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                      DECPG Daily
        Economics and Financial Market Commentary
                    January 26, 2011
 Mick Riordan (x31289), Cristina Savescu (x80812), Nadia Islam Spivak (x80504)
   Eung Ju Kim (x85804), Shane Streifel (x33867), Annette De Kleine (x34710)
  You’ll find recent issues of this Daily and lots of other current analysis and high-frequency data at our
              intranet website: http://gem or for external users http://www.worldbank.org/gem.

Emerging market equities gained the most in 2 weeks. Developing-country stocks
climbed the most since January 12 on Wednesday, as expectations for increasing
prices of semiconductors and higher raw-materials prices boosted technology and
commodity shares. The MSCI Emerging Market Index gained 0.6% in mid-day trading,
heading for the largest gain in two years. The gauge rose from a four-week low,
trimming 2011 year-to-date declines to 0.7%. Benchmark stock indexes in China,
Hungary, Indonesia, Poland, Russia, South Africa, South Korea, and Thailand all gained
more than 1% today. In contrast, Egypt’s benchmark EGX30 index plummeted 6.1%,
the biggest decline since November 2009, amid ongoing protests against the
government of President Hosni Mubarak. Emerging-market bond spreads over
comparable U.S. Treasuries tightened by 8 basis points (bps) to 240 bps today,
according to JPMorgan’s EMBI+ Index.
U.S. new home sales surge 17.5% in December 2010 (m/m). Closing off a disastrous
year for the homebuilding industry, in which new home sales dropped 12% to the lowest
levels since 1963, a 17.5% jump in sales during December was welcome news. This
follows last week’s release that purchase of existing homes ratcheted higher at year–
end as well, such that the a degree of dynamic is being returned to the market, with
buyers taking advantage of low mortgage rates and reduced prices.
The median price of a new home sold during December also picked-up, by 8.5% versus
year earlier levels to $241,500; the increase in values probably reflects the change in
the mix of sales toward the West of the country were prices are generally higher [see
Chart at http://gem or http://www.worldbank.org/gem. The supply of homes on the
market fell to 6.9 months, the lowest since April, at December’s sales pace. “This is
consistent with a gradual path of recovery�, notes Drew Matus of UBS Securities.
Among Emerging Markets ...in East Asia and the Pacific, in a bid to rein in speculative
investment in the domestic property market, China increased the minimum down-
payment for houses (other than the primary home) from 50% to 60% today, and
simultaneously asked local authorities to release more land for affordable housing
construction to ease supply bottlenecks. Home prices in Shanghai surged 26% in 2010
according to SouFun Holdings.
In Latin America and the Caribbean, Mexico's retail sales dipped 0.5% in November
from the previous month, as consumers remained shy of increasing spending amidst
the economic recovery. While retail spending is 2.4% above what was recorded last
year, median market forecasts had expected a rise of 4.3% over November 2009. In
Brazil, the benchmark IPCA consumer price index increased to 0.76% in the month to
mid-January (m/m) following a 0.7% gain in the previous monthly span. This
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corresponds to annual inflation of 6.04% for January compared to 5.8% recorded in
December, pushing inflation to the top of the central bank's target 2.5-6.5% band.

Recent issues and other current analysis are also available on the Prospects blog.
*****************************************************
The Daily Brief is a summary of economic news items for Bank staff whose responsibilities require that
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