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Prospects Daily: Ukrainian financial markets slump amid escalating civil unrest, U.K. unemployment at 7.2%, South Africa’s inflation accelerates

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Financial Markets…Ukraine’s financial markets slumped on Wednesday amid escalating civil unrest.  The nation’s benchmark stock index tumbled as much as 4.2% before parings the loss to 2.0%, and the yield on the government bonds due in June rose by 1,135 basis points to an all-time high of 34.27%.  Investors are dumping financial assets of Emerging Europe’s riskiest borrowers after Ukrainian President Viktor Yanukovych yesterday banned anti-government protests after clashes in Kiev killed at least 25 people.

Chinese shares rose to a two-month high as financial and energy stocks rallied.  The benchmark Shanghai Composite Index gained 1.1% to the highest level since December 18.  The gauge has bounced back 7.6% from its January 20 low as record new credit and encouraging trade data offset signs of a slowdown in the manufacturing sector.  The Shanghai index is currently valued at 8.2 times of the 12-month estimated earnings, compared with the 5-year average multiple of 12.3.

High Income Economies…Reflecting severe winter weather conditions across the country, U.S. home construction starts fell in January for a second month to an annual rate of 880,000, down 16.0% (m/m sa), following a 4.8% decline in December.  Applications for building permits fell in January for a third month, dropping 5.4% to an annual rate of 937,000.  Housing construction in 2013 rose 17.7 (y/y) to 976,000 units, the best showing since 2007.  The expectation is that housing will deliver another year of solid gains, helped by an improving economy.

The U.K. ILO unemployment rate posted at 7.2% for the three months to December, down 0.4 percentage point from July to September 2013 and down 0.6 percentage point from a year earlier.

Japan's leading indicator rose less than initially estimated in December, final data showed that the leading index posting 111.7 in December, down from the flash estimate of 112.1, but above November's reading of 111.3.  The coincident index, a measure of the current economic situation, climbed to 111.7 from 110.7 in November.  The lagging index, which gauges the past economic performance, improved to 114.7 from 114.1 in November.

Developing Economies… East Asia and pacific: Malaysia’s annual consumer price inflation rose for the fifth consecutive month to a new high in January, moving up to 3.4% from 3.2% in December, remaining above the government’s target of 2-2.8% for 2014.  Contributing to this increase, costs of food and non-alcoholic beverages rose 4.2% (y/y), prices of non-food products increased 3.0% (y/y), housing costs and utility prices edged up 3.2% (y/y), and transportation costs climbed 5.3% (y/y).  Month-on-month, prices rose 0.6% in January.
 
China’s Ministry of Industry and Information Technology announced on Tuesday, February 18, 2014, that the government’s industrial production growth target for 2014 is 9.5%, which is slightly lower than the 9.7% growth recorded in 2013.
 
Sub-Saharan Africa: South Africa’s annual headline inflation, measured by the consumer price index, accelerated to a 4-month high in January, rising to 5.8% from 5.4% in December, close to the 6% upper limit of the central bank’s inflation target, as the depreciation of the rand pushed food and transportations costs higher.  Transportation costs rose 7.8% (y/y) from 6.3% in December, and food and non-alcoholic beverage prices increased 4.3% from 3.5%.  Month-on-month prices rose 0.7% (m/m) in January, up from 0.3% in December.  The core consumer price inflation rate, which excludes food, non-alcoholic beverages, gasoline and energy costs, remained unchanged at 5.3% (y/y) in January. 
 

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