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Prospects Daily: Indonesia bond yields rise, France raises budget deficit targets, Malaysian and South African IP growth accelerates

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Financial Markets…The Japanese yen hovered near recent lows at about Y100/$ on Wednesday as easing tensions over Syria dented demand for the safe-haven currency, while uncertainty about the Federal Reserve's stimulus plan kept the dollar range-bound. The yen hit a seven-week low against the dollar and a 3-1/2-month trough versus the euro, before recovering losses. It also fell to a four-year low against the British pound, which had rallied after Friday's U.S. jobs data.

Indonesia sold $1.5 billion of dollar-denominated Islamic bonds at the highest yield since 2009 as it seeks to bolster its foreign-exchange reserves to support the plunging rupiah. The nation issued the notes due in 5.5 years to yield 6.125%. That was the highest rate for global Shariah-compliant securities since Indonesia paid 8.8% on its debut dollar sukuk in 2009. The country last offered global Islamic paper in November 2012 selling $1 billion of 10-year securities at a record-low yield of 3.3%.

High Income Economies…During the three months to July, the U.K. unemployment rate edged down to 7.7%, 0.1 percentage points lower than the February to April period.  The number of jobless claims decreased by 32,600 to 1.40 million in August, the lowest since February 2009.  The better-than-expected jobless rate figure indicates that the recovery has started creating employment, further suggesting an early interest rate hike from the Bank of England under its “forward guidance” policy.

The unemployment rate in South Korea decreased to 3.1% in August from 3.2% in July.  The number of employed people stood at 25.29 million, an increase of 432,000 from a year earlier, the largest year-on-year increase in eleven months. 

In Australia, the Westpac and Melbourne Institute index of consumer sentiment climbed to its highest level in nearly three years in September rising by 4.7% from 105.7 in August to 110.6. This is the highest level since December 2010.

France revised its budget deficit target for this year to 4.1% of GDP, well above its initial target of 3.7% and further in breach of the EU's 3% upper limit for the budget deficit measure.  At the same time, the economic growth forecast for next year was revised down to 0.9% from 1.2% previously, while adhering to its forecast of 0.1% growth for this year.

Developing EconomiesEast Asia and Pacific: Malaysia’s industrial output accelerated in July, rising 7.6% (y/y) from 3.7% (y/y) in June.  Mining provided the strongest boost with a 15.4 % (y/y) increase, followed by electricity and manufacturing with output growth of 6.2% (y/y) and 5.4% (y/y) respectively.  Month-on-month, industrial production advanced 1.9% (sa) in July on account mainly of manufacturing output growth which increased  2.5% (m/m, sa)in July, mitigating the 4.3% (m/m, sa) and 1.4% (m/m, sa) decline in mining and electricity production.

Europe and Central Asia: Hungary’s annual headline inflation eased in August.  Consumer price inflation was recorded at 1.3% (y/y) in August, down from 1.8% (y/y) in July, remaining well within the central bank’s target of 3%.  Food prices rose but prices of clothing and utility costs fell. Month-on-month consumer price inflation also fell in August, easing 0.3%. However, core inflation rose 3% (y/y) and 0.3% (m/m) in August.

Romania’s headline inflation also slowed in August.  The consumer price index rose 3.67% (y/y) in August, less than the 4.4% (y/y) increase recorded in July, but still above the central bank’s target of 3.5% for the year. On a monthly basis, the consumer price index fell 0.2% (m/m, sa) in August compared with the 0.44% (m/m, sa) fall recorded in July.

Latin America and the Caribbean:  Mexico’s industrial production fell 0.5% (y/y) in July, less than the June’s 2.4% (y/y). Output in the construction and mining sectors fell; while manufacturing output and electricity and water production rose. 

Sub-Saharan Africa: South Africa’s manufacturing output expanded a faster pace in July,  advancing 5.4% (y/y), considerably more than the 0.5% (y/y) increase in June on account of strong output growth in the basic iron and steel, non-ferrous metal products, metal products and machinery, food and beverage, and petroleum and chemical products sectors.

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