Financial Markets… U.S. Treasuries gained for a fifth day on Tuesday, with the benchmark 10-year note yields sliding to 2.84%, as investors await on a Federal Reserve announcement tomorrow on the future of U.S. stimulus program. U.S. government bonds have declined 3.6% this year through yesterday, while they gained 2% last year.
Developing-country stocks fell from yesterday’s three-month high as Chinese stocks posted the steepest decline in more than two months amid less-than-estimated foreign direct investment in August. The MSCI Emerging Market Index dropped 0.2% with China’s Shanghai Composite Index sliding 2.1%, the most since July 8. Elsewhere, the Russia’s Micex Index fell 0.2% after jumping 2.1% to the highest level since March 15 as oil prices traded lower and the country’s metal stocks fell sharply.
High Income Economies… Compared to the same month a year ago, the U.S. consumer price index (CPI) increased by 1.5% (y/y) in August, slowing down from the 2.0% (y/y) increase for July. On a month-to-month basis, the CPI was up 0.1% (m/m sa) following the 0.2% increase in July. Prices for shelter (0.2% m/m sa) and medical care (0.7%) saw slight increases. Food prices edged up by 0.1% (m/m sa) because of a 1.2% jump in prices for fruits and vegetables, while energy prices dipped by 0.3% mainly due to a 2.3% drop in prices for natural gas.
Driven by increasing expectations of the economic recovery gaining momentum amid an overall improvement in the Eurozone outlook, the German Zew Indicator of Economic Sentiment increased by 7.6 points to 49.6 in September, which is its highest level since April 2010. The Zew Index measures investors' expectations about the German economy in six months’ time and has a historical average of 23.8 points.
Down from July’s 2.8% (y/y) increase, U.K. inflation slowed for the second consecutive month as the CPI increased by 2.7% (y/y) in August compared to the same month a year ago. The largest contributions to the slowdown in inflation came from modest price increases in the transport (particularly motor fuels and air transport) and clothing sectors, which were partially offset by inflation increases from furniture, household equipment & maintenance, and food industries.
Thanks to a revival in exports, the Euro Zone’s trade surplus widened in July to 18.2 billion euros from 16.5 billion euros in June and from 13.9 billion euros in July 2012. Exports rose by 3% (y/y), following a 3% drop in June, while imports were flat in July after a 6% decrease in June. The bloc saw exports to Britain, Russia and Turkey, rising in July, although both exports and imports to and from the United States and China declined.
Developing Economies… East Asia and Pacific: China’s foreign direct investment growth eased 0.62% (y/y) in August to US$8.38 billion, down from US$9.41bn the previous year. For the eight-month ending in August, foreign direct investment totaled US$79.8bn, up 6.4% from 2012.
Europe and Central Asia: Turkey’s central bank decided to keep its benchmark interest rate, the one-week repo policy rate, unchanged at 4.5% on account of continued price and financial stability. The overnight lending rate and the borrowing rate were also kept unchanged at 7.75% and 3.5%, respectively.
Sub-Saharan Africa: Ghana’s annual headline inflation, measured by the consumer price index, eased to 11.50% (y/y) in August from 11.8% (y/y) in July, ending seven consecutive months of increases as a 14.2% (y/y) decline in non-food prices help offset a 7.9% (y/y) increase in food prices. Notwithstanding this improvement, consumer price inflation remains well above the central bank average inflation target of 8.9% for 2013.