Important developments today:
1. Brazil to sell $500 million of international bonds
2. U.S. retail sales back on the rise
3. German investor confidence continues its decline
Brazil to sell $500 million of international bonds. Brazil’s government plans to raise about $500 million with the reopening of its global bonds that mature in 2041, according to a person close to the transaction. The last sovereign debt issue by Brazil was in July, when it raised $825 million with the reopening of its 2021 global bond. In a statement, Brazil’s Treasury said the country is retapping bonds without specifying the amount. The bonds will be offered to investors in North America and Europe on Tuesday, and some of securities will then be offered to Asian investors, according to the Treasury statement.
Recently, large Brazilian companies, including mining company Vale SA, the Brazilian Development Bank, and telecommunications company Telemar Norte Leste SA, have come to the international bond market. In the past week they raised a combined total of $6 billion. Brazilian corporates are taking advantage of near-record low borrowing costs amid growing investor appetite to secure long-term financing. More Brazilian companies are expected to tap the market soon.
U.S. retail sales back on the rise. For the second month running, U.S. consumers increased spending on groceries, clothing, sporting goods, health and personal care items, gasoline, and other general merchandise. Figures released today by the U.S. Department of Commerce show August retail sales jumped by 0.45% (m/m, saar), the highest increase in 5 months. Compared to a year ago the August figures were up 3.6% [see chart]. Against the backdrop of fall in retail sales in May and June, which raised concerns of the possibility of a double-dip among certain commentators, given the size of consumer spending in the U.S GDP (70%), the recent retail sales data bodes well for continued growth, even if at a more moderate level. Nonetheless, consumer spending will continue to be constrained by elevated levels of unemployment (9.6%) and the need to deleverage household indebtedness from their current high levels (household debt to income was 119% in Q1 2010).
Source: World Bank DEC Prospects Group and Thomson Reuters.
German investor confidence continues its decline, 5 months running. The ZEW index of investor expectations, which seeks to predict developments six months ahead, fell to a 5 month low of negative 4.3, according to a release today by the ZEW Center for European Economic Research in Germany. This fall should be seen against the backdrop of the very strong performance of the German economy in both Q1 and Q2 2010, on the back of the global rebound. Further, the slowdown in global growth and implementation of fiscal austerity in selected eurozone countries continues to weigh on investor sentiments going forward.
Among emerging markets:
In South Asia, India’s wholesale price index increased to 8.5% in August in y/y terms. In July the figure was 9.5%.
In Latin America and the Caribbean, Brazil retail sales increased 0.4% m/m and 10.9% y/y as released by the country’s national statistics office.
In Central Europe and the CIS, the Slovak Republic revised its forecast for the country’s GDP to 4% and 3.3% growth in 2010 and 2011 respectively, from a previous 3.2% and 3.8%, on account better expectations for the external environment.