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Prospects Daily: Credit risk on European government and corporate debt rises...French consumer confidence falls in September

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Financial Markets…Credit risk on European sovereign and corporate debt climbed as Spain’s political and banking-sector woes prompted concern over the region’s worsening debt crisis.

Credit-default swaps on 15 European governments rose 7 basis points (bps) to 142 with Spanish swaps jumping 23 bps to 390. And contracts on of 50 mostly speculative-grade European firms climbed 24 bps to 575.

Spanish benchmark 10-year bond yield rose to as high as 6.04%, approaching the level seen before the announcement of the European Central Bank’s new bond-purchase program.

Corporate defaults have increased in Europe and may climb further due to political and economic uncertainty, according to Standard & Poor’s. S&P’s non-investment grade default rate rose to 5.3% in the second quarter, up from 4.7% in the previous quarter.

High-income Economies
France’s INSEE household confidence index fell to 85 in September from 86 in August, the third monthly decline, on concerns about stalled growth, rising unemployment, and the prospect of tax increases and spending cuts. 

Germany’s consumer price inflation slowed to 2.0% (y/y) in September from 2.1% in August, according to flash estimates from six of Germany's 16 regions.

retail sales declined at a faster pace of 3.2% (y/y) in July following a -0.5% (y/y) decline in June, marking the fourth month of falling sales as economic recession, austerity measures, and high unemployment discourage shoppers.

Sweden’s goods trade surplus declined to SEK3.3 bn. in August 2012 compared to a surplus of SEK5.2 bn. in the same month in 2011, as exports fell at a faster pace (-5% y/y) than imports (-3% y/y). Separate data showed Swedish consumer confidence falling to its lowest since March.  
industrial production fell 2.2% (y/y) in August (-2.3% m/m) following a 2.5% (y/y) rise in July and a 8.2% pace in June.

Developing EconomiesBrazilian bank lending rose 1.2% (m/m) in August, a higher rate than 0.7% increase in July. Loans in arrears for 90 days or more were the equivalent of 5.9% of outstanding loans last month, unchanged from July.

China's Ministry of Land and Resources has announced that land intensity, that is, the usage of construction land per unit of gross domestic output, will be reduced by 30% from 2010's level by 2015. During 2006-2010, land intensity in China was reduced by 29%, achieved by restricting the conversion of arable land to construction land.

Ghana's GDP growth slowed to 2.5% (y/y) in the second quarter of 2012 from the previously reported 15.7% (revised from 8.7%) in the first quarter, mainly on declining oil production.

Mexico's trade deficit widened to $979 mn in August from $429 mn in July. Export showed 0.33% (m/m) decline in August on a drop in car export, while import grew 1.24% (m/m).

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