Financial Markets…A global stock markets rally stalled on Thursday, with the benchmark MSCI world equity index sliding about 0.2% from a 18-month high, as concerns over U.S. budget worries resurfaced. Meanwhile, developing-country stocks gained for the ninth consecutive day on positive China’s economic data, posting the longest winning rally in more than 14 months.
The U.S. dollar appreciated 0.3% against a basket of major currencies (the dollar index) to a three-week high of 80.12 as growing investors’ concerns about a looming political battle over spending cuts boosted demand for safe-have currencies. But the greenback fell 0.4% versus the yen to 87.14. The strengthening of the dollar pushed the euro down 0.2% to $1.3162 from a 8-1/2 month high of $1.3300 yesterday.
The European Central Bank’s latest report showed lending to euro-zone companies and consumers remained weak in November, with bank loans to the private sector falling by 0.8%, the same pace of decline seen in October. Despite encouraging signs of recovery in the banking sector, weak loan data highlighted the region’s fragile economic conditions and could increase expectation of further rate cut by the ECB.
High-income Economies…Initial unemployment claims in the US rose by 10,000 to 372,000 in the week ended December 29. The four-week average of claims, a less volatile measure, was little changed at 360,000 compared to the previous week's 359,750, indicating employers held on to current staff at the end of 2012.
Employment in Germany remained broadly stable in December edging up a seasonally adjusted 3,000 to 2.942 million, and the unemployment rate held steady at close to a two-decade low of 6.9%, indicating resilience of the labor market despite cooling economic activity. The Bundesbank said in December that Germany’s economy may have contracted markedly in the fourth quarter of 2012 after expanding modestly in Q3.
Unemployment in Spain fell by 1.2% (m/m) in December to just under 4.85 million, marking the first monthly decline since July, as service sector hiring rose in the run-up to Christmas.
Hong Kong’s retail sales growth accelerated to 9.5% (y/y) in November from 3.9% in October, largely due to a broadly stable labor market and a surge in visitor arrivals in that month.
The Singapore Institute of Purchasing & Materials Management’s (SIPMM) Purchasing Manager's index (PMI) dipped slightly to 48.6 in December from 48.8 in November, suggesting that manufacturing activity continues to contract (An index level below 50 indicates contraction). The downturn was led by further declines in new orders and new export orders, in part due to subdued demand from Western economies for the country’s exports.
Developing Economies…China's purchasing managers' index for the non-manufacturing sector increased to 56.1 in December after rising for three consecutive months, indicating that the non-manufacturing sector, which includes service sectors such as retail, aviation, software, real estate and construction, continues to expand at an accelerated rate.
The Dominican Republic's central bank held its key interest rates unchanged at 5.0% and the Lombard rate steady at 7.0%. The inflation rate in the Dominican Republic rose slightly to 3.4% (y/y) in November from 2.9% in October and is within the bank's target range of 5.0%, plus/minus one percentage point.
India’s Markit Economics PMI for the manufacturing sector increased to 54.7 in December from 53.7 in November indicating expanding activity. Both new orders as well as output at factories increased at the fastest pace in six months in December.
Inflation in Thailand accelerated to 3.6% (y/y) in December compared to 2.7% in November on account of increased food prices due to poor weather that cut supplies, and on growing energy costs.
Turkey’s Markit economics PMI indicates that business conditions in the Turkish manufacturing sector continue to improve with the purchasing managers' index rising to 53.1 in December from 51.6 in November – the highest reading since October 2011.
Turkey's consumer price inflation weakened to 6.2% (y/y) in December from 6.4% in November, the lowest level in fifteen months.
Uganda's central bank kept its Central Bank Rate (CBR) steady at 12.0%.Uganda's inflation rate rose to 5.5% in December from November's 4.9%, but the bank said the core rate of 4.6% was still within the bank's 5.0% target.