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Prospects Daily: Developing-country stocks gain, Eurozone business sentiment rises for consecutive sixth month, China’s manufacturing growth on track to strengthen

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Financial Markets…Irish government securities advanced, with the benchmark 10-year bond yield sliding to as low as 3.84%, after Moody’s Investors Service raised its credit outlook on the country’s debt. Additionally, risk premium that investors demand for buying Irish 10-year bonds instead of similar-maturity German bunds fell to 187 bps, the lowest since May 2010.

Most developing-country stocks gained on Monday as Chinese manufacturing jumped to a six-month high in September, signaling that a recovery in the world’s second largest economy is gaining momentum. China’s Shanghai Composite Index gained 1.3%, the most in 2 weeks, while benchmark stock indexes in Romania and the Philippines advanced at least 0.8%. In contrast, Thailand’s SET Index plunged 3.4%, while India’s S&P BSE Sensex lost 1.8%.

High Income Economies… Rising for the sixth consecutive month to 52.1 in September from 51.5 in August, the Markit Eurozone Purchasing Managers' Index (PMI) Composite Output Index is at a 27-month high, signaling the largest rise in activity since June 2011.  Measuring activity in both manufacturing and services sectors, the latest flash estimate showed that the upturn, predominantly driven by new orders, was broad-based across both sectors, although only services saw growth accelerate in September.  The Service Sector PMI advanced from 50.7 in August to 52.1, the highest since June 2011, while the manufacturing PMI fell to 51.1 from 51.4 in August, which nonetheless, signaled that manufacturing output rose for the third straight month.

Private sector activity in Germany and France strengthened in September, helped by strong performance of the service sector. The German composite PMI advanced to an 8-month high of 53.8 from 53.5 in the prior month, while the French composite PMI reached a 19-month high of 50.2 in September, up from 48.8 in August.

Edging down to 52.8 in September from 53.1 in August, the Markit Flash U.S. Manufacturing PMI suggested a modest improvement in manufacturing business conditions.  The flash PMI index, based on approximately 85% of usual monthly survey replies, indicated that manufacturing sector growth was the weakest since June as the growth of new orders and job creation slowed and exports orders declined.

Developing Economies… East Asia and Pacific: China’s manufacturing growth strengthened in September, with the headline purchasing manager’s index rising to 51.2 in September up from 50.1 in August as new export orders rebounded.  The September PMI reading was the highest in six months.

Malaysia’s unemployment rate edged up to 3% from 2.7% in June, but remained below the 3.4% in May.  Year-on-year the unemployment rate has declined by 2 percentage points.

Europe and Central Asia: Turkey’s tourist arrivals surged in August, rising 10.6% (y/y) following an increase of just 0.5% in July. Over the period January-August, tourist arrivals increased 10.6% from the same period a year ago. 

Latin America and the Caribbean: Argentina’s GDP rose 8.3% (y/y) in the second quarter of 2013 compared to the same quarter the previous year, its fastest pace in two years, owing to robust output growth in the agricultural and manufacturing sectors, which grew 26.9% (y/y) and 4.1% (y/y), respectively. 

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