Developing-country stocks dropped for 9th day on Tuesday as growing expectations of the Fed’s earlier-than-expected tapering continued to weigh on those countries with a weak external balance and inflation pressures. The benchmark MSCI Emerging Market Index dropped 0.2%, heading the longest losing streak since 2006, led by declines in Indonesia (1.4%), Turkey (1%), and Czech Republic (1%). The gauge has declined 4.9% in the previous nine days. Meanwhile, benchmark stock indexes in Hungary and China rallied 1.1% and 0.8%, respectively.
High Income Economies…Largely due to falling petroleum prices, U.K. consumer price inflation fell more-than-expected to 2.2% (y/y) in October from 2.7% in September. Nonetheless, inflation hovers above the Bank of England's 2% target.
Driven by a drop in fixed investment and a poor harvest, the Russian economy expanded less-than-expected in Q3 with a growth rate of 1.2% (y/y), unchanged from GDP growth in Q2 and down from Q1’s 1.6%.
The Japanese consumer confidence index fell unexpectedly from 45.4 in September to 41.2 in October, its lowest since Shinzo Abe became prime minister in December. All component sub-indices were below 50, indicating a pessimistic outlook across the board. The income growth sub-index was the most pessimistic with a reading of 37.7, while the least pessimistic was the employment prospects sub index at 46.3.
Developing Economies…East Asia and Pacific: The Indonesian central bank raised its benchmark interest rate by 25 basis points to 7.5%, bringing the benchmark rate to its highest level since April 2009, in an effort to reduce the current account deficit, which had widened to a record 4.4% of GDP in Q2, and keep inflation under control. With this increase, the benchmark interest rate has increased by a cumulative 175 basis points since June 2013. The central bank also raised the deposit facility and lending facility rates by 25 basis points to 5.75% and 7.5% percent respectively.
Europe and Central Asia: Hungary’s annual headline inflation, measured by the consumer price index, rose to 0.9% (y/y) in October, its lowest rate in nearly 40 years, staying well within the central bank’s medium term target of 3%. Contributing to this gain, water charges fell 10% (y/y), cost of housing electricity, gas and other fuels decreased by 7.1% following a 6.4% decline in September, and transportation cost and prices of consumer durable goods declined by 1.6% and 1.9%, respectively. Alcoholic beverages and tobacco recorded the highest annual increase in October at 11.8%, while prices of food and non-alcoholic beverages slowed to 0.8% from 1.4% in September. Month-on-month, the CPI fell 0.3%.
Middle East and North Africa: Egypt’s consumer price index rose to 10.4% (y/y) in October from 10.1% in September, on account of higher food prices which accelerated to 15.3% (y/y) in October from 12.9% in September. In addition, cost of restaurants and hotels increased by 22.6%. Mitigating these increases, the cost of housing slowed to 1.8% from 3.4% in September, cost of medical care eased to 9.7% from 10.5% in September, and transport prices rose slightly at 7.45 from 7.52% in September. Month-on-month, prices slowed to 1.1% in October from 1.6% in September. Core CPI, which excludes subsidized goods and volatile items such as food and vegetables, decelerated to 1.2% in October after rising 1.7% in September. Year-on-year, core CPI was steady at 11.1%.
South Asia: India’s industrial production improved in September, rising 2.0% (y/y) after rising 0.4% in August, but was less than the consensus forecast of 3.5%. Contributing to this improvement, manufacturing output increased 0.6% (y/y), reversing August’s 0.2% fall; mining output rose 3.3% and electricity production accelerated by 12.9%. In the period April-September, industrial production increased 0.4% compared with the gain of 0.1% in the same period last year.