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Prospects Daily: Italian bonds slide, Eurozone producer price inflation slows, Turkey’s inflation eases

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Financial Markets… Italian government bonds weakened for a second day, with the benchmark 10-year yields approaching last week’s three month high of 4.96%, amid lack of progress in talks to form a new government. The loss was limited as the European Central Bank bond purchasing program prevented a sharper sell-off.

The euro fell versus the dollar on Monday, approaching a 2-1/2 month low of $1.2966 reached last week, after a series of weak economic data in euro-zone prompted speculation the ECB may cut interest rate further soon along with the political uncertainty in Italy. The 17-nation currency weakened 0.3% against the yen to 121.52.

Developing-country stock market index fell for a second day on Monday, with the MSCI Emerging Market Index sliding 1.1%, led by the sharpest decline since 2008 for Chinese property shares.  China’s Shanghai Composite Index tumbled 3.7%, posting the biggest loss among major stock indexes in Asia. Indonesia’s benchmark index slid 1% from a record high, Vietnam’s VN Index fell 1.8%, snapping a 3-day gain.

High-income EconomiesUS consumer sentiment continues to improve. The University of Michigan Consumer Sentiment final number for February came in at 77.6, up from preliminary 76.3 mid-month reading and the January final reading of 73.8.

South Korea’s manufacturing PMI rose to a 9-month high of 50.9 in February from January’s sub-50 reading of 49.9, led by rising orders. Industrial production has strongly rebounded since December, after contracting most of last year.

producer price inflation slowed to the lowest level in 6 months in January, to 1.9% (y/y) from 2.1% in December driven by easing energy, capital goods and durable consumer goods prices.

manufacturing PMI rose to 51.9 in February led by rising output and new orders. This is an improvement from the previous three months when it posted readings of around 50.4, although the rate of the expansion remains modest. 

Developing EconomiesEurope and Central Asia: Turkey’s inflation eased slightly to 7.03% (y/y) in February, from 7.31% in January. Alcoholic beverages, tobacco prices and housing costs registered largest increases. Inflation remains above the central bank’s target of 5%. Separately, producer price inflation, at the same time, remained unchanged at 1.84% (y/y) in February compared to 1.88 (y/y) a month ago.

Latin America and the Caribbean: Nicaragua’s monetary authority has revised the national accounts statistics for the 2007-2011 five-year period. For 2007, the real GDP growth rate has been revised up to 5.0% (from 3.6%), up for 2008 to 2.9% (from 2.8%), up for 2009 -1.4% (from -1.5%), down for 2010 to 3.1% (from 4.5%) and up for 2011 to 5.1% (from 4.7%) in 2011. In total, the average growth rate for the period was revised up to 2.9% from 2.8%.

Middle East and North Africa: Algeria’s inflation edged downwards in January to 7.8% (y/y) from 9.0% (y/y) the month earlier as food prices eased.

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