Financial Markets… Global stocks tumbled on Thursday after Federal Reserve Chair Janet Yellen signaled that U.S. interest rates may rise sooner than expected. Asian shares fell sharply, with Japan’s Nikkei index slumping 1.7% to close at a six-week low level, and benchmark stock indexes in all of the 18 markets in western Europe declined with German’s DAX and the U.K.’s FTSE 100 retreating at least 1%. Developing-country shares were hit as well by the prospect of earlier Fed tightening, with the MSCI Emerging Market Index sinking 1.5%, extending its year-to-date drop to 6.6%. U.S. equities also opened slightly lower, but they bounced back after better-than-expected economic data offset concerns over earlier-than-expected rate-hike.
U.S. Treasuries traded roughly flat today with the benchmark 10-year yield remaining unchanged at 2.77% following yesterday’s increase of 10 basis points in the wake of Yellen comments. While long-term Treasury yields were mostly unchanged from Wednesday’s levels, short-term yields continue to climb slightly with both 3-year and 5-year bond yields advancing 2 basis points to 0.9% and 1.72% respectively.
High Income Economies…At the first meeting led by new chairperson Janet Yellen on Wednesday, the U.S. Federal Reserve trimmed another $10 billion from its monthly asset-purchase program, lowering the monthly bond buys to $55 billion. The Fed also altered its forward guidance on interest rates, dropping its 6.5% unemployment target in favor of a broader range of indicators, and reiterated its promise to keep interest rates exceedingly low for now.
U.S. first-time jobless claims edged up less-than-expected to 320,000 in the week ended March 15th, an increase of 5,000 from the previous week's unrevised figure of 315,000, which was a three-month low. The less volatile four-week moving average dipped from the previous week's average of 330,500 to 327,000, the lowest level since November. Meanwhile, continuing claims, a reading on the number of people receiving ongoing unemployment assistance, rose to 2.89 million in the week ended Mach 8th from the preceding week's revised level of 2.85 million.
Driven by exports (up 3.1%) and household spending on goods and services (up 1.3%) New Zealand’s GDP grew 0.6% (q/q sa) in Q4 2013 after rising 1.0% in Q3. On an annualized basis, 2.3% 3.9%. For all of 2013, GDP was up 2.5%.
Developing Economies…East Asia and Pacific: In light of the slowdown in industrial production and investment, the government of China issued a statement that it plans to speed up investment and stabilize demand. The statement specified that preliminary work and construction on key investment projects and other measures aimed at expanding demand and stabilizing growth will be accelerated, with adequate and timely allocation of budget funds.
Latin America and the Caribbean: Colombia’s economy expanded at 4.9% (y/y) in Q4 2013, following a 5.1% (y/y) growth in Q3. On an annualized quarter-on-quarter basis, GDP grew 0.8% (q/q) in Q4 after rising 1.1% in Q3. For the full year, GDP grew 4.3%, beating market expectations, but lower than the government target of 4.5%.