Important developments today:
1. European markets’ woes deepen amid growing concerns over Spain
2. Initial unemployment claims hit four year-low
European markets’ woes deepen amid growing concerns over Spain. European stock markets retreated for a third day on Thursday, after failing to hold on their earlier gains, and Spanish and Italian bonds continued to slide as investors worried about Spain’s debt problems. The euro weakened as well, falling for a fourth day against the dollar. The benchmark Stoxx Europe 600 Index fell 0.5%, extending its weekly loss to 2.2%. Spanish 10-year yields climbed 11 basis points (bps) to 5.80% after rising to 5.84% earlier, the highest level since the first implementation of the European Central Bank’s Long-term Repo Operation (LTOR) in December. The yield on Italian 10-year bonds rose as well, climbing 13 bps to 5.49%, with the yield premium over the benchmark German bunds widening to 375 bps. The 17-nation currency fell 0.5% to $1.3072 in morning trade after sliding to a near 3-week low of $1.3057, while the euro weakened 1.2% to 107.08 yen.
Initial unemployment claims hit four year-low. In continued signs of a labor market on the mend, weekly initial unemployment claims for US workers fell by 6000 to 357,000 for the week ending March 31st and the closely watched four-week moving average, which gives better idea of trends by removing weekly volatilities, fell to a four-year low of 361,800 [see at http://prospects or http://www.worldbank.org/prospects]. Recent improvements in the labor market has supported the rise in consumer spending and thus contributed to the resilience of the US economy to perturbations elsewhere in the global economy. US retail sales growth accelerated at an annualized pace of 5.5% in the three months leading to March where as in the Eurozone, where the unemployment rate is on the rise, it was decelerating at 3%. Notwithstanding the positive developments in the US labor market, unemployment still remains at historically high levels (8.3% in March, April unemployment report is due tomorrow) and growth in real disposable incomes remain weak. Further, rising gas prices threaten to stifle the ongoing fragile recovery.
Among Emerging Markets
In East Asia and Pacific, Philippines’ inflation continued to recede to 2.6% year-on-year (y/y) in March, the lowest rate since September 2009, from 2.7% in February, due to a low rate of food price increases and weak domestic demand.
In Europe and Central Asia, Russia’s current account surplus rose to $42.3 billion in the first quarter of 2012, a 37% increase from the same period last year, according to initial estimates by the central bank. This was mainly due to a 19% (y/y) increase in merchandise exports, including crude oil, refined oil products and natural gas, and slower import growth. Russia’s consumer price inflation stayed at a decade-low of 3.7% (y/y) in March, unchanged from February, as planned increases in administered prices for residential utilities were postponed until July and a good harvest that moderated food inflation.