78093

                      DECPG Daily
        Economics and Financial Market Commentary
                       May 1, 2013
                            Damir Cosic, Eung Ju Kim, Tehmina Khan

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Jakarta stocks climb to record highs…US and Chinese manufacturing slow
Financial Markets… The dollar Index, which tracks the US currency against a basket
of six major currencies, fell to a two month low of 81.596 on Wednesday amid growing
expectations the Federal Reserve will maintain its monetary easing policy. The Fed is
purchasing $85 billion of bonds every month as a part of its stimulus program.
Global equities gained in April, outperforming bonds of all types, the dollar, and
commodities for a second month, as investors speculated stocks will benefit from
continued central banks’ stimulus policies. The MSCI global stock index rose 2.9%,
compared with an average gain of 1% for global bonds. The Dollar Index fell 1.5%,
while the S&P index of 24 commodities plunged 4.7%.
Indonesian stocks advanced for a third day, with the benchmark Jakarta Composite
index climbing 0.5% to a record high level, as bank earnings optimism offset concerns
about rising inflation. The index has gained 17% thus far this year, and it rose for a fifth
consecutive month in April, posting a gain of 1.9%.
High-income Economies…In another sign of softness in the US labor markets, private
sector payrolls showed an increase of 119,000 jobs in April (vs 131,000 in March), the
slowest pace in seven months. While the construction sector added 15,000 jobs,
manufacturing lost 10,000. Separately, Markit’s manufacturing purchasing managers’
index (PMI) fell to 52.1 in April, down from 54.6 in March, signaling the weakest pace of
expansion in six months led by a sharp slowdown in domestic order growth.
Moody’s cut Slovenia’s credit rating to Ba1– its highest "junk" bond rating – from Baa2
citing turmoil in the banking sector, deteriorating government finances and uncertain
funding prospects. The move has forced Slovenia to abandon a bond auction it hoped
would raise 2.2 billion euros ($3 billion).
UK PMI data showed that the slump in manufacturing eased in April, with the index
rising to 59.8 from 48.6 in March. Along with a gain in new business orders, production
recorded a modest growth during the month, after falling in both March and February.
Developing Economies…East Asia and Pacific: China’s manufacturing expanded at
a slower rate in April with the official PMI falling to 50.6 from 50.9 in March. The
moderation of growth in new orders and production led the declines. However, the PMI
has remained in expansion territory for seven consecutive months.


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Indonesia’s inflation eased in April to 5.6% (y/y), down from 5.9% in March due to lower
food prices. However, it was still above the upper limit of the central bank's target range
of 3.5-5.5%.
Europe and Central Asia: Russia’s manufacturing PMI softened in April to a four-
month low of 50.6, down from 50.8 in March. The slowdown was broad-based, with new
orders, employment and export orders all declining for the third month running.
Sub-Saharan Africa: Uganda’s inflation fell in April to 3.4% (y/y), down from 4% in
March on continuing deceleration of food price inflation. Core inflation also eased to
5.8%, down from an eight-month high of 6.8% in March and remains above the central
bank’s medium-term target of 5%.
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DECPG Daily is an informal briefing for Bank staff whose responsibilities require that they stay abreast of
changes in global markets. The views expressed here are those of the various authors and do not
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