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Prospects Daily: Global equities fall on tighter Western sanctions on Russia, South Africa’s central bank raises benchmark repo rate

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Financial Markets

World stock markets retreated on Thursday as the U.S. and EU imposed tighter sanctions against Russia over Ukraine, prompting concerns over escalating geopolitical tensions. Global equities extended their losses significantly on news that a Malaysian passenger plane crashed in Ukraine near the Russian border after reportedly being hit by a missile. The decline was led by European shares with Germany’s DAX index and France’s CAC index sliding by 1.1% and 1.3%, respectively. Developing-country stocks also fell with Russia’s Micex index tumbling 2.9%, the most since April. U.S. equities opened lower as well, with the S&P and the Dow slipping 0.5% and 0.3%, respectively.

Ivory Coast successfully sold $750 million of 10-year global bonds today, returning to the international bond market for the first time since the country defaulted on debt in 2011. The country is joining frontier African borrowers from Zambia to Kenya—Senegal is also expected to issue bonds next week—in the latest signs of increased investor demand for risky developing-country debt. The new bond was priced at 5.625%, significantly lower than 6.875% of Kenya’s $1.5 billion 10-year debt issued last month. The bond sale was met with strong demand, attracting about $4.75 billion in bids

Developing Economies

Europe and Central Asia

At its meeting of July 17th 2014, Turkey’s central bank reduced the benchmark one-week repo rate for the third consecutive meeting, lowering it by 50 basis points to 8.25, noting that the adverse impact of exchange rate movements since mid-2013 on annual inflation is tapering off amid improvement in global liquidity conditions. The marginal lending rate was left unchanged at 12.0%, while the borrowing rate was reduced to 7.5% from 8.0%.

Latin America and Caribbean

At its meeting of July 16th 2014, Brazil’s central bank left the benchmark Selic rate unchanged at 11% for the second consecutive meeting as expected, as inflation remained high amid slow economic growth.

Sub-Saharan Africa

At its July 17th 2014 meeting, South Africa’s central bank decided to raise the benchmark repo rate by 25 basis points to 5.75% effective July 18th, as inflation breached the upper limit of the central bank’s target range amid a possible wage-price spiral resulting from recent wage settlements and deteriorating economic growth outlook. The central bank revised its GDP growth forecast to 1.7% compared to 2.1% previously