Global stocks markets extended their gains on Friday after the latest U.S. jobs report showed the labor market fully recouped all the jobs lost during the recession and added to an already buoyant investor sentiment lifted by the European Central Bank’s stimulus pledge. Asian benchmark stock gauge rose to a 7-month high and European stocks are gearing for a 6-year high. Developing-country stocks also advanced to extend their weekly gains with Indian equities rising to an all-time high for a second day. U.S. equities opened higher as well with the S&P 500 index climbing to a fresh record high.
Government bonds across the Euro Area continued to rally today following yesterday’s ECB’s commitment to a fresh package of stimulus measures. Benchmark yields on Belgian, French, Irish, Italian, and Spanish government debt slid to record lows and German 5-year yields fell to the lowest level since May 2013. Notably, the average yield to maturity on government securities from Greece, Ireland, Italy, Portugal, and Spain declined to a record low of 2.12% yesterday, down sharply from a record high of 9.55% in November 2011.
High Income Economies
Showing a continued gradual improvement in the labor market, U.S. non-farm payroll employment increased by 217,000 jobs in May, after jumping by a revised 282,000 jobs in April. This fourth consecutive month with a job growth of above 200,000 was partly due to a notable increase in employment in the education and health services sector, which added 63,000 jobs. Meanwhile, job growth in the construction sector showed a notable slowdown, as the sector added 6,000 jobs in May compared to the increase of 34,000 jobs in April. The unemployment rate came in unchanged compared to the previous month at 6.3%.
Citing strength in the domestic economy and the gradual recovery of the euro area, the German central bank raised its growth projection for 2014 to 1.9% from 1.7% estimated in December. In 2015, growth will rise to 2.0% unchanged from the previous estimate. At the same time, German industrial production grew 0.2% in April from March, when it was down by a revised 0.6%, while exports advanced 3.0% monthly in April, the biggest since May 2012, when shipments surged 3.9%.
The leading index for Japan came in at 106.6 in April, above economists’ forecasts for a reading of 106.1. This follows a 107.1 score in March. The coincident index, a measure of perceptions on the current economic scenario, fell to 111.1 in April from 114.5 in March. Following the trend, the lagging index, reflecting economic conditions in the recent past, decreased to 116.0 in April from 118.5 in March.
East Asia and Pacific
Malaysia’s export growth accelerated 18.9% (y/y) in April, largely exceeding economists’ forecast of a 9.6% increase. Contributing to this acceleration, exports of manufactured goods and of electrical and electronic product rose by 18% (y/y) and 22% (y/y), respectively. In comparison, imports rose 5% (y/y), while economists’ forecast a decline of 0.7%. The trade surplus increased sharply to MYR8.87bn in April, up from MYR1.04bn the previous year. In the four months ended April, exports and imports grew by 12.8% and 5.4%, respectively.
Europe and Central Asia
Turkey’s retail sales grew by 5.0% (y/y) in April, after slowing to a downwardly revised 3.2% growth in March. Month-on-month, retail sales were flat in April, after contracting 1.5% in March.
Latin America and the Caribbean
Brazil’s annual consumer price inflation rose for the fourth consecutive month to 6.37% in May from 6.28% in April, its highest rate in 11 months, remaining near the 6.5% upper limit of the central bank’s target for 2014. Food prices rose 7.7% (y/y), housing costs increased 7.5% (y/y), and health and personal care climbed 6.7%. On a monthly basis, inflation slowed for the second consecutive month to 0.46% in May from 0.7% in April.
At its meeting of June 6th 2014, Mexico’s central bank unexpectedly decided to cut the benchmark overnight interest rate by 50 basis points to a record low 3%, citing persisting slack in the economy. The central bank also announced that no further interest rate cuts were expected.