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Prospects Daily: Japan affirms its monetary easing plans, US housing market continues recover, Russia industrial production slows

Financial Markets…The yen weakened to a three-year low against the euro on Wednesday, slumping to as low as 133.30 per euro in early trading, as the Bank of Japan affirmed its plan to expand the monetary base and upgraded its assessment of the economy. Weakening yen pushed the benchmark Nikkei stock index to the highest closing level since December 2007.

German bonds advance today for the first time this week, with the 10-year yield falling 3 basis points to 1.37%, after the nation sold €4.1 billion of bunds due in May 2013 at a yield of 1.41%, up from a record low of 1.28% at last month auction. Meanwhile, the country’s benchmark stock index snapped it’s record 11-day rally with the DAX sliding 0.2% in morning session.

Russia canceled the planned auction of 33.6 billion rubles ($1.1 billion) of December 2019 OFZ bonds today, marking the first cancellation of the government bond sale since October, amid rising borrowings costs. The yield on Russia’s current ruble bonds due 2019 jumped 11 basis points since Monday to a two-week high of 6.47%.

High-income EconomiesUS existing home sales rose to a three-year high in April. According to the National Association of Realtors existing home sales climbed 0.6% (m/m) to a seasonally adjusted annual rate of 4.97 million in April from an upwardly revised 4.94 million in March.

Consumer confidence in Australia fell sharply to its lowest level in May since August 2012 on concerns about the economy and deteriorating public finances. The Westpac and Melbourne Institute index of consumer sentiment fell 7% to 97.6 in May from 104.9 in April.

Consumer spending weakened in the UK with retail sales volume declining unexpectedly in April, by 1.3% (m/m sa) after a 0.6% fall in March. Sales excluding fuel, dropped 1.4% following a 0.7% fall in March.

Developing EconomiesEast Asia and the Pacific: Malaysia’s inflation edged up in April to 1.7% (y/y), up from 1.6% in March and the highest level in 11 months. Inflation picked up on the back of the rising food (up 3.8% y/y) prices.

Europe and Central Asia: Russia’s industrial production slowed to 2.3% (y/y) in April, down from 2.6% (y/y) increase in March. The slowdown was led by weak growth in manufacturing which grew by 1.2% y/y in April, down from 3.4% growth in the previous month.

Latin America and the Caribbean: Mexico’s retail sales grew by 0.25% in March (m/m sa), however, they contracted by 0.2% (q/q saar) for the entire 2013Q1, which is a slower pace of contraction than in the previous quarter when retail sales shrank 3.4% (q/q saar).

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