73599


                      DECPG Daily
        Economics and Financial Market Commentary
                    October 25, 2012
           Allen Dennis (84812), Eung Ju Kim (85804), Sanket Mohapatra (37721),
                            Ekaterine T. Vashakmadze (36773)
  You’ll find recent issues of this Daily and lots of other current analysis and h igh-frequency data at our
                                    website: http://www.worldbank.org/gem

Financial Markets…U.S. and German government bonds declined, pushing the US
benchmark 10- year yield as much as 6 basis points to 1.85%, the highest since
Sep.17, while comparable German yield climbed as high as 11 bps to a five-week high
of 1.66% earlier, as improving market sentiment damped demand for the world’s safest
assets.
Credit-default swaps (CDS) for U.S. corporates declined for the first time in six days on
Thursday, with the Markit CDX North America Investment Grade Index sliding 1 basis
point to 97.7 bps amid a rebound in U.S. durable goods orders and an improvement in
jobless claims. CDS spreads for European companies also rallied.
Crude oil prices bounced back after dropping for five days, with West Texas
Intermediate for December settlement climbed as much as $1.02 to $86.75 a barrel in
New York trading, after reaching $85.73 yesterday, the lowest since July 10. Brent for
December delivery also rose 91 cents to $108.76 a barrel in London trading.
High-income Economies…After contracting for three consecutive quarters, UK’s GDP
rebounded by 1.0% (q/q) in the third quarter of 2012, ending Britain’s “double dip�
recession, helped by an upturn in services activity, including Olympic Games ticket
sales, and a rise in industrial output. GDP was flat on a year-on-year basis in the third
quarter, after contracting 0.5% in Q2.
US initial unemployment claims fell by 23,000 to 369,000 in the week ending October
20, as seasonal volatility at the start of the quarter wound down, but the four-week
moving average rose by a modest 1,500 to a 368,000. US durable goods orders rose
9.9% (m/m) in September, following a 13.1% decline in August, while so-called “core�
orders which exclude transportation rose 2% (m/m), reversing August’s 2.1% fall.
Italy’s retail sales were flat for the second month in August, while year-on-year sales fell
1% following a 3.2% decline in July, reflecting weak domestic demand.
Hungary’s retail sales declined at a slower pace of 2.4% (y/y) in August compared with
a 2.6% drop in July, helped by a 0.2% monthly increase in sales.
Singapore’s industrial output fell at a faster pace of 2.5% (y/y) in September (-1.8%
m/m) compared with a 2.3% fall in August, led by a 12.2% (y/y decline in electronics
output and a 8.9% decline in pharmaceuticals production, reflecting still anemic global
demand.
Developing Economies…The central bank of Botswana held its benchmark bank rate
unchanged at 9.5%. In September, the headline inflation rate rose to 7.1% (y/y) from
                                       1
6.6% in August due to higher fuel prices, remaining above the medium-term inflation
target range of 3-6%.
Brazil’s unemployment rate fell to 5.4% in September (a record low for the month) from
6% a year earlier, as employment was buoyed by a series of government stimulus
measures to spur expansion, including eliminating payroll taxes and other incentives to
companies that pledge to avoid firing workers.
The central bank of Georgia kept its refinancing unchanged at 5.75% stating that it is
expecting inflation to meet the bank's 6% rate in the medium term.
Mexico posted its biggest trade surplus in six months in September ($437mn), as a
slump in imports (-1.44% m/m) outweighed broadly flat exports (-0.05% m/m).
Manufacturing exports, however, fell by a larger 0.33% (m/m), dragged down by a 0.8%
fall in automotive exports, a mainstay of Mexico's recent export performance.
The central bank of Namibia kept its repurchase rate unchanged at 5.5% to support
economic activity at a time of weak global growth, but signaled concern over rising
household debt. The inflation rate rose to 6.7% (y/y) in September from 5.8% in August
on higher food and energy prices.
The Philippines’ central bank cut overnight rates by 25 bps to a new low of 3.5% for the
borrowing window and 5.5% for the lending facility, as the headline inflation was at the
midpoint of the country’s 3 to 5% target band.

            .Recent issues and other current analysis is also available on the Prospects blog

*****************************************************
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
necessarily reflect those of the World Bank Group's Executive Directors or the countries they represent.
The content is subject to copyright and is not for quotation outside of the World Bank. The Prospects
Group of the World Bank is pleased to share this content under the agreed terms and conditions of use.
Feedback and requests to be added to or dropped from the distribution list may be sent to
adennis@worldbank.org.




                                                    2