Financial Markets…Global equities advanced on Wednesday, with the benchmark MSCI All-Country World index gaining 0.2%, driven by Asian shares that climbed to a 16-month high on Chinese optimism after the Communist Party’s new leaders said they would actively promote urbanization. Stock gains were limited due to more-than-estimated drop in euro-zone retail sales in October.
Spanish government bonds fell, pushing 10-year yields up 11 basis points to a nearly one-month high of 5.36%, after the country failed to raise its target amount at today’s debt auction. The Spanish Treasury sold €4.25 billion ($5.6 billion) of securities maturing between 2015 and 2022, below the target of €4.5 billion. Italian 10-year bonds also fell, with the rate climbing 2 bps to 4.45%.
The Turkish government issued $1 billion of global bonds due in January 2041 at a yield of 158 basis points over comparable U.S. Treasuries. It was Turkey’s cheapest long-dated dollar-denominated bonds on record, and sold a month after the country’s first investment-grade rating in 18 years sent funding costs plummeting. Of note, foreign investment in Turkey’s $287 billion government debt market rose to a historic high of $19 billion thus far this year.
High-income Economies…Markit’s Euro Area composite purchasing managers’ index (including both manufacturing and services) rose to 46.5 in November from 45.7, suggesting a slowing of the pace of decline in Euro Area output. The composite index has remained below the 50-mark, indicating contraction, for the 10th straight month.
Euro Area retail sales fell at a faster 1.2% (m/m) pace in October compared with a 0.6% drop in September, as consumer spending continued to slow in the face of the continuing debt crisis, fiscal austerity measures, and a recession in the previous (third) quarter.
The deterioration in Spain’s industrial production slowed in October, with output falling 3.3% (y/y) compared with a 7.5% (y/y) fall in September. On an unadjusted monthly basis, output rose 9.4% (m/m), the highest registered for the month of October in the last five years.
Factory orders in the US rose 0.8% (m/m) in October, a slower pace compared with a 4.5% (m/m) increase in September. But after excluding the volatile transportation component, factory orders rose 1.3% (m/m) compared with a 1.2% increase in September. Moreover, orders for non-defense capital goods excluding aircraft (a proxy for future business investment) rose strongly by 2.9% (m/m) in October following a 0.5% decline in September.
Finland’s economy slipped into recession in the third quarter of 2012, with output contracting by about 0.4% (q/q) on an annualized basis, a slower pace of decline compared with an annualized 4.5% fall in the second quarter. However, on a year-on-year basis, GDP fell a larger 1.2% (y/y) in the third quarter compared with a 0.3% (y/y) decline in the second quarter due to base effects.
Poland’s central bank cut its key interest rate by 25 basis points to 4.25% percent, the second rate cut in a month after three years of unchanged policy interest rates, in an effort to boost demand and support a slowing economy.
Developing Economies…Brazil’s HSBC index for service sector business activity advanced to 52.5 in November from 50.4 in October, indicating that activity strengthened.
China’s official non-manufacturing sector purchasing managers' index inched up to 55.6 in November from 55.5 in October, suggesting solid expansion in activity. However, the unofficial HSBC business activity index for China’s service sector fell to 52.1 in November from 53.5 in October.
India’s HSBC business activity index for the service sector dropped to 52.1 in November from 53.8 in October suggesting a moderation in expansion of economic activity in the services sector. Meanwhile, India's ruling coalition won a vote on allowing foreign supermarkets to operate in India.
Russia’s HSBC service PMI fell to 57.1 in November from 57.3 in October, but remains high indicating dynamically expanding activity. Russia's headline inflation stabilized in November at 6.5% (y/y), unchanged from October.
The Philippines' inflation slowed to 2.8% (y/y) in November from 3.1% in October. The central bank forecasts inflation in the range of 2.7% to 3.6% in 2012.