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Prospects Weekly: Financial market volatility remains sharply elevated

Global Macroeconomics Team's picture

Financial market volatility remains sharply elevated this week as market attention shifted from Greece, to Italy and even France. Concern about counterparty risk kept European banking-sector spreads high, even as banks mark-down and sell-off distressed Euro Area sovereigns to repair their capital base. Continued turbulence and credit tightening could prompt sudden reversals in global capital markets. In 2012, developing country external financing requirements are estimated at $1trn (7.1% of GDP), of which two-thirds is accounted for by short-term debt. Developing Europe and Central Asia, with debts coming due equal to 7.6% of GDP, is the developing region most vulnerable to a tightening of financial conditions. Worries about faltering world demand, led by expectations of recession in Europe, have contributed to deep declines in international commodity prices.

Global Commodity Watch - November 2011

John Baffes's picture

Non-energy commodity prices fell by 7.6 percent in October—a third straight monthly decrease—on growing worries about demand, and in part due to dollar appreciation (up 0.9 percent against a broad group of U.S. trading partners). Declines were heaviest for metals due to concerns about global industrial production, but agriculture prices also fell sharply on improving supplies. Oil prices slipped below $100/bbl on slowing demand growth and supply gains, but light/sweet crude and distillate markets are tight ahead of peak winter demand.