%, and close to one-month high, while gold is down $2 to $1,389 an ounce.

High Income EconomiesU.S. private employers added 176,000 jobs in August and new claims for jobless benefits fell last week by 9,000 to 323,000, a near five-year low.  This could bolster expectations that the U.S. Federal Reserve will begin tapering its quantitative easing this month.

UK unemployment rate was 7.8% in July unchanged from June, but jobless claims fell by 29,000 to 1.4m, the lowest since February 2009.

Australia’s GDP accelerated to 0.6% (q/q sa) in 2013Q2, up from 0.5% in the previous quarter. Consumption and inventories were positive contributors to growth while strong private investment was fully offset by declines in public investment.

Developing EconomiesEast Asia and Pacific: Philippines’s annual headline inflation eased further in August to 2.1% (y/y), down from 2.5% (y/y) in July well below the Central Bank’s target range of 3 to 5%, owing to reduced cost of food, housing, and transport. Core inflation, which excludes selective food items and energy, also eased to 1.9% (y/y) in August, down from 2.3% (y/y) in July.

Latin America and the Caribbean: Brazil’s trade balance improved in August with a surplus of US$1.2bn, compared with a deficit of US$1.9bn in July; however, this was much lower than the trade surplus of US$3.2bn recorded a year ago, resulting from a slowdown in exports.

South Asia: The IMF has approved a three-year $6.6bn loan for Pakistan to stave off a balance of payments crisis as foreign reserves have sunk to about six weeks worth of imports. The IMF loan, of which $540m will be disbursed immediately, should trigger the release of another $6bn in funds from other international lenders over the next three years.