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Prospects Daily: Euro falls on rate cut expectations, German and US consumer confidence picks up, Croatia IP rebounds

Financial Markets…U.S. stocks rose to fresh records on Monday, with the S&P’s 500 Index climbing 0.7% to close at all-time high of 1,593.61, as investors cheered a better than expected report on pending sales of U.S. home and remained firmly on the prospect of an extension of the current stimulus programs by the Federal Reserve. The S&P has gained 1.6% thus far in April, and it surged 136% from a 12-year low in 2009.

The euro fell and European government bonds advanced as the Euro-zone’s rising unemployment and slowing inflation boosted the prospect of more stimulus by the European central Bank. The 17-nation currency fell 0.3% versus the dollar to $1.3055, after rising to $1.3121 in earlier trading. Germany 10-year bund yield slid to a nine-month low of 1.18%, while comparable French bond yield fell to a record low of 1.7%.

Asian stocks advanced today, with the benchmark MSCI Asia Pacific Index gearing for the highest closing since June 2008, amid growing expectations that central banks from China to Europe and the U.S. will maintain stimulus plans to bolster growth. The MSCI index has climbed 4.7% in April, extending gains for a six month, and the gauge has rallied 8.6% thus far this year.

High-income EconomiesGermany’s forward-looking GfK consumer climate index rose to 6.2 for May - its highest level in nearly six years, and up from 6.0 in April. Consumers' income expectations and willingness to buy were both up, though their view on how the overall economic situation will develop in the next year dropped slightly.

In the US, the Conference Board’s consumer confidence index jumped to 68.1 in April from an upwardly revised 61.9 in March, helped by a better outlook for the job market and expectations for higher pay. But the index remains well below the 90 readings registered prior to the 2009 global financial crisis.  

Japan’s industrial output grew by 8.0% (q/q saar) in March after a 7.1% fall in December. Separately, retail sales fell by 1.4% (m/m sa) in March, reducing the annualized growth rate to 2.6% (3m/3m saar) from 3.0% in February.

Spain reported a seventh consecutive quarter of economic decline, with GDP contracting by 2% (q/q saar), following a 3.1% contraction in Q4.  Separately, unemployment hit a new record of 27.2% in Q1, up from 26.0% in Q4.

Inflation in the Euro-zone fell to a 38-month low of 1.2% (y/y) in March from 1.7% the previous month. The rate has been below the ECB’s 2% ceiling since February. The March jobless rate advanced to 12.1%, the highest since the data series began in 1995.

Developing EconomiesEurope and Central Asia: Croatia’s industrial production grew by 4.1% (y/y) in March, up from a contraction of 4.1% in February led by expansion of energy production and intermediary products. Industrial production recovered during 2013Q1 as it grew by 3.5% (3m/3m, annualized), up from a contraction of 2.8% in 2012Q4.

Latin America and the Caribbean: Colombia’s central bank held its benchmark rate steady at 3.25%, after rates have been cut seven times by a total of 200 basis points since July 2012 and most recently by 50 basis points in March amid weakening growth. Inflation is below central bank’s target of 2-4%.

Middle East and North Africa: Tunisia's industrial production expanded 2.6% (y/y) in January, decelerating from its 3.5% advance in December. On a monthly basis, output dropped 2.5% (m/m) lower in January. Manufacturing and energy output posted slower growth in January, while mining output inched higher from a year earlier.