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Prospects Daily: Developing-country shares extend gains on easing concerns over Ukraine, German ZEW investor confidence lowest since August, Turkey leaves key policy rates unchanged

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Financial Markets…Developing-country stocks advanced for a second day on Tuesday, leading a global stock rally, as concerns over the Ukrainian conflict eased after Russian President Vladimir Putin said he did not want to split up its neighbor.  The benchmark MSCI Emerging Market Index rose 0.7% with the Russia’s Micex index surging 4.1%, building on yesterday’s gains.  Indian shares climbed to record highs amid strong demand by foreign investors, and benchmark stock indexes in Hungary and Turkey posted at least 1.8% gains.

The Zambian Kwacha depreciated against the dollar for a fourth day, becoming the world’s worst performing currency after Ukraine’s hryvnia, as plunging copper price desiccated dollar supplies in Sub-Saharan Africa’s second largest copper producer.  The kwacha weakened 2% to 6.265 per dollar, gearing for its steepest decline since the last month of 2012, and extended its year-to-date drop to 11.5%.  The nation’s central bank has used $178 million of its foreign-exchange reserves and hiked its key interest rate to a record in an effort to shore up the local currency.

High Income Economies…With an increase in food prices offsetting a drop in energy prices, U.S. consumer prices edged up 0.1% (m/m sa), matching expectations and January’s increase.  The increase was largely due to higher food prices, which rose by 0.4% in February after inching up by 0.1% in January.  Meanwhile, energy prices dropped 0.5% following January’s 0.6% increase.  Excluding food and energy prices, the core consumer price index ticked up 0.1% for the third consecutive month.  On a three monthly annualized basis, the CPI increased 1.8% (3m/3m saar) in February, after rising 1.5% in January.

Amid political uncertainty in Ukraine, the Centre for European Economic Research (ZEW) economic confidence index for Germany dropped more-than-expected from 55.7 in February to 46.6 in March, the weakest since August 2013.  Meanwhile, the measure of experts' assessment of the current economic situation improved to 51.3 points, the highest since August 2011, from 50 in February.

Developing Economies…East Asia and Pacific: Foreign direct investment into China increased notably in January-February, rising 10.4% (y/y) to US$19.3bn.  Driving this increase, FDI flows from the U.S. rose 43.3% (y/y), offsetting a 13.8% (y/y) decline from the European Union.  Outbound investment from China rose 37.2% (y/y) to US$11.5bn over the January-February period.
Philippine’s wholesale price inflation slowed in January, rising 4.8% (y/y) compared with December’s 5.3% (y/y) increase.  Supporting this slowdown, the prices of crude materials and inedible products eased 32.4% (y/y); while the prices of chemical products eased 6.2%.  Price increases came from mineral fuels, lubricants and related materials which rose 6.5% (y/y), manufactured goods (+1.6%, y/y), and machinery and transport equipment (+1.8%, y/y).  Month-on-month, wholesale prices increased 0.3% in January after rising 1% in December.
Europe and Central Asia: Turkey’s central bank left its key interest rates unchanged for the second consecutive meeting, noting that the rate increase delivered in January helped stabilize the lira.  The one-week repo rate was left at 10.0%, and the overnight borrowing rate and overnight lending rate were kept at 8.0% and 12.0%, respectively, in line with expectations.

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