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Prospects Daily: Gold bounces back, US industrial production accelerates, Turkey cuts rates

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Financial Markets…Turkish government bonds tumbled, with the 2-year bond yields sliding as much as 26 basis points to a record low of 5.53%, as the country’s central bank cut its benchmark 1-week repo rate by more-than-expected 50 basis points to 5%.

Gold prices bounced back on Tuesday, rising 3% to $1,388.36 an ounce in London afternoon trading, after plunging 14% over two days, the biggest drop in 30 years. Despite todays’ gain, gold has declined 17% this far this year. Other precious metal prices including silver, platinum, and palladium also advanced today.

China's shares bounced back from a three-month low, with the benchmark Shanghai Composite Index gaining 0.6%, as property stocks jumped on speculation that the government is not likely to levy new real-estate restrictions amid rising growth concerns. The Shanghai index has declined 9.8% from this year’s highs reached on February 6 amid concerns over the property sector.

High-income EconomiesUS industrial production accelerated in March to 5% (3m/3m saar), up from 2.3% in Q4 2012 as cold weather kept utilities busy generating heat and a surge in auto production helped offset broader weakness in manufacturing. Separately, growth in housing starts eased to 7.2% (3m/3m saar) in March, down from 16.8% in Q4 2012 despite reaching 1.04 million-unit annual rate, the highest since 2008.

US inflation eased in March to 1.5% (y/y), down from 2.0% in February on the account of lower energy, namely, gasoline prices. Core inflation eased as well to 1.9% (y/y) in March, down from 2.0%.

Eurozone inflation fell slightly to 1.7% (y/y) in March, from 1.8% in February. At the same time, core inflation accelerated to 1.5% from 1.3% in February. In the EU27, annual inflation eased marginally to 1.9% in March from 2% in February. The lowest annual rate was observed in Greece (-0.2% y/y), while Romania logged the biggest rate of 4.4% (y/y).

Developing EconomiesEurope and Central Asia: Turkey’s central bank cut its benchmark policy rate by 50 bps to 5.0% as well as its borrowing rate to 4.0% and the lending rate to 7.0% by the same amount. It has cut at least one of the three rates each month since September as growth slowed to 2.2% in 2012 from 8.8% in 2011.

Croatia’s inflation eased to 3.7% (y/y) in March, its weakest level in eight months, down from a 4.9% (y/y) increase in February. Inflation is easing as base effects of VAT, electricity and fuel price increases from last year disappear.

Latin America and the Caribbean: Colombia launched a $2.7bn stimulus package aimed at easing the appreciation of the peso and boosting the economy after two sluggish quarters. The package takes aim at the exchange rate by encouraging private and state pension funds to invest more money overseas.

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