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Prospects Daily: Ukrainian financial markets tumble again amid shattered truce, Singapore revises Q4 GDP from contraction to growth, China’s manufacturing PMI falls to a seven-month low

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Financial Markets…Global equities moved lower on Wednesday as downbeat economic data from China and Eurozone and escalating turmoil in Ukraine dampened market sentiment. The benchmark MSCI world stock index dropped 0.5% to a 6-day low, with the MSCI developing-country stock index sliding 1.1%. Meanwhile, U.S. equities opened higher in morning trade with the S&P 500 and the Dow gaining 0.3% and 0.4%, respectively.

Ukraine’s financial markets tumbled again today as a new wave of deadly clashes shattered a truce declared last night by President Viktor Yanukovych and opposition leaders. The Ukraine’s benchmark stock index slumped 2.8%, extending its three-day loss to 8.8%, while the cost to insure the nation’s sovereign debt for 5 years against default using credit default swaps surged to 1,376 basis points, the highest level since 2009. Furthermore, 3-month non-deliverable future contracts on the Ukrainian currency jumped 1.7% to 9.9870 per dollar, reflecting a 10% depreciation during the period.

High Income Economies…U.S. first-time jobless claims fell by 3,000 to 336,000 for the week ended February 15, following the previous week’s reading of 339,000. At the same time, the four-week moving average for initial claims edged up 1,750 to 338,500, and continuing claims advanced 37,000 to 2.981 million for the week ended February 8.

Indicating that the economy did not lose much momentum despite widespread severe winter weather conditions, the Conference Board's U.S. leading economic index increased 0.3% (m/m) in January to 99.5. The uptick follows no change in December and a 0.9% increase in November. Despite slight downward revisions for November and December, the six-month average growth rate of the index suggests that the economy will remain resilient in the first half of 2014.

Revising earlier estimates that showed a contraction, the Singapore economy expanded in Q4 by 6.1% (q/q saar), besting the 2.7% contraction estimated in January and accelerating from Q3’s 0.3% growth. The improvement largely came from a 7.0% (y/y) expansion in the manufacturing sector, helped by a stronger electronics cluster and continued strong growth in transport engineering. Singapore also revised its 2013 GDP growth estimate to 4.1% from 3.7% reported in January, and maintained the growth forecast of between 2% and 4% for 2014.

Developing Economies…East Asia and Pacific: China’s preliminary or flash manufacturing Purchasing Managers’ Index fell for the second consecutive month in February, dropping to a seven-month low of 48.3 from 49.5 in January, moving further below the no-change 50 mark which denotes contraction and suggesting that conditions in the manufacturing sector continues to deteriorate. Driving the decline, new orders contracted due to weak demand, and export orders fell albeit at a slower pace than in January. Manufacturing output decreased and firms reduced their workforce for the fourth consecutive month and at a faster pace. Input costs and factory gate prices declined further in February.

Latin America and the Caribbean: Brazil’s unemployment rate rose for the first time in four months in January, climbing to 4.8% from December’s record low of 4.3%, but it was still lower than the 5.4% unemployment rate recorded a year. The January unemployment rate also came in below the consensus forecast of 5.1%, suggesting that the labor market remains strong. The number of unemployed rose 9.6% (m/m) in January but fell 12.6% (y/y); while the number of employed fell 0.9% (m/m) and remained unchanged year-on-year.

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