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Prospects Daily: U.S. equities remains strong, U.S. consumer sentiment at lowest level since January 2013, India’s industrial outputs expands at a weak pace

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Financial Markets…The long-dated U.S. Treasuries gained for the first time in four days today, with the benchmark 10-year note yield sliding 3 basis points to 2.66%, as investors remained cautious about a quick resolution of the U.S. debt-ceiling deadlock despite some signs of progress being made.  Notably, the benchmark rate has been rising from a historic low of 1.379% reached in July 2012, but it still remain well below the average rate of about 6.4% since September 1981, the onset of the three-decades bull market in government bonds.  Lingering concerns over the risk of U.S missing debt payments also seen in rates on shorter-term Treasury bills as the one-month T-bill yields traded at 0.23% on Friday, down slightly from 0.26% late yesterday.  Rates remain much higher than the levels at the beginning of October, before fears of a U.S. default intensified, when they traded at only around 0.02%.
U.S. equities remained strong on Friday, following the second-largest gain of the year for the S&P500 index yesterday, as U.S. lawmakers continued to talk to increase the nations’ debt ceiling to avoid a default and investors started to pay attention to corporate earnings.  The S&P 500 advanced 0.2% in morning trade session, extending yesterday’s gain of 2.2%, and the Dow Jones Industrial Average gained 0.3%. Mixed third-quarter earnings reports from several major companies also weighed on U.S. shares.
High Income Economies…Reflecting concerns regarding the ongoing government shutdown and prospect of a debt default, U.S. consumer sentiment, as measured by the Thomson Reuters and the University of Michigan index, deteriorated to 75.2 for October, compared to the final September reading of 77.5.  With the decrease, the index fell for the third consecutive month and hit its lowest level since January.  Similarly, the sub-index for consumer expectations fell from 67.8 in September to 63.9, its lowest level so far this year.  On the other hand, the sub-index for sentiment regarding current economic conditions edged up to 92.8 from 92.6.
The Canadian unemployment rate declined 0.2 percentage points to 6.9% in September.  Employment was up 1.2% (y/y) (+212,000 jobs) compared with 12 months earlier.  However, the employment rate was little changed, as employment and the working-age population grew at a similar pace.  The job gains were primarily in the private sector, and were concentrated in finance, insurance, real estate and leasing, natural resources and agriculture, while manufacturing and public administration saw employment go down.  Also, the job gains were tempered with a decline in the labor force participation rate to 66.4%, 0.2 percentage points lower than in August and the lowest level since 2002, and resulting in the labor force shrinking by 25,100 people between August and September.
Poland's current account deficit increased to EUR719 million in August from EUR497 million in July.  The deterioration of the balance mainly reflected an increase in income deficit to EUR1.74 billion from EUR1.6 billion.  In addition, the surplus of current transfers dropped to EUR240 million from EUR352 million, and the surplus of services dropped modestly to EUR515 million from EUR574 million.  Meanwhile, the surplus of merchandise trade advanced to EUR264 million from EUR175 million.
Developing Economies…Europe and Central Asia: Turkey’s unemployment rate increased to 9.3% in July from 8.8% in June.  Year-on-year, the unemployment rate rose by 0.9 percentage point.  The non-agricultural unemployment rate increased by 1.1 percentage points (y/y) to reach 11.8% in July; and youth unemployment climbed 1.7 percentage points (y/y) to 18%.
 
Turkey’s current account deficit narrowed to US$1.9bn (m/m) in August from US$5.9bn in July.  During the eight-month period January-August of 2013, the current account deficit totaled US$44.3bn compared with US$35.3bn in the same period of last year.  The trade deficit increased to US$38.4bn from US$31.4bn last year.
 
Hungary’s annual headline inflation, measured by the consumer price index, increased to 1.4% (y/y) in September from 1.3% in August, more than consensus expectations.  This increase was driven by alcoholic beverages and tobacco, which rose 12.2% (y/y) from 10.2% (y/y) in August; and miscellaneous goods and services, which rose by 9.8% (y/y) due to a jump in the cost of financial services.  Month-on-month prices rose 0.5% in September.  Overall, inflation remains below the government’s target of 3% for 2013.
 
Latin America and the Caribbean: Mexico’s industrial production declined for the fourth consecutive month in August, decreasing by 0.7% (y/y), following a contraction of 0.2% (y/y) in July.  Driving this decline, mining output fell 2.2% (y/y) and construction output declined 5.1% (y/y).  Manufacturing output increased 1.6% (y/y).  Month-on-month industrial production rose 0.5%, following a 0.15% gain in July.
 
South Asia: India’s industrial production expanded at a weak pace in August, increasing by 0.6% (y/y) compared to the revised July’s reading of 2.8%.  This weak growth was due mainly to a poor performance of the mining and manufacturing sectors, which contracted by 0.1% (y/y) and 0.2% (y/y) respectively.  Electricity output grew by 7.2% (y/y).  During the period April-August, industrial output grew by 0.1% compared to the same period of last year.