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  Daily Economic News – Jan. 26, 2015


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



Greece’s financial markets tumble on election outcome…Germany’s business
confidence reach a six-month high…Brazil’s consumer confidence drops to
record low


Financial Markets

Greek financial markets tumbled on Monday after the anti-austerity Syriza party won Greece’s general
election. Greek government’s benchmark 10-year yield rose 68 basis points to 9.09%, while the country’s
ASE stock index fell 3.25 with banking shares posting the biggest drop. Contagion beyond Greece was
limited as investors speculated that the ECB’s QE decision last week would stem any wider contagion.
Indeed, Italian and Spanish government bonds rallied, pushing their 30-year bond yields down to record
lows. Germany’s 10-year yields, the benchmark borrowing cost for the currency bloc, also touched a fresh
low of 0.299%.

Russian shares slumped and the ruble weakened amid escalating conflict in eastern Ukraine that raised
the possibility of tougher Western sanctions. Russia’s Micex stock index slipped 1.8%, trimming its year -
to-date gain to 18%, while the country’s dollar-denominated RTS stock index lost 4.8%, the biggest loss
among stock markets across the world. Russian currency weakened 3.4% against the dollar, posting the
worst performance among developing-country currencies.



High Income Economies

Germany’s Ifo Institute business confidence index improved in January for the third consecutive month to
reach a six-month high of 106.7, as falling oil prices and a weaker Euro increased business conditions
and expectations. The latest reading was better than December’s 105.5 and economists’ expectation of
106.4. The assessment of current conditions in January improved to 111.7 from 109.8 in December, while
a gauge of expectations rose to 102 from 101.3.

Greece’s victorious Syriza party moved quickly on Monday to form a government after winning
parliamentary elections on Sunday. Alexis Tsipras, the 40-year-old party leader, was sworn in as
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Greece’s youngest prime minister in 150 years. Syriza fell just short of the threshold for a majority in the
300-seat Parliament, forcing a coalition deal with a small right-wing party, the Independent Greeks. Mr.
Tsipras has promised to roll back austerity and to win forgiveness of some of Greece’s towering debt.

Singapore’s industrial production contracted 1.9% (y/y) in December, falling for the second consecutive
month following November’s contraction of 2.1%. The latest figure was better than economists’ forecast of
a much sharper 4.0% decline. Excluding biomedical manufacturing, production declined 2.1% in
December. For 2014 as a whole, the industrial production climbed 2.6% from 2013. On a monthly basis,
industrial production grew 1.8% (m/m sa) in December following a 1.0% fall in November.



Developing Economies

Europe and Central Asia

Russia’s industrial production expanded 1.7% (y/y) in 2014, supported by the ruble’s depreciation and a
ban on food imports from states that sanctioned Moscow. The expansion was led by 2.1% growth in the
manufacturing sector and a 1.4% expansion in mining. The industrial production growth, however, failed
to keep economic growth afloat. Russia's economic growth slowed to 0.7% in 2014 from 1.3% in 2013,
when industrial output grew by 0.4%.

Latin America and Caribbean

Brazil’s consumer confidence declined by 6.7% (m/m) to 89.8 in January from 96.2 in December,
reaching its lowest level since the series began in September 2005, the data from the think tank FGV
showed. The index, the main gauge of consum er confidence in Latin America’ largest economy, has
traced a nearly steady decline since April 2012 on mounting concerns about high inflation and sluggish
economic growth. The current conditions index also dropped to 88.5 in January from 96.8 in December,
and the expectations index dropped to 90.8 from 96.8 in December. Both current and expectations index
reached their historical lows.


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

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stay abreast of changes in global markets. The views expressed here do not reflect those of the World
Bank Group.
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