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Prospects Daily: Oil bounces back from 5-month low, German manufacturing orders posts large increase, Indonesia’s economic growth slows in Q3

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Financial Markets…Asian stock markets edged higher on Wednesday, advancing for the first time in five days, as a weaker yen sent Japanese shares higher.  The benchmark MSCI Asia Pacific Index rose 0.3% with Japan’s Topix index gaining 0.8%.   Japanese equity has been the best-performing mature-market stock market thus far this year amid Bank of Japan’s unprecedented stimulus program.

Oil price bounced back from a 5-month low today amid expectation that a government report may show U.S. fuel inventories fell last week. West Texas Intermediate (WTI) crude for December settlement advanced as much as 0.9% to $94.25 a barrel in New York, rebounding from yesterday’s closing price of $93.37 (the lowest level since June 4).  Brent oil for December delivery rose as much as 1% to $106.41 a barrel in London, after falling to $105.33 yesterday, the lowest since July 2.

High Income Economies…German manufacturing orders posted a very large increase of 3.3% (m/m sa) in September compared to August when orders decreased by 0.3%.  September's rebound was largely driven by a 5.5% gain in orders of capital goods.  On a three-monthly annualized basis, orders increased by 6.7% (3m/3m saar) in September compared to 8.0% in August.

The final Markit Eurozone PMI Composite Output Index fell slightly to 51.9 in October, from a 27-month high of 52.2 in September, signaling that business activity in the currency union expanded for the fourth successive month.  The latest output expansion was led by accelerated growth at manufacturers. Service sector business activity rose for the third month running, but the pace of increase was slower than in September.  Among the countries, Ireland took the lead with an October reading of 58.8 (80-month high).  Germany’s and France’s composite PMIs were unchanged at 53.2 and 50.5, respectively.  Italy has a composite PMI of 51.3, while Spain’s came in at 50.1.

Signaling growth of activity for the third month running, the HSBC Russia Services Business Activity Index improved to a six-month high of 52.5 in October from 51.5 in September, but remained well below its long-run average of 56.2.  The Composite Output Index, which includes business sentiment in the manufacturing sector, rose to 53.3, the highest since March but still below the long-run trend of 55.1.  Overall growth of services activity was supported by a rise in the level of incoming new business.  While the rate of expansion in new contracts was the fastest since April, it is still historically weak.

Australia’s trade deficit narrowed 59% (m/m) to A$284 million in September, from A$693 million in August.  During the month, exports were mostly flat, while imports were down 1.0% (m/m sa).  Despite exports barely rising in the month, shipments of metal ores and minerals had a solid rise.

Developing Economies… East Asia and Pacific: Indonesia’s economy grew at 5.6% (y/y) in Q3, its slowest pace in four years, down from 5.8% in Q2.  Contributing to this slowdown, on the production side, all sectors expanded at a slow pace with the exception of mining and quarrying, which rose 1.6% (y/y) up from a 1.2% contraction in Q2.  Services also rose, advancing 5.6% (y/y) up from 4.5% in Q2.  On the expenditure side, gross fixed capital formation increased 4.5% (y/y) down from 4.7% in Q2, reflecting the 150-basis point increase in the interest rate carried out by the central bank since June.  Mitigating the investment slowdown, government consumption grew 8.8% (y/y), up from 2.1% in Q2, and private consumption rose 5.5% (y/y) from 5.1%; exports increased 5.3% (y/y) and imports rose 3.8% (y/y).  Quarter-on-quarter, the economy grew 2.9%, up from 2.6% in Q2.  In the year to September, the economy grew 5.8% over the same period in 2012.

Europe and Central Asia: Hungary’s retail sales growth slowed in September, rising 0.3% (y/y), following annual increases of 1.4% in August and 1.3% in July.  Contributing to the September slow down, retail sales of food, drinks and tobacco decreased 0.4% (y/y), retails sales of non-food products was unchanged, while sales of automotive fuel rose 3.1%.
 
Sub-Saharan Africa: Kenya’s central bank decided at its November meeting to keep its benchmark interest rate unchanged at 8.5%, citing the moderation of inflationary pressure.  Annual headline inflation slowed to 7.7% in October from 8.3% in September, but remained above the upper limit of the central bank’s target range of 2.5% - 7.5%, which was breached in September following the introduction of 16% value added tax.  The November decision marked the sixth straight meeting at which the monetary policy committee decided to hold the interest rate unchanged.