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Prospects Daily: Strong U.S. jobs data pushed stocks and dollar higher, India’s HSBC Composite Output Index at 16-month high in June

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Financial Markets

Further signs of strengthening in the U.S. Jobs market pushed U.S. stocks to new record highs and the dollar and U.S. bond yields climbed as well on Thursday. The Dow Jones Industrial Average broke above 17,000 for the first time, while the S&P 500 climbed closer towards the 2,000 milestone. The greenback also gained in the currency market as the prospect of higher interest rates set the U.S. dollar apart from its major counterparts that are adding to currency-debasing. Meanwhile, the benchmark 10-year Treasury yield increased as much as 6 basis points to 2.69%, the highest level in two months.

The European Central Bank left its key interest rates unchanged at record lows today, shifting the markets’ focus onto when the central bank will provide more information on last month’s unprecedented stimulus package. Investors have been waiting more details on how the plan will work and have speculated the implications for how long borrowing costs will remain near zero. Notably, the degree of monetary policy normalization is diverging among the main high-income central banks. Stronger economic picture in both the U.S. and U.K. has allowed their central banks to start talking about the end of crisis-era monetary support, while a still-weak Euro Area and Japan are likely to keep their accommodative monetary police for an extended period of time.

Developing Economies

Europe and Central Asia

Turkey’s annual consumer price inflation slowed in June to 9.2%, down from 9.6% in May owing to slowing food prices, but remained above the central bank’s target of 7.6% for 2014. Year-on-year, prices of food and non-alcoholic beverages rose 12.5%, slowing from 14.1% in May. Month-on-month consumer prices rose 0.3% in June following a 0.4% increase in May. The country’s producer price inflation also slowed in June, rising 9.7% (y/y) after increasing 11.3% in May. Month-on-month producer prices rose marginally to 0.06% in June following a 0.5% decline in May.

South Asia

Reflecting a rapid increase in output in the manufacturing and service sectors, India’s HSBC Composite Output Index rose to a 16-month high, seasonally adjusted 53.8 in June from 50.7 in May, moving well above the no-change 50 mark, which indicates expansion. Notably, the HSBC Services Business Activity Index rose to a seasonally adjusted 54.4 in June, a 17-month high, up from 50.2 in May.

Sub-Saharan Africa

South Africa’s HSBC/Markit Purchasing Managers’ Index fell for the third consecutive month in June to 49.5 down from 49.7 in May, remaining below the no-change 50 mark which denotes contraction, as private sector output and new orders continued to decline. Meanwhile both input and output prices rose at a faster pace in June, but labor costs slowed.

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