88298 Daily Economic News – May 2, 2014 AUTHORS Derek Chen (x-81602) Eung Ju Kim (x-85804) Gerard Kambou (x-32386) Strong U.S. jobs data lift dollar and stocks… U.S. employment jumps; unemployment rate drops to 6.3%… Turkey’s manufacturing PMI slows for second consecutive month in April Financial Markets U.S. equities gained, the dollar appreciated versus most its major counterparts, and yields on Treasuries rose after a larger than expected increase in U.S. job growth boosted market sentiment, offsetting some anxiety stemming from escalating unrest in Ukraine. The S&P 500 index advanced 0.4% to 1,891.24 in morning trade, passing its record close on April 2. The dollar strengthened 0.4% to $1.38141 per euro today after weakening to $1.3889 yesterday, and the greenback advanced 0.5% to 102.79 yen. Meanwhile, benchmark 10-year Treasury yields climbed 5 basis points to 2.66%. The Ukrainian government bonds fell on Friday, pushing benchmark borrowing costs to a six-week high, as the country’s troops moved on a stronghold for pro-Russia separatist, overshadowing investor optimism in the wake of the approval of the IMF ’s aid. The yield on the country’s benchmark dollar- denominated bonds due in 2023 jumped 23 basis points (bps) to 10.9%, extending its fourth weekly drops. The yield surged a record 173 bps in April and is up 67 bps this week. High Income Economies Posting the largest monthly increase since January 2012, U.S. non-farm payroll employment surged up by 288,000 jobs in April, on top of upward revisions to the job growth in the two previous months. Revised data showed that employment rose by 203,000 jobs in March and 222,000 jobs in February, reflecting a net upward revision of 36,000. With the stronger than expected job growth, the unemployment rate dropped more-than-expected from 6.7% in March to 6.3% in April, the lowest level since September 2008. Suggesting that the economic recovery is not yet strong enough to improve the labor market situation, Eurozone unemployment rate held steady at 11.8% in March, unchanged since December from February, 1 after revisions to data from the previous months. The number of unemployed in the euro area totaled 18.91 million in March, down by 22,000 from February and by 316,000 from a year ago. In March, the lowest unemployment rates were recorded in Austria, Germany and Luxembourg, while the highest figures were in Greece and Spain. Developing Economies East Asia and Pacific Indonesia’s annual consumer price inflation slowed further in April, easing to 7.25% from 7.32% (y/y) in March in line with expectations, but remained above the central bank ’s target range of 3.5%-5.5% for the year. Meanwhile Indonesia’s exports rose unexpectedly in March, advancing 1.24% (y/y), while imports fell but at the slower-than-expected pace of 2.3% (y/y). Nevertheless, the resulting trade surplus, amounting to US$673 million, was higher than the forecasted surplus of US$520 million. Elsewhere, survey data from HSBC/Markit showed the manufacturing sector growing at the fastest pace in 11 months. The HSBC manufacturing PMI for April was 51.1 up from 50.1 in March, bolstered by strong expansion in new orders, an increase in employment, and continued growth in purchasing activity. Europe and Central Asia Turkey’s HSBC manufacturing PMI slowed for the second consecutive month in April, coming in at 51.1 compared with 51.7 in March, but remained above the no-change 50 mark which denotes expansion. The new orders sub-index was at its weakest level since August 2013, reflecting subdued domestic demand; while export orders increased at the strongest pace since February 2011, reflecting improved conditions in key export markets. Overall, manufacturing production posted its weakest growth since July 2003, but firms stepped up purchasing activity and employment in the sector increased, indicating that underlying conditions remained positive. Input price inflation slowed to a 6-month low and, reflecting this slowdown, output prices rose at the slowest pace this year. South Asia India’s manufacturing purchasing managers’ index (PMI) was stable in April at 51.3, unchanged from March. Output growth in the sector remained weak, reflecting structural bottlenecks, and new order growth slowed amid the elections. At the same time, staffing levels rose for the seventh consecutive month in April and purchasing activity posted growth for the sixth consecutive month; while input price inflation and output prices charged by firms remained subdued. 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