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   Daily Economic News – Feb. 6, 2015


AUTHORS                Derek Chen (x-81602)                     Eung Ju Kim (x-85804)
                       Mizuho Kida (x-31943)



Equities, dollar, and bond yields rise after robust U.S. jobs data… U.S. jobs
growth better than expected in January… Emerging markets start 2015 in low
gear

Financial Markets

Stronger-than-expected U.S. job growth for January lifted European and U.S. stocks and pushed up
government bond yields on Friday as investors renewed speculation the Federal Reserve may move to
raise borrowing costs by mid-year. The dollar soared against the yen and the euro on the news, and oil
prices gained for a second day with Brent crude heading for a weekly gain of 7%, supporting bullish
market sentiment. U.S. 2-year Treasury yields climbed 10 basis points (bps) to 0.62%, while benchmark
10-year yields rose 11 bps to 1.92%, the highest level in two weeks. Meanwhile, developing-country
stocks retreated, trimming a weekly gain, as shares in Brazil and China slumped.




High Income Economies

U.S. non-farm payroll employment rose by 257,000 jobs in January compared to economist estimates for
an increase about 230,000 jobs. Revised data also showed that employment in November and
December jumped by 423,000 jobs and 329,000 jobs, respectively, reflecting a net upward revision of
147,000. Nonetheless, the unemployment rate edged up from a six-year low of 5.6% in December to
5.7% in January, exceeding economists’ expectations for an unchanged rate. The unexpected uptick in
the unemployment rate reflected a substantial increase by the size of the labor force, which swelled up by
1.05 million people. Meanwhile, average hourly earnings rose 0.5% (m/m) in January - the steepest
monthly increase since 2011 - putting the annual rate at 2.2%.

Disappointing economists who had been anticipating a 0.4% rise, German industrial production inched up
by a lackluster 0.1% in December, unchanged from November. The November figure was revised
upwards from an earlier estimate of a 0.1% fall. Year on year, production fell 0.7%, missing economists’
forecast for a 0.3% decline.


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The Japanese leading index, which measures expected future economic activity, climbed slightly less-
than-expected to 105.2 in December from 103.7 in November. Economists had expected the index to
rise to 105.4. The coincident index, reflecting current economic activity rose from 109.2 in November to
110.7, the highest score since May. At the same time, the lagging index, which measures the past
economic activity, dropped to 118.3 in December from 120.6 in November.



Developing Economies

Emerging markets grew at a slower pace in January, a survey by Markit Economics and HSBC bank
showed. The HSBC Emerging Market Index (EMI) declined to 51.2 in January from 51.7 in December, the
lowest reading since May, although a reading above 50 indicates expansion in activity. The overall
slowdown was driven by weak services activity, which slowed to an eight month low, while manufacturing
activity grew at to the fastest pace since August. Among the largest emerging economies, both Russia
and Brazil saw their output contract, while Chinese growth slowed for the fourth time in five months. India
bucked the overall lackluster trend, growing by one of the quickest rates in two y ears.

Latin America and Caribbean

Brazil's consumer price inflation accelerated to 7.14% (y/y) in January from 6.41% in December, the
highest level since September 2011 and well past the government's 4.5% inflation target. Month-on-
month, the prices rose 1.24% from 0.78% in December, the highest monthly rate in nearly 12 years.
Electricity rates and bus fares were among the biggest drivers of inflation last month, jumping by 8%.
Food prices also rose sharply last month, by 1.48%. Economists say the pent-up price pressure is so high
that inflation could stay above 7% throughout 2015.


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