Financial Markets…Global equities turned lower on Monday, with the benchmark MSCI world equity index sliding 0.15% from an 18-month peak level, as some investors took profits following last week’s stock market rally. Notably, the Standard & Poor’s 500 Index declined 0.4% from a five-year high on Friday, and Europe’s Stoxx 600 index dropped 0.3% after reaching its highest level since February 2011 last week.
The euro weakened as much as 0.4% versus the dollar to $1.3017 amid concern the region’s economy is weakening. The 17-nation currency fell also against the Japanese currency, dropping 0.5% to 114.66 yen. In December, the single currency gained 0.8%, while the dollar and the yen slid 0.3% and 0.7%, respectively.
Italian 10-year bond yields climbed 5 basis points to 4.31%, after tumbling 23 bps last week, amid political concerns over next month’s general election. Spanish government bonds also fell before the country holds its first debt auction of the year later this week, pushing 10-year yields up 4 bps to 5.09%. In contrast, German 10-year bund yields fell 2bps to 1.51%.
High-income Economies…Euro Area producer price inflation slowed to 2.1% in November from 2.6% in October, as easing energy inflation (4.1% y/y in November vs. 5.9% y/y in October) offset a modestly higher pace of price increases in intermediate and capital goods.
Japan’s monetary base rose 11.8% (y/y) in December to 131.98 trillion yen, according to the Bank of Japan, following a 5.0% (y/y) increase in November, as monetary easing measures lead to a rise in the domestic currency in circulation.
Ireland’s retail sales fell for the first time in five months in November, dropping by 1.1% (m/m), reversing a 1.7% rise in October. Retail sales were 0.5% lower in November from a year earlier (+3.0% in October).
Hungary's producer prices fell 2.9% (y/y) in November, after rising 0.2% the previous month, mainly due to a sharp fall in manufacturing prices. On a monthly basis, producer prices declined 0.7% in November after falling 0.4% in October.
Developing Economies…Chile’s trade balance rose to $1.51 billion in December from $0.56 billion in November, boosted by growing exports of copper. On an annual basis, Chile's trade balance declined to $4.208 billion in 2012 from $10.792 billion in 2011 reflecting weak mid-year demand for Chile’s exports.
Indonesia's current account deficit showed signs of stabilization in the fourth quarter, totaling $5.4 billion or 2.3% of GDP. This is slightly above $5.34 billion in the third quarter but significantly lower than in the second quarter when the current account deficit hit a record $7.69 billion. For the entire 2012, the current account deficit is estimated to reach $21.5 billion, compared with a $1.68 billion surplus recorded in 2011.
Philippines' overall gross international reserves grew to $84.25 billion in December from $83.93 billion in November, and above the $75.3 billion attained in December 2011.
Romania's central bank held its policy rate steady at 5.25%. Inflation in Romania eased to 4.56% in November, down from 4.7% in October, but remained above the central bank's 2013 target of 2.5% (+/- one percentage point).