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Prospects Daily: Emerging-market equities extend gains, U.S. unemployment rate at 6.6%, China’s services purchasing managers’ index falls

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Financial Markets… Emerging-market equities extended their gains on Friday, with the benchmark MSCI index climbing 0.9%, while Emerging-Asian currencies posted their biggest weekly gain in two months, led by the Philippines’ peso and Malaysia’s ringgit. The MSCI gauge has advanced 2.4% in the past two days, paring its year-to-date loss to 6.4%; and currencies in the Philippines, Thailand, Malaysia, and Indonesia appreciated at least 0.4% versus the dollar. However, data shows global investors continued to withdraw funds from developing-country stocks and bonds this week, suggesting the relative calm in market sentiment maybe short-lived.

Global investors moved record amounts of money out of U.S. stocks and into U.S. bonds, and repatriated funds from developing-country equities for a 15th consecutive week. U.S. equity funds posted outflows of $24 billion in the week ending February 5th, pushing worldwide outflows from global stock funds to $28.3 billion. In contrast, investors put $13 billion into U.S. fixed-income funds, accounting for most of the $14.8 billion that flowed into bond funds worldwide.

High Income Economies…U.S. non-farm payroll employment increased by 113,000 jobs in January following a slightly upwardly revised increase of 75,000 jobs in December. Despite the weaker than expected job growth, the unemployment rate edged down from 6.7% in December to 6.6% in January, its lowest level since hitting 6.5% in October of 2008.

U.K. industrial production grew 0.4% (m/m) in December, after falling 0.1% in November. At the same time, manufacturing output rose 0.3%, more than offsetting the 0.1% drop in November. Both increases were less than expected. On a three-monthly annualized basis, manufacturing output increased by 2.8% (3m/3m saar) in December, compared with the 2.7% increase in November.

Marking the fourth consecutive rise, the Japanese leading economic index increased more-than-expected to 112.1 in December from 111 in November. The coincident index, a measure of the current economic situation, moved up to 111.7 from 110.7 in November. At the same time, the lagging index, which gauges the past performance of the Japanese economy, advanced to 115.1 from 114.1 in November.

Developing Economies… East Asia and Pacific: China’s HSBC/Markit Services Purchasing Managers’ Index fell in January, dropping to 50.7 down from 50.9 in December; but remained above the no-change 50 mark, which denotes expansion, indicating a moderation of growth of business activity in the service sector. The composite index, which measures performance of both the manufacturing and service sectors, also fell in January, decreasing to 50.8 from 51.2 in December.

Latin America and the Caribbean: Brazil’s annual headline inflation, measured by the consumer price index, slowed in January, coming in at 5.6% after rising 5.9% in December, the lowest inflation rate since November 2011. Despite the slowdown, the January reading remained well above the 4.5% midpoint of the central bank’s inflation target range of 2.5%-6.5%. Month-on-month, prices rose 0.5% in January following a 0.9% increase in December, helped by lower transport prices.

Meanwhile, Mexico’s annual headline inflation, also measured by the consumer price index, accelerated to 4.5% in January, the highest rate in seven months, after rising 4.0% in December, moving further above the central bank’s target of 3%. The January increase was driven by higher prices of communication and transport (+11%, y/y), fruits and vegetables (+10.5%, y/y), and energy (+9.7%, y/y). Month-on-month, prices rose 0.9%, up from 0.6% in December. The core consumer price index, which excludes volatile food and energy prices, rose 0.8% in January.

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