91104




  Daily Economic News – July 31, 2014


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



China’s stocks post biggest monthly gain since 2012…Eurozone’s
consumer price inflation slows to near 5-year low…Philippines’ central
bank hikes key policy rates


Financial Markets

China’s stocks rose on Thursday, sending benchmark indexes to their highest monthly gain since
December 2012, amid optimism government stimulus will boost economic growth. The Shanghai
Composite Index rose 0.9% to 2,201.56 at the close, the highest level since December 2012, for a
monthly gain of 7.5%. Meanwhile the CSI 300 Index advanced 1.2% for a July gain of 8.6%, and the
Hang Seng China Enterprises Index, or H-shares gauge, rose 0.2%, extending a rebound since a March
low to a 21.0% monthly gain.

U.S.’s stocks fell sharply on Thursday, with the S&P 500 falling below its 50-day moving average, viewed
as a sign of short-term momentum, a level it has not closed below since April 15, erasing its gains for the
month of July as concerns mounted over the strength of overseas economies and ongoing tensions with
Russia. Weak U.S. data also contributed to the bearish tone as jobless claims rose more than expected
and the Chicago business barometer fell unexpectedly in July to its lowest level since June 2013.


High Income Economies

Eurozone’s annual consumer price inflation slowed to 0.4% in July, its lowest level since October 2009,
following a 0.5% increase in June according to a flash estimate from Eurostat, underscoring concerns
about a risk of deflation. Expectations were for the inflation reading to remain unchanged at 0.5% in July.
Meanwhile core inflation, excluding energy, food, alcohol and tobacco, was steady at 0.8% (y/y). A
breakdown of the CPI showed that energy prices fell 1.0%, and prices of food, alcohol and tobacco
dropped 0.3%; while cost of services rose 1.3% and prices of non-energy industrial goods remained flat.
                                                                           th
U.S.’s first-time jobless claims rose to 302,000 in the week ended July 26 , an increase of 23,000, from
the previous week’s revised level of 279,000, which was a fourteen-year low. Economists’ forecast was
                                                    1
for jobless claims to rise to 301,000 from 284,000 originally reported for the previous week. Meanwhile,
the less volatile four-week moving average fell by 3,500 to 297,250, its lowest level since hitting 296,000
in April 2006. At the same time, continuing claims, a reading on the number of people receiving ongoing
                                                                                th
employment assistance rose to 2.539 million in the week ended July 19 from the previous week ’s
revised level of 2.508 million; while the four-week moving average of continuing claims declined by 9,000
to 2.535 million from the previous week, hitting its lowest level since October 2007.


Developing Economies

East Asia and Pacific
                         th
At its meeting of July 30 2014, Philippines’ central bank raised its key policy rates for the first time in
more than three years, citing signs of inflation pressures and elevated inflation expectations. The
overnight borrowing rate or reverse repurchase facility and overnight lending rate or repurchase facility
were raised by 25 basis points to 3.75% and 5.75%, respectively. Meanwhile, the rate on special deposit
accounts was left unchanged at 2.25% and the reserve requirements ratio was kept steady at 20%.

Latin America and Caribbean
Brazil’s producer price inflation slowed to 5.04% (y/y) in June, its lowest level since July 2013 when it was
4.98%, after climbing 6.56% (y/y) in May. On a monthly basis, producer prices fell 0.13% after decreasing
0.26% in May.

Sub-Saharan Africa
South Africa’s merchandise trade deficit fell sharply to ZAR 0.19bn in June, more than economists ’
forecast for a deficit of ZAR6.3bn, down from ZAR7.44bn in May. Contributing to this improvement,
exports increased 3.7% (m/m) in June, while imports fell 5.1% (m/m). For the January to June period, the
trade deficit totaled ZAR48.27bn up from ZAR35.57bn in the same period the previous year. During the
period, exports rose 9.3% (y/y) while imports increased 11.3% (y/y).



You’ll find recent issues of this Daily and lots of other current analysis and high -frequency data on our
GEM intranet website: http://go.worldbank.org/0TC32BNV30

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 :
dchen2@worldbank.org or gkambou@worldbank.org.




                                                      2