German borrowing costs fall below zero Financial Markets The yield on Germany’s government debt fell below zero for the first time on Tuesday on growing concerns about a potential Britain’s exit from the European Union. Polls showed a growing chance a Brexit vote will prevail in the June 23 referendum. Benchmark German 10-year Bund yields dropped as much as 4 basis points (bps) to minus 0.032 percent, the lowest on record. The country joined Japan and Switzerland having 10-year government bond yields of less than zero. Emerging-market assets fell for a fourth day as investors turned more bearish on deepening Brexit concern. MSCI’s gauge of emerging-market stocks dropped 0.8 percent with equity indexes from Russia and South Africa sliding at least 1.2 percent. The gauge has extended its four-day decline to 4.6 percent. Russians’ rubble weakened against the dollar for a third day and the Hungarian forint led declines among developing-country currencies. The premium investors demand to buy emerging-market bonds rather than U.S. Treasuries widened 5 basis points (bps) to 405 bps, according to JPMorgan’s bond index. Advanced Markets U.S. retail sales went up 0.5 percent (m/m) in May, following a 1.3 percent jump in April and above market expectations of a 0.3 percent increase. This was the second straight month of sales increase, reflecting steady gains in consumer spending, with the current figures buoyed broad-based increase in all major categories. The Euro Area industrial production expanded 1.1 percent (m/m, sa) in April, following a contraction of 0.7 percent in March, and above the market forecast of 0.8 percent gain. The rebound was boosted by a surge in the output of consumer durables and non-durable goods and capital goods. Except for Spain, Latvia, Lithuania, and Luxembourg, all the member states registered positive industrial production readings. On a yearly basis, output grew 2 percent in April, the highest increase in three months, compared to a 0.2 percent rise in March, and better than the market expectations of a 1.4 percent gain. U.K.’s inflation rate held steady at 0.3 percent (y/y) in May, similar to the April reading, and below the market expectations of a 0.4 percent increase. The increase in consumer prices were driven by rising transport cost, which was offset by deflationary pressures from falling food and clothing costs, according to the Office for National Statistics. Excluding food and energy, inflation rate was 1.2 percent in May, unchanged from April, and below the economists’ forecast of a 1.3 percent gain. Japan’s industrial production was revised upwards to 0.5 percent (m/m) in April (the period when it was struck by two earthquakes), up from the earlier estimate of 0.3 percent gain, and higher than the earlier market expectations that output would shrink 1.3 percent. Year-on-year, output fell 3.3 percent, lower than the 3.5 percent drop originally recorded. Emerging and Developing Economies Middle East and North Africa 1 Reaching the largest gain since Q4 2013, Moroccan manufacturing production rose 2.1 percent (y/y) Q1, after a 0.8 percent gain in Q4. Production of food, chemicals, automobiles, leather and non-metallic mineral products increased, while output of metal products, textiles, furniture and plastics fell. Sub-Saharan Africa Rwanda's economy advanced 7.3 percent (y/y) in Q1, following a 7 percent rise in Q4. The expansion was mainly boosted by agriculture, forestry and fishing, services, industry, trade and transport. On a quarterly basis, the GDP contracted by 0.7 percent. Nigeria’s consumer prices rose 15.6 percent (y/y) in May, following a 13.7 percent rise in April. It was the highest reading in more than 6 years, as cost of food, housing, utilities and transport surged mostly due to 67 percent increase in gasoline prices. Import costs have been rising due to a weak naira. On a monthly basis, consumer prices went up 2.75 percent. June 14, 2016 The Global Daily is an informal briefing on global economic and financial developments compiled by the World Bank’s Development Economics Prospects Group. Recent issues, together with analysis of a variety of macroeconomic topics, covered by the Group, may be found at: http://www.worldbank.org/prospects. The views expressed in the Global Daily do not necessarily reflect those of The World Bank Group, its Board of Executive Directors, or the governments they represent. Feedback and requests to be added to or dropped from the distribution list may be sent to: Derek Chen (dchen2@worldbank.org). 2