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Prospects Daily: Global equities and the dollar rally, U.S. jobless claims jump sharply amid more distortions, Malaysia’s industrial production eases

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Financial Markets… Global equities and the dollar rallied on Thursday as some signs of progress towards resolving the U.S. budget deadlock eased fears of a disastrous debt default.  Europe’s Stoxx 600 index gained 1.4%, bouncing back from a one-month low, and U.S. equities opened higher in morning session, with the S&P 500 and the Dow Jones Industrial Average advancing 1.4% and 1.3%, respectively.  The dollar index (DXY), which measures the greenback against the 6 major currencies, rallied to near a three-week high.

Yields on short-dated U.S. Treasury bills declined and rates on longer-term U.S. government debt climbed on hopes of the U.S. debt limit deal.  The rate on the one-month T-bill fell 5 basis points to 0.27%, down from a 5-year high of 0.36% on Tuesday, but that is still an elevated level, suggesting lingering worries over the U.S. default among investors.  Meanwhile, the benchmark 10-year note yield rose 5 bps to 2.71%, the highest level since September 23.  The 30-year yield also climbed to 3.78%, the highest since September 20, before the Treasury auctions $13 billion of new 30-year securities later today.

High Income Economies…U.S. first-time jobless claims reached their highest level since the end of March when it rose by 66,000 to 374,000 in the week ending October 5th, compared to the marginal increase of 1,000 claims seen for the previous week.  However, half of the increase was due to a change in computer systems in California.  The ongoing government shutdown also contributed to the jump.  The less volatile four-week moving average for new claims rose to 325,000, an increase of 20,000 from the six-year low of 305,000 set in the previous week.  Meanwhile, continuing claims fell to 2.905 million in the week ended September 28th from the preceding week's revised level of 2.921 million.

According to the minutes of the September 16-17 meeting, the U.S. Federal Reserve still expects to taper this year.  The minutes show most Fed members anticipate the economy will be strong enough to begin winding down QE3 this year and ending it completely by the middle of 2014.

Qatar's merchandise trade surplus increased 1.9% (y/y) to QAR 32.97 billion in August as compared to the same month last year.  Exports grew 3.8% (y/y), while imports increased 12.2%. In July, the country registered a surplus of QAR 32.9 billion.  Export growth was led by a 17.6% (y/y) gain in shipments of petroleum gases and other gaseous hydrocarbons.  The main destinations for Qatari exports were Japan, South Korea and India.  Imports were dominated by automobiles, aircraft spare parts, and other iron and steel products, with majority of imports coming from the U.S., China and Italy.

Japan's consumer confidence improved significantly in September seasonally adjusted consumer confidence index advancing to 45.4 from 43 in August.  The increase was driven by Japanese households being slightly more upbeat about their income growth and overall livelihood.  Employees also turned more optimistic about the employment conditions.

Cyprus' merchandise trade deficit declined to EUR267 million in August, sharply down from July’s EUR310 million. Merchandise exports decreased to EUR101 million from EUR154 million in July, while imports decreased to EUR368 million from EUR465 million in July.

Developing Economies…East Asia and the Pacific: Philippines’ exports surged in August, rising by 20.2% (y/y) from a 2.3% (y/y) increase in July, boosted by increased shipments of petroleum products, other mineral products, and chemicals. Month-on-month, exports fell 5.3%. For the eight-month period January to August, total merchandise exports are down 0.8% from the same period in 2012.  Electronic products, Philippines’ main exports, recorded a 0.4% (y/y) decline in August.
 
Malaysia’s industrial production growth eased to 2.3% (y/y) in August from July’s revised growth of 7.5% (y/y).  This slowdown was driven by a fall in mining output, which decreased by 4.6% (y/y); while manufacturing output rose 4.6% (y/y) and electricity production increased 5.1% (y/y). Month-on-month, industrial production fell 4.6% in August, with all sub-sectors reporting declines from July. Mining and manufacturing fell 3.6% and 5.4% respectively and electricity production decreased 2.5%.
 
Meanwhile, Malaysia’s manufacturing sales increased further in August, rising by 5.1% (y/y) following a 3.9% (y/y) increase in July. 72 of the 116 industries surveyed reported an increase in sales, with the manufacture of television and radio receivers and computer and computer peripherals posting the strongest increase. Month-on-month average sales value per employee fell 1.1% in August.
 
Middle East and North Africa: Egypt’s annual headline inflation, measured by the consumer price index, rose to 10.1% (y/y) in September, after decelerating to 9.7% (y/y) in August. Contributing to this increase, food prices excluding fruits and vegetables rose to 15.6% (y/y) in September from 12.6% (y/y) in August and transport cost jumped to 7.5% (y/y) from 2.6% in August. Month-on-month, prices increased by 15.7% from August to September compared to a 0.7% increase from July to August. Core inflation, which excludes subsidized goods and volatile items such as food and vegetables, increased to 11.1% (y/y), its highest level since March 2009. On a monthly basis, the core inflation rate increased to 1.7% in September from 0.14% in August.
 
Sub-Saharan Africa: South Africa’s manufacturing output eased in August, growing by 0.1% (y/y) compared with July’s strong expansion of 5.5% (y/y). Driving the weakening of manufacturing output growth, the production of motor vehicles, parts and accessories and other transport equipment fell by 25% (y/y). Month-on-month, manufacturing production fell by 3.6% (m/m, sa)) in August, faster than the consensus forecast. In the three-month period ending in August, production increased 0.2% from the preceding three months.
 

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