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Prospects Daily: Global stocks markets decline, U.K. unemployment rate falls to lowest since 2009, Retail sales growth eases in Brazil and South Africa

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Financial Markets…Global equities fell, with the benchmark developing-country stock index extending the longest slump since 2006, as growing concerns about the prospect of sooner-than-expected Fed’s tapering and uncertainty over China’s economic reforms damped investors’ risk appetite. The MSCI global stock index retreated 0.6%, with Europe’s Stoxx 600 index and S&P 500 index sliding 0.6% and 0.7%, respectively. The MSCI emerging-market index dropped 1.2% to a two-month low level, declining for a 10th day, with China’s Shanghai index dropping 1.8%. Meanwhile, U.S. Treasuries advanced as the benchmark 10-year yield at 2-month highs attracted investors and oil price rebounded from a five-month low.

Italy’s borrowing costs fell to the lowest level since 2010 at a new bond auction today, helped by the European Central Bank’s rate cut last week. The Italian Treasury issued €3 billion of three-year notes due in November 2016 at a yield of 1.79%, the lowest rate since March 2010, and down from 2.25% at the last month’s auction. It also sold €1.47 billion of bonds maturing in 2044 and €1 billion of 2018 floating-rate bonds. The county’s one-year borrowing cost also fell to a record low yesterday when the Treasury sold €6.5 billion of 12-month bills.

High Income Economies…The U.K. unemployment rate fell to 7.6% in July-September from 7.7% in the three months through August. The figure was the lowest since February-April 2009, raising prospects that the Bank of England may bring forward the timing of its future interest rate hike. The number of unemployed stood at 2.5 million, the lowest in more than two years.

Eurozone industrial production dropped a seasonally adjusted 0.5% (m/m sa) in September, partially reversing the previous month's 1.0% increase. Contributing to the marginal slowdown includes the production of durable consumer goods which fell by 2.6%, capital goods which decreased by 1.0%. In addition, production of intermediate goods dropped by 0.8%, while that of non-durable consumer goods declined by 0.2%. In contrast, energy production increased by 1.3%. Among the Member States for which data are available, industrial production fell in twelve and rose in thirteen. The largest decreases were registered in Portugal (-11.2%), Luxembourg (-4.1%), Croatia (-3.3%) and the Czech Republic (-2.8%), and the highest increases in Ireland (+2.9%), Romania (+2.4%), Hungary (+1.8%) and Poland (+1.4%). On a three-monthly annualized basis, Eurozone industrial production fell 0.9% (3m3m saar) in September compared to August increase of 0.8%.

The South Korean seasonally adjusted jobless rate remained stable at 3.0% in October, unchanged from September and a year earlier. While the number of regular employees continues to increase, part-time, daily contracted and self-employed workers continued to decline.

Developing Economies…East Asia and the Pacific: Indonesia’s current account deficit narrowed to 3.8% of GDP in the third quarter from 4.4% of GDP recorded in the second quarter. Contributing to this improvement, the merchandise trade account came in nearly balanced, rebounding from a deficit in the second quarter, thanks to the increase in the surplus of non-oil and gas trade; and the deficits in the services account and income account narrowed.

Europe and Central Asia: Turkey’s current account deficit widened in September as exports fell and imports rose. The current account deficit amounted to US$3.28bn in September, up from US$2.43bn in August and higher than the consensus forecast of a deficit of US$2.73bn in September. The main drivers of the current account deficit were: the merchandise trade deficit, which increased to US$5.99bn from US$5.7bn in August; and the services account deficit, which climbed to US$2.61bn from US$2.02bn. The income account recorded a deficit of US$3.39bn, up from the deficit of US$2.51bn recorded in August; while the current transfers account had a surplus of US$111 million, up from the surplus of US$79 million recorded in August.

Latin America and the Caribbean: Brazil’s retail sales growth slowed to a seasonally adjusted pace of 0.5% (m/m) in September, after rising 0.9% (m/m) in August. Contributing to this slowdown, sales of fuels and lubricants increased 0.8% (m/m), and sales of food product, beverages and tobacco rose 0.6% (m/m), while sales of textiles, clothing and footwear was unchanged. Year-on-year, retail sales grew 4.1% in September, following a 6.2% (y/y) gain in August. Extended retail sales, which excludes sales of motor vehicles, motorcycles and parts, and building materials, fell 0.7% (m/m) in September; and rose 7.5% (y/y), which was slower that the consensus forecast growth of 8.2% (y/y).

South Asia: Pakistan’s central bank decided at its November meeting to increase its benchmark policy rate by 50 basis points to 10%, citing the need to control inflation and contain potential pressure on the exchange rate. This was the second time this year that the central had increased the policy rate by 50 basis points.

Sub-Saharan Africa: South Africa’s retail sales growth slowed in September, coming in at 0.2% (y/y) seasonally unadjusted, following a 3.2% (y/y) increase in August. The September reading was also lower than the consensus forecast of a 2.5% (y/y) sales growth in September. Contributing to this slowdown, sales of food, beverages and tobacco, pharmaceuticals, and household furniture fell in September. Increases came from sales of textiles, clothing, footwear, and hardware. Month-on-month retails sales fell 0.7% in September, after rising 1.2% in August, the biggest decline since March 2013. Sales rose 0.4% in the third quarter from the previous quarter.

Angolas annual headline inflation, measured by the consumer price index, slowed to 8.38% (y/y) in October compared with 9.76% a year ago. The October reading was the lowest on record, with the CPI remaining below 10% for the fifteenth straight month. Month-on-month, prices eased 0.4% in October from 0.5% in September. Contributing to this slowdown, cost of housing equipment and routine maintenance slowed to 0.95% (m/m) from 1.23% in September; prices of food and non-alcoholic beverages eased to 0.44% (m/m) while transportation and housing cost was stable. The main increases came from the prices of restaurants and hotels, which went up by 0.8% (m/m) in October, and prices of clothing and footwear which rose 0.7% (m/m).

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