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Prospects Daily: Euro-area money market rates drop to record low…Italian new orders jump…Malaysia’s consumer price inflation slows for second consecutive month

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Financial Markets
 
The rate banks in the Eurozone charge one another to borrow overnight, known as Eonia, fell to a record low as the European Central Bank decided to charge a negative interest on overnight bank deposit in an effort to boost the cash liquidity into the economy and curb the threat of deflation.  The Eonia index rate was set at an all-time low of 0.01% after markets closed yesterday, compared with an average for this year of 0.19% and a record high of 5.75% reached in April 2001.
 
Oil prices remained high on Friday amid growing concerns over the turmoil in Iraq. U.S. WTI (West Texas Intermediate) crude prices for August settlement advanced 46 cents to $106.51 a barrel in New York. Meanwhile, Brent oil prices for August delivery fell 31 cents to $114.75 a barrel in London after jumping 80 cents to $115.06 yesterday, the highest close since September 6.  Brent is up 1.2% this week, while WTI is just 0.3% higher.
 
High Income Economies
 
Italy's new industrial orders jumped 3.8% (m/m) in April, exceeding economists' expectations of a 1% increase. In March, industrial orders rose by revised 1.4%.  Foreign orders surged 9.2% in April, while domestic orders fell 0.4%.  On a year-over-year basis, total orders rose by unadjusted 6.2% (y/y) in April after increasing 2.8% in March.
 
Citing stronger public finances and growth prospects, Fitch Ratings upgraded Latvia's sovereign ratings to 'A-' from 'BBB+' with 'stable' outlook. The 'stable' outlook reflects Fitch's assessment that upside and downside risks to the rating are currently balanced.  The agency noted that public finances are stronger than the 'A' median and that fiscal consolidation efforts has lowered Latvia's fiscal deficit down to one of the lowest in the euro area.  Further, Latvia's growth prospects are positive notwithstanding heightened geopolitical risk which has had little spill-over effects to date.
 
The ANZ-Roy Morgan Consumer Confidence index for New Zealand rose to 131.9 in June from 127.6 in May.  Strengthening consumer confidence was underpinned by a robust economy, low unemployment, and weak inflation.  The combined current conditions index rose to 127.5 in June from 123 in May, while the combined future conditions index rose to 134.9 in June from 130.7 in May.
 
 
Developing Economies
 
East Asia and Pacific
Helped by slowing food and fuel prices, Malaysia’s annual consumer price inflation eased for the second consecutive month in May, coming in at 3.2% (y/y) following a 3.4% increase in April, remaining within the central bank’s target range of 3-4% for 2014.  Food and non-alcoholic beverage prices rose 3.3%, slowing from 3.6% in April; while prices of housing, water, electricity, gas and other fuel slowed to 3.1% from 3.6% in April.  Month-on-month, consumer prices inched up 0.1% in May. In the four months to April, consumer price inflation was up 3.4% compared with the same period in 2013.
 
Latin America and Caribbean  
Mexico’s retail sales growth fell by 0.4% (y/y) in April, partially reversing March’s 1.7% increase.  On a monthly basis, retail sales advanced 1.1% in April, rising from 0.8% in March.
 

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