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Prospects Daily: Developing-country stocks bounce back…Japanese industrial production accelerates…Vietnam GDP growth up slightly

Global Macroeconomics Team's picture
Financial MarketsThe dollar gained against the yen but fell versus the euro on the last trading day of the quarter and the month as fears of an imminent scaling back of the U.S. stimulus program faded. The U.S. currency was up 0.6% to 98.94 yen today, but it has lost 1.4% to Japan’s currency this month. The euro gained 0.4% against the dollar to $1.3090, extending its quarterly gain to 2.1%.

Developing-country stocks rose today, gearing for the biggest weekly gain in nine months, as China’s credit crunch eased and Federal Reserve officials continued to downplay the prospect of an early withdrawals of U.S. stimulus. The benchmark MSCI Emerging Market Index rallied 1.8%, extending its weekly gain to 3.9%, the most since September. The index has declined 7.3% thus far this month, set for the steepest drop since May 2012.

Foreign investors pulled the most money out of Indian stocks this month in almost two years amid concerns that the country’s government finances will worsen when the U.S. Federal Reserve scale back its bond purchasing program.  Foreign funds sold a net of $1.76 billion of local stocks in June through today, the largest since the $2.1 billion outflows in August 2011. They also reduced debt holdings by $5.4 billion after increasing them for the previous six months.

High-income EconomiesJapanese industrial production growth accelerated to an annualized 7.2% pace in the three months ending in May (3m/3m saar), from 5.2% in April (and from 2.3% in Q1). Japan’s consumer price index (CPI) decline slowed to -0.3% (y/y) in May from -0.7% in April. Japan’s official core CPI was flat in May (y/y), marking the first time it has stopped falling in 14 months. 

German retail sales growth picked up to an annualized 4.5% in the three months to May (3m/3m saar) following a 3.3% increase the previous month. Germany’s EU-harmonized HICP inflation rose to 1.9% (y/y) in June from 1.6% in May, mainly due to sharp increases in food and energy prices.

Euro Area economic confidence rose to a 13-month high in June, with the EC’s economic sentiment indicator rising to 91.3 from 89.5 in May. An improvement in industry confidence was driven by more positive assessments of overall orders, particularly export orders. Consumer confidence improved for the seventh consecutive month, with consumers less pessimistic of their future economic situation.  

US consumer confidence was slightly below a six-year high in June, according to the Thomson Reuters/University of Michigan’s index of consumer sentiment which was revised up to 84.1 in June, higher than the 82.7 initially reported, and slightly below the 84.5 recorded in May.  

South Korea’s industrial production declined at a faster annualized 12.3% pace in the three months ending in May (3m/3m saar) following a 10.3% annualized decline in April.

Developing Economies…East Asia and Pacific: Vietnam’s GDP grew by 5% (y/y) in 2013Q2, following the revised 4.8% (y/y) growth in the previous quarter. Despite the uptick, growth is behind the government’s target and is historically low (average growth over last two decades is 7.5%), and has been propped up by repeated rate cuts. Vietnam’s central bank has cut its lending rate eight times since the beginning of 2012, with the refinancing rate at 7% and the discount rate now at 5%. The government also announced it will set up an asset company to take on bad debts from the banks.

Europe and Central Asia: Albania’s trade deficit shrank to USD207mn in May 2013, a drop of more than 10% compared with the same month of 2012. The narrowing in the trade gap is the result of rising exports, which grew by 15.6% y/y in May and 16.2% in January-May. In contrast, imports fell by 5.7% y/y in the first five months of the year, despite an increase of 1.1% y/y in May. Albania's biggest foreign market remains the EU, representing nearly 70% of the country's trade turnover in January-May period.