Financial Markets… European stocks extended their gains on Monday, after reaching a 5-year high last week, as Lawrence Summers’ withdrawal from the Federal Chairman race eased the risk of an early end of U.S. monetary stimulus. The benchmark Stoxx Europe 600 Index rose 0.7% to the highest level since June 2008 as the German DAX index rallied 1.3% to a record high level.
Turkish lira appreciated the most in three years against the dollar as the U.S. and Russian agreed on a plan for the country’s neighbor Syria to confiscate chemical weapons. The lira gained 1.9% to 1.9907 per dollar in afternoon trading, the most since May 2010. The country’s bonds rallied as well with the benchmark 2-year note yields sliding 28 basis points to 8.84%.
High Income Economies… U.S. industrial production climbed 0.4% (m/m sa) in August, the sharpest increase in six months, after being flat in July. Manufacturing production advanced 0.7% (m/m sa), after declining 0.4% in July, as automobile assembly rebounded 5.2% (m/m sa) after falling 4.5% in July. Gains in industrial production were mostly broad-based, though utilities output fell for a fifth consecutive month. On a three-monthly annualized basis, IP and manufacturing output increased 0.8% (3m/3m saar) and 1.3% (3m/3m saar), respectively, up from 0.2% and -0.2% in July.
The Eurozone final annual consumer price inflation fell to 1.3% (y/y) in August, down from 1.6% in July, and half the 2.6% recorded a year earlier. The largest increases to inflation came from fruit (+0.12 percentage points), electricity and tobacco (+0.10 each), while fuels for transport (-0.26), telecommunications (-0.18) and medical & paramedical services (-0.08) saw the largest downward contributions. Individual countries saw a variation from a 1% decrease in prices in Greece to a 3.6% rise in Estonia.
Italy's trade surplus surged to €5.95bn in July from €3.62bn in June as consumer demand for imports remained weak during its long recession. The surplus is composed of €3.1bn in trade with EU countries and €2.8 billion for the rest of the world. Exports to China and Belgium were up 23.4% (y/y) and 19.3% (y/y), respectively. Imports from OPEC countries were down 27.9% (y/y) and purchases of products from the extraction of minerals and quarrying (except oil and gas) were down 33.1% (y/y).
Developing Economies… Europe and Central Asia: Turkey’s unemployment rate remained unchanged in June at 8.8%. Year-on year, the unemployment rate was up by 0.8 percentage point; but the employment rate also improved, increasing to 47.4% (y/y) in June compared with the 46.8% rate recorded a year ago.
South Asia: India’s annual headline inflation, measured by the whole sale price index, accelerated in August to 6.10% (y/y), up from 5.79% in July on account of higher food prices and energy costs. With this reading, annual inflation remains well above the central bank’s target of 3% for the year.