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    Daily Economic News – July 1, 2014


AUTHORS                Derek Chen (x-81602)                      Eung Ju Kim (x-85804)
                       Gerard Kambou (x-32386)



Global equities advance on strong Chinese data… Eurozone PMI dips
as French downturn deepens… China’s manufacturing PMI improves
in June


Financial Markets

Global stock markets started the second half of 2014 on a strong note, supported by solid Chinese
manufacturing data. Encouraging U.S. and Japan factory figures also pushed shares prices higher.
Europe’s Stoxx 600 index advanced 0.9%, the most in nearly two months, while the benchmark MSCI
Asia Pacific index climbed 0.3%, heading for the highest closing in 6 years. The MSCI developing-country
stock index also gained 0.1%, after climbing 5.6% in the second quarter, the largest quarter gain since
September 2012. U.S. equities opened higher as well with the S&P 500 index rising to a fresh record
high.

Ukraine’s government bonds retreated on Tuesday as the country’s military resumed its campaign
against pro-Russian rebels in the violence-torn east, increasing the possibility of a prolonged conflict. The
yield on the country’s dollar-denominated bonds due in 2017 jumped 29 basis points to 9.10%, the most
in two weeks. The country’s currency also weakened for the first time in four days, sliding 0.6% to
11.8250 per dollar and extending its depreciation against the dollar in the past 6 months to 30%.


High Income Economies

The Institute for Supply Management (ISM) purchasing managers index (PMI) for the U.S. unexpectedly
edged down to 55.3 in June from 55.4 in May, although a reading above 50 still indicates growth in the
manufacturing sector. Economists had forecast the index to inch up to 55.8. The modest decrease by
the headline index was partly due to a slowdown in production growth, as the production index dipped to
60.0 in June from 61.0 in May.



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The Eurozone unemployment rate remained unchanged at an elevated level in May as flattening recovery
in Q2 strained job creation. In line with economists ’ estimates, the jobless rate held steady at a
seasonally adjusted 11.6% in May, after April's figure was revised down from 11.7%. The overall EU28
jobless rate fell marginally to 10.3% in May from 10.4% in April. The lowest rates were registered in
Austria, Germany and Malta, while Greece and Spain logged the highest rates.

At the same time, providing some indication that the upturn is losing momentum, the Markit PMI for the
Eurozone manufacturing sector dipped to a seven-month low of 51.8 in June, down from 52.2 in May and
below the earlier flash estimate of 51.9. The decline came as growth of output and new orders slowed.
Among member countries, operating conditions brighten in Spain and Ireland, but France fell further into
contraction territory.


Developing Economies

East Asia and Pacific

China’s official manufacturing Purchasing Managers ’ Index improved in June, rising to 51.0 up from 50.8
in May. The improvement was broad-based with nine out of the 12 indices showing increases. Meanwhile
Markit/HSBC’s final estimate of China’s manufacturing PMI for June came in at 50.7, slightly less than the
flash estimate of 50.8 but up from 49.4 in May, rising above the no-change 50 mark which signals
expansion, with new orders and factory output increasing at a fast pace. However, staffing levels
remained weak while input costs rose for the first time since December 2013.

South Asia

India’s manufacturing sector continued to strengthen in June. HSBC manufacturing PMI rose to 51.5 in
June from 51.4 in May. Output and new orders continued to expand as domestic and foreign demand
remained robust; but employment in the sector rose marginally, and both input and output prices
increased.

Sub-Saharan Africa

South Africa’s manufacturing PMI rose to 46.6 in June, up from 44.3 in May, continuing to remain below
the no-change 50 mark which indicates contraction. This improvement was due mainly to a sharp
increase in the employment index which rose to 49.3 in June from 37.2 in May. Meanwhile, the new sales
orders index fell to 43.9 from 44.8; and, reflecting a slowdown in demand, the business activity index
declined for the third consecutive month to 39.5 in June, its lowest level since July 2011. The price index
in the manufacturing sector rose as weakness in the exchange rate pushed up prices of imported inputs.




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See also our Prospects blog: http://blogs.worldbank.org/prospects

The Daily Economic News is an informal briefing for Bank staff whose responsibilities require that they
stay abreast of changes in global markets. The views expressed here do not reflect those of the World
Bank Group.
Feedback, and requests to be added to or dropped from the distribution list, may be sent to :
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