Equities tumbled in January S&P/Citi-Group BMI Global Index, ch%
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The External Environment for Developing Countries
February 2008The World Bank
Development EconomicsProspects Group
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Equities tumbled in January S&P/Citi-Group BMI Global
Index, ch%
-20
-15
-10
-5
0
5
10
15
20
25
Emerging MarketsMature Markets
Source: Standard &
Poor’s.
January 2008
3 months:from October 2007
1 year:from January 2007
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140
240
340
440
540
640
740
Jan-07
Feb-07
Mar-07
Apr-07
May-07
Jun-07
Jul-07
Aug-07
Sep-07
Oct-07
Nov-07
Dec-07
Jan-08
Feb-08
Source: JPMorgan-Chase and Thomson/Datastream
Spreads widen, but yields stable EMBIG spread and U.S. 10-year T-note,
basis points
EMBIG spreads
U.S. 10-year Treasury note
EMBIG yields
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Industrial countries
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4.8 4.9
0.6
-4.0
-2.0
0.0
2.0
4.0
6.0
Q3-2007 P Q3-2007 F Q4-2007
Source: Department of Commerce and DECPG calculations.
U.S. GDP growth falls to 0.6% in fourth quarter as housing takes a toll
growth of real GDP, and contributions to growth in percentage points
Net exportsGovernmentConsumption
Fixed InvestmentChange in stocks
Growth 2007 2.2%
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-35-30-25-20-15-10
-505
1015
Source: National Assn of Realtors and Department of Commerce.
Existing home sales
U.S. new home sales drop 33% over 2007– worst in 45 years
existing and new home sales, ch% 3mma y/y
New home sales
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3.0
4.5
6.0
7.5
9.0
Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08
40
80
120
160
200
240
280
Source: Departments of Labor and Commerce.
Employment [R]
Retail sales [L]
Employment decline in Januarypoints to weaker retail spending ahead retail sales, ch% 3mma y/y [L], change in
employment 3mma [R]
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1.5 1.3
3.7
-2.5
0.0
2.5
5.0
Q3-2007 P Q3-2007 F Q4-2007 P
Source: Cabinet Office and DECPG calculations.
Japanese GDP jumps to 3.7% growth in fourth quarter on exports
growth of real GDP, and contributions to growth in percentage points
Net exportsStocks
Fixed InvestmentGovernmentConsumption
Growth 2007 2.1%
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Japan’s public-sector and residential investment show sharp declines
public- and residential investment, share of real GDP, percent
0
3
6
9
Q1 2005 Q3 2005 Q1 2006 Q3 2006 Q1 2007 Q3 2007
Source: Cabinet Office through Thomson/Datastream.
Public investment
Residential investment
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Japan’s orders momentum up in December supporting exports and production export volume and IP, ch% saar [L]
machinery orders ch% saar [R]
-15
-10
-5
0
5
10
15
20
25
Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07
-25
-15
-5
5
15
25
35
45Exports [L]
Industrial production [L]
New machinery orders [R]
Source: Cabinet Office through Thomson/Datastream.
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0
1
2
3
4
Euro Area Germany France Spain
2007-Q2 2007-Q3 2007-Q4
Euro Area growth eases in fourth quarter on consumer and exports
percent change
Source: EuroStat.
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German exports and production dampened by euro strength
export volumes and IP ch% 3mma, y/y
0
2
4
6
8
10
12
14
16
Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07
Source: Eurostat through Thomson/Datastream.
Production
Exports
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ECB hints at cut in policy rates as Euro Area growth slows
HICP inflation (ch% y/y) [L]; Germany IP ch% saar [R]
1.0
1.5
2.0
2.5
3.0
3.5
Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08
0
3
6
9
12
Source: Eurostat and Bundesbank.
Germany IP [R]
HICP inflation (y/y) [L]
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Industrial production
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-6
-4
-2
0
2
4
6
8
Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08
Possible contraction of industrial production in the Euro-zone in 2008-Q1
Euro Area industrial production, 3mma ch%, saar
Source: DECPG
Forecast
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-10
-5
0
5
10
15
Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08
Has the slowdown in U.S.- and Mexican IP bottomed out?
Industrial production, 3mma, ch% saar
United States
Mexico
data forecast
Source: DECPG
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-15
-5
5
15
25
35
Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08
IP growth appears to be moving “sideways” in East Asia
Other EAP countries
China
forecastdata
Source: DECPG
Industrial production, 3mma, ch% saar
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High-tech Markets
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The tech-cycle has been truncatedby global growth uncertainties and delayed
investment spending global semi-chip sales and high-tech
exports, ch% saar
-20
-10
0
10
20
30
40
Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07
Source: SIA, Thomson/Datastream, Haver.
Exports
Semiconductor sales
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Production trends still at lofty rates but signs of downturn emerging
unit value index in USD terms, ch% year-on-year
0
5
10
15
20
25
30
Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07
Global
East Asia x Japan
Source: National Agencies and DECPG calculations.
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-20
-10
0
10
20
30
40
Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07
Source: National Agencies and DECPG calculations.
G-3 high-tech orders back in negative territory
G-3 orders for high-tech manufactures, US dollar terms, ch% saar
G-3 High-tech orders
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International trade
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Developing countries are now key drivers of global imports and trade
contribution to global import growth, ch% year-on-year
-6
-4
-2
0
2
4
6
8
10
Source: National Agencies through Thomson/Datastream.
Developing country imports
U.S. imports
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Gap between developing export- and high-income import- growth widens
growth (USD, y/y percent) developing country exports and high-income imports
-10
0
10
20
30
Source: National Agencies through Thomson/Datastream.
Developing country export volumes
High-income import volumes
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Large emerging economies’ import growth and contributions strengthen contribution to global import growth,
ch% year-on-year
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Source: National Agencies through Thomson/Datastream.
China
Russia
India
Brazil
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Oil prices
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Crude oil prices remain elevated
50
60
70
80
90
100
Jan-07Apr-0
7Jul-0
7Oct-0
7Jan-08
$/bblWTI
BrentDubai
Source: DECPG Commodities Group.
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OPEC maintaining production levels
21
22
23
24
25
26
27
28
29
30
31
Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08
OPEC-10 Quota
OPEC-10
Including Iraqmb/d
Source: OPEC and DECPG Commodities Group.
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Thermal coal prices surge on weather supply problems in Australia, China and South
Africa
0
20
40
60
80
100
Jan-96 Jan-98 Jan-00 Jan-03 Jan-04 Jan-06 Jan-08
Australia Thermal Coal $/ton (fob)
WB Oil Price $/bbl
Source: DECPG Commodities Group.
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Non-oil commodity prices
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Grains prices surge on strong competition for feed, food and fuel
4
6
8
10
12
14
Jan-06Jul-0
6Jan-07
Jul-07
Jan-08
1
2
3
4
5
$/bushel
Soybeans
Corn
Wheat
$/bushel
Source: DECPG Commodities Group.
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Aluminum prices rise on electric power disruptions
1600
1800
2000
2200
2400
2600
2800
3000
3200
Jan-05Jan-06
Jan-07Jan-08
400
600
800
1000
1200
1400
1600
$/ton ‘000 tons
Aluminum price
LME stocks
Source: LME and DECPG Commodities Group.
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Global steel production growth slowing
0
5
10
15
20
25
30
35
40
45
Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08
China Other Asia Europe
FSU Other N America
mil tons
Source: LME and DECPG Commodities Group.
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International Finance
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Sharp decline in bank lending and equity placement in January
Source: DECPG Finance Team.
Gross capital flows to emerging markets
$ billion 2005 2008
Total H1 H2 Total H1 H2 Total Jan
Total 361 209 285 494 357 326 683 21
Bonds 126 63 74 137 107 39 146 7
Banks 175 103 142 246 164 180 343 8
Equity 59 43 67 111 86 107 194 6
Lat. America 87 51 65 116 69 88 157 6
Bonds 43 17 24 41 31 14 45 4
E. Europe 129 76 103 179 156 96 252 4
Bonds 55 28 36 64 50 14 64 1
Asia 107 56 97 153 100 113 213 10
Bonds 21 8 11 19 18 6 23 3
Others 38 26 20 45 32 28 60 1
2006 2007
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Equities tumbled in January S&P/Citi-Group BMI Global
Index, ch%
-20
-15
-10
-5
0
5
10
15
20
25
Emerging MarketsMature Markets
Source: Standard &
Poor’s.
January 2008
3 months:from October 2007
1 year:from January 2007
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All sectors lost ground in January Total return by sector (based on
MSCI world stock indices)
-20 -10 0 10 20 30 40
Utilities
Telecomm
Info-tech
Financials
Healthcare
Consumer Staple
Consumer Disr
Industrials
Materials
Energy
2008 to date
2007
Source: Bloomberg and DECPG calculations.
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140
240
340
440
540
640
740
Jan-07
Feb-07
Mar-07
Apr-07
May-07
Jun-07
Jul-07
Aug-07
Sep-07
Oct-07
Nov-07
Dec-07
Jan-08
Feb-08
Source: JPMorgan-Chase and Thomson/Datastream
Spreads widen, but yields stable EMBIG spread and U.S. 10-year T-note,
basis points
EMBIG spreads
U.S. 10-year Treasury note
EMBIG yields
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Large credit write-downs reported by major banks
0 5 10 15 20 25
Barclay's
Wachovia
Deutsche Bank
JP Morgan
HSBC
Bank of America
Morgan Stanley
UBS
Merrill Lynch
Citigroup
Total write-downs, billions U.S. dollars
Source: Bloomberg.
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100
200
300
400
500
600
Jan-07
Feb-07
Mar-07
Apr-07
May-07
Jun-07
Jul-07
Aug-07
Sep-07
Oct-07
Nov-07
Dec-07
Jan-08
Feb-08
Source: JPMorgan-Chase.
Corporate default risk at record highs Credit default swaps, basis points
CDSs on benchmark European exchange
CDSs on the North American index
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Currencies
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88
90
93
95
98
100
103
105
Jan-07
Feb-07
Mar-07
Apr-07
May-07
Jun-07
Jul-07
Aug-07
Sep-07
Oct-07
Nov-07
Dec-07
Jan-08
Feb-08
Source: Thomson/Datastream.
Dollar in holding pattern against the majors since mid-January
index, LCU per USD, January 1, 2007 = 100
euro
yen
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U.S. capital inflows up since August 2007– demand for Treasuries falling
billions U.S. dollars
-60
-30
0
30
60
90
120
150
180
Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07
Source: TICS data system: U.S. Treasury.
o/w Treasuries/Agencies
Net foreign purchases of U.S. securities
o/w Private securities
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88
90
93
95
98
100
103
105
108
110
Jul-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08
Source: Thomson/Datastream.
Commodity currencies tradingslightly stronger against the dollar
index, LCU per USD, July 1, 2007 = 100
A$rubleBrazil Rl
C$
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The External Environment for Developing Countries
February 2008The World Bank
Development EconomicsProspects Group