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Prospects Daily: Global equities extend gains, U.S weekly jobless claims dip, Philippines’ central bank leaves key policy rate unchanged in June; Vietnam’s central bank devalues its currency

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Financial Markets

Global stock markets rallied for a second day on Thursday a day after the Federal Reserve lowered its long-term forecasts for growth and interest rates.  European shares jumped to fresh six-year highs after Asian stocks posted robust gains, and developing-country stocks advanced as well with their currencies. Safe-haven government debt and gold also rallied, while the dollar weakened on the Fed’s rate outlook. Meanwhile, U.S. equities opened lower in morning trade session after the S&P 500 index reaching a new record high yesterday. 

Argentina’s bonds declined today, reversing yesterday’s rally, after the country’s cabinet chief said the government won’t send a mission to New York next week to discuss settlement with holdout creditors of its defaulted debt.  Earlier Wednesday a lawyer for Argentina informed a Manhattan federal judge that the country is planning to start talks with the holdouts for the first time.  The risk premium investors demand to buy Argentine debt over U.S. Treasuries rose 34 basis points to 8.31%. 

High Income Economies

In line with estimates, U.S. first time jobless claims dipped to 312,000 in the week ended June 14th, a decrease of 6,000 from the previous week's revised level of 318,000.  Economists had expected jobless claims to drop to 313,000 from the 317,000 originally reported for the previous week.  The less volatile four-week moving average fell to 311,750, a decrease of 3,750 from the previous week's revised average of 315,500.  Continuing claims also dropped to 2.56 million in the week ended June 7th from the previous week's revised level of 2.62 million.  With the decrease, continuing claims fell to their lowest level since hitting 2.54 million in the week ended October 13, 2007.

Rising for the fourth straight month and suggesting continued economic expansion, the Conference Board leading economic index for the U.S. rose by 0.5% (m/m) in May following a 0.3% increase in April.  Economists had expected the index to increase by about 0.6%.  Additionally, the coincident economic index rose by 0.3% in May after edging up by 0.2% in April, and the lagging economic index also advanced by 0.4% in May following a 0.3% increase in April.

The leading indicator for Japan, a measure of expected economic conditions, was revised to 106.5 in April from the flash estimate of 106.6, and lower than the 107.4 in March.  The latest reading is the lowest since March 2013, when it was 106.3.  The coincident index, measuring current economic situation, was left unrevised at 111.1 in April, down from 114.7 in March.  The lagging index, indicating past economic conditions, was revised to 118.2 from the preliminary 116.0 estimate in April.  In March, the score was 119.5.

Developing Economies

East Asia and Pacific  
Vietnam’s central bank devalued the country’s currency, the dong, for the first time this year to help boost exports.  In the first such action since June 28 2013, the central bank lowered the reference rate of dong by 1.0 percent to 21,246 per US dollar.  The dong exchange rate can move in the range of 21,034 to 21,458 per dollar.  

The Philippines’ central bank left its key policy rate, the overnight borrowing or reverse purchasing facility, unchanged at 3.5%, noting that the future inflation path is expected to remain within the central bank target range of 4+/-1% for 2014 and 3+/-1% for 2015.  The overnight lending or repurchase facility was also left unchanged at 5.5%.  The central bank, however, raised the Special Deposit Account (SDA) facility by 25 basis points to 2.25%, with the aim to counter risks to price and financial stability that could emanate from rapid credit growth.

Europe and Central Asia   
Gross wages in Hungary increased at a faster pace in April, climbing 4.1% (y/y), compared with March’s 2.8% increase, and February’s 1.7% growth. Excluding family tax benefits, net earnings rose 2.4% in the four months to April. 

Sub-Saharan Africa  
South Africa’s wholesale trade sales fell for the first time in more than a year in April, dropping 0.7% (y/y) after posting a 6.7% growth in March.  Month-on-month, wholesale trade sales increased by a seasonally adjusted 1.1% in April, rebounding from a 4.7% (m/m) decline in March.  In the three months ended April, wholesale sales fell 1.2% from the previous three months.