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Prospects Daily: Global stocks and commodities fall on weak Chinese trade data, Eurozone investor confidence at 35-month high, China’s exports tumble in February

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Financial Markets…Global equities and commodities moved lower on Monday as weaker-than-expected China’s exports damped investor sentiment that was already on edge over lingering tensions in Ukraine. The decline in world stocks was led by Asian and developing-country shares with their benchmark indexes sliding 1.1% and 1%, respectively. U.S. equities opened lower as well after the S&P 500 index reached a fresh record high on Friday. Poor trade data from China also weighed on commodity prices with gold falling $3 to $1,337 an ounce and U.S. crude oil sliding as much as $1.53 to $101.05 a barrel.

China’s benchmark interest rate for loans between lenders fell to a 21-month low as disappointing trade data spurred growth concern. The seven-day repurchase rate, a gauge of funding availability in the Chinese banking system, fell to 2.37%, the lowest level since June 2011, after the rate tumbled 113 basis points last week. China’s central bank has scaled back cash withdrawals in its money market operations since early February, allowing short-term money rates sliding steadily.

High Income Economies…With an increase in non-revolving credit more than offsetting a modest drop in revolving credit, U.S. consumer credit increased largely in line with expectations by $13.7 billion in January following a downwardly revised $15.9 billion increase in December. Non-revolving credit such as student loans and car loans rose by $13.9 billion after climbing $12.8 billion in December. On the other hand, revolving credit, such as credit card debt, edged down by $0.3 billion after rising by $3.1 billion.

Eurozone investor confidence, as measured by the Sentix composite confidence index, reached its highest level since April 2011, supported by a significant improvement in the current situation assessment. The headline index rose to 13.9 in March from 13.3 in February, with the assessment of current situation climbing to 4.8, the highest since July 2011, from 1.8 in February. However, the expectations index declined for the first time since September, with the coming in at 23.5, down from 25.5 in February.

Growing for the fourth consecutive quarter, Japan's GDP expanded 0.2% (q/q) in Q4 2013, unchanged from Q2. Consumer spending increased by 0.4%, up from Q3’s 0.2% increase, while capital expenditure expanded for the third straight quarter growing 0.8% following the 0.2% uptick in Q3. On an annualized basis, GDP increased by 0.7% down from the 1.1% increase saw in Q3.

Developing Economies…East Asia and Pacific: China’s exports fell sharply in February, dropping 18.1% (y/y), reversing the 10.6% (y/y) increase recorded in January. At the same time, imports rose 10.1% (y/y) after increasing by 10.0% (y/y) in January. As a result, the trade balance moved from a surplus of US$31.8bn in January into a deficit of US$22.9bn in February, the highest in two years. Considering January and February 2014 together, exports fell 1.6% (y/y) while imports rose 10.0% (y/y).

Meanwhile, China’s annual headline inflation, measured by the consumer price index, slowed from 2.5% in January to 2.0% in February, the lowest rate in 13 months. Contributing to the slowdown, food prices decelerated to 2.7% (y/y) from 3.7% in January while prices of non-food products slowed to 1.6% (y/y) from 1.9% (y/y). Month-on-month, the inflation rate slowed to 0.5% in January.

Europe and Central Asia: Turkey’s industrial production increased to 7.3% (y/y) in January, up from 7.1% in December, faster than economists’ forecast of 2.9%, led by rising mining output. Mining and quarrying grew 9.4% (y/y); while manufacturing output rose 7.8% (y/y), and output of electricity, gas, steam and air conditioning expanded 3.5% (y/y). Month-on-month, industrial production grew a seasonally adjusted 1.1% in January.