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Prospects Daily: Ukraine’s currency weakens to five-year low against the U.S. dollar, Japanese service sector slows to 5-month low, Indonesia’s GDP growth slows to four-year low in 2013

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Financial Markets… World stock markets were mixed on Wednesday with Asian and European shares posting small gains while U.S. equities opened lower. The MSCI Asia-Pacific stock index advanced 0.8%, after sliding the most since June 20 yesterday, as Japan’s Topix index gained 2.1%. The Japanese gauge declined 13% between January 8th and yesterday. The Stoxx Europe 600 Index was up just 0.1% as a sharp drop in December retail sales offset an encouraging euro-zone PMI report and relatively calmer conditions in developing-country financial markets. Meanwhile, U.S. stocks slid in morning session, with the S&P 500 and the Dow dropping 0.3% and 0.2%, respectively, as investors reacted to weaker-than-expected private-sector job report.
 
Ukraine’s currency weakened to a five-year low against the U.S. dollar as the country’s foreign-exchange reserves shrank and the hryvnia’s deteriorations accelerated amid a political stalemate with Russia. The Ukrainian hryvnia slumped 1.1% to 8.875 per the dollar in afternoon trading, the weakest since February 2009. The country’s foreign reserves declined to an estimated $18.8 billion in January from $20.4 billion a month ago. The current turmoil has also made the Ukraine’s government bonds the worst performing in Europe this year.
 
High Income Economies…According to ADP and Moody's Analytics, U.S. private sector employment increased by 175,000 jobs in January following a downwardly revised increase of 227,000 jobs in December.  The increase was less than expected.
 
Increasing for the second successive month, consumer price inflation in the Organization for Economic Cooperation and Development (OECD) area, as per the consumer price index, accelerated to 1.6% (m/m) in December from 1.5% in November and 1.3% in October.  December's increase mainly reflected a 1.7% growth in energy prices, and a 1.5% gain in food prices.  Excluding food and energy, the inflation rate was 1.6%, unchanged from the November level.
 
Signaling that Japan's service sector growth slowed to a five-month low in January, the Markit Economics Business Activity Index fell to 51.2 in January from 52.1 in December.   The index nevertheless remained above the 50.0 no-change threshold for the fifteenth consecutive month in January, continuing the longest sequence of expansion to date.  On the manufacturing front, output expanded at the sharpest pace in over 12 years of data collection in January.  Consequently, the composite output index that combines manufacturing and services, rose to 54.1 in January, signaling a solid expansion.
 
 Developing Economies… East Asia and Pacific:  Indonesia’s GDP growth slowed to a four-year low in 2013. GDP growth came in at 5.78% (y/y) for 2013, compared with 6.23% in 2012, the weakest economic expansion since 2009 when GDP grew at 4.63%. In the fourth quarter of 2013, GDP expanded at the annualized pace of 5.72% (y/y), up from 5.62% in the third quarter, supported by household consumption, which grew 5.3% (y/y) and exports, which rose 7.4% (y/y).
 
Philippines’ annual headline inflation, measured by the consumer price index, rose to 4.2% in January, up from 4.1% in December, remaining close to the central bank’s inflation target of 4% +/- 1 percentage point for 2014. This moderate increase in inflation was brought on by higher food prices, which rose 5.5% (y/y) from 4.8% in December.  Core inflation, which excludes food and energy items, came in at 3.2% almost the same as in the previous month. Month-on-month, headline inflation eased to 0.5% in January from 0.6% in December.
 
Latin America and the Caribbean: Brazil’s composite output index, a gauge of performance in the manufacturing and service sectors combined, came in at a seasonally adjusted 49.9 in January, down from 51.7 in December but close to the no-change 50 mark, which separates contraction and expansion. New business received by the private sector increased for the fifth consecutive month in January, with new orders rising in both the manufacturing and service sectors. However, the purchasing managers’ index for the service sector fell for the first time in five months in January to 49.6 from 51.7 in December, moving below the 50 mark, which signals contraction.
 
South Asia: India’s HSBC/Markit Services Purchasing Managers’ Index improved in January, rising to 48.3 from 46.7 in December, but remained below the 50-mark for the seventh consecutive month, suggesting that activity in the service sector continued to contract in January but at a slower pace. At the same time input prices in the sector increased at the fastest pace in three months, with the corresponding index rising to 54.7 from 52.8 in December.