Financial Markets…U.S. Treasuries advanced for a third day on Tuesday, with the benchmark 10-year yield sliding 3 basis points to an almost two-week low of 1.81%, as concerns over the ongoing debt ceiling debate boosted demand for safe-haven government securities. Notably, U.S government bonds declined 0.4 percentage point in the first two weeks of January, while the country’s corporate debt gained 4.6 percentage points.
The yen appreciated the most in 8 months versus the dollar today, rising as much as 1.2% to 88.40 per dollar, as Japan’s economy minister warned of the potential drawbacks of an overly weak currency. Japanese currency also rose 1.3% against the euro to 118.14. Despite today’ rally, the yen is still down more than 6% against the dollar and 7% versus the euro from a month earlier.
India’s benchmark equity index (Sensex) advanced 0.4% to 19,986.8 at Tuesday closing, after exceeding a 20,000 intraday level for the first time since January 2011, as oversea investors continued to increase their holdings of local stocks amid government initiatives to boost economic growth. Indian shares posted their largest annual gain since 2009 last year, with foreigners investing a net $24.5 billion into local stocks.
High-income Economies…Euro Area exports rose for the first time in three months in November, rising by 0.8% (m/m) from October as external demand strengthened, but imports fell 1.5% (m/m). As a result, the Euro Area’s seasonally adjusted trade surplus rose to 11bn euros in November from 7.4bn euros in October.
US retail sales rose 0.5% (m/m) in December, building on a 0.4% gain in November. Consumer spending (which accounts for about 70% of the economy) was boosted by improving labor and housing markets and discounting by retail chain stores.
France’s budget deficit fell modestly by 300,000 euros to 87.2bn Euros in 2012, according to preliminary estimates, benefiting in part from 2.5bn euro savings from lower debt-service charges, according to the Finance Minister.
German consumer price inflation edged up to 2.1% in December from 1.9% in November, mainly due to a rapid pace of increase in cost of food (4.8% y/y) and energy (5.2% y/y). Annual inflation in 2012 at 2.0% was however lower than the 2.3% recorded in 2011. Germany’s GDP may have dropped as much as 0.5% (q/q) in the fourth quarter (an annualized 2% decline), according to preliminary estimates by the Federal Statistics Office.
UK consumer price held at 2.7% (y/y) in December, the same rate as November and higher than the Bank of England’s 2% target. The EU-harmonized consumer price inflation also stayed unchanged in December in Italy (2.6% y/y) and Spain (3% y/y).
Developing Economies… Brazilian retail sales grew at a slower 0.3% (m/m) pace in November, following 0.8% increase in October. On an annual basis, retail sales expanded by 8.4% in November compared to 9.2% growth in October.
Russia's central bank held its benchmark refinancing rate steady at 8.25% as inflation continued to exceed the bank's target. Inflation in Russia was 6.6% in December, slightly higher than the bank targeted 5-6%.
In the Philippines, overseas remittances reached US$19.42 billion in the first 11 months of 2012 – expanding 6% compared with the last year. On a monthly basis, cash remittances amounted to US$1.918 billion in November, compared to US$1.928 billion in October. The US, Canada, Saudi Arabia, UK, Japan, UAE and Singapore accounted for 78 percent of total remittances during the 11-month period.