The Spanish GDP shrank 0.7% q-o-q in Q4 2012, its sharpest contraction in a year, owing to government spending cuts and stubbornly high unemployment rates, the statistics institute INE said yesterday. On y-o-y basis, GDP fell 1.8% in the fourth quarter. Following the news, Prime Minister Mariano Rajoy pledged stimulus measures, including tax breaks for entrepreneurs, shortly.

The S&P/Case Shiller composite index for 20 metropolitan areas rose a seasonally adjusted 0.6% in November, the 10th successive monthly increase and the longest string of gains since the market downturn in 2006. On y-o-y basis, prices across the 20 cities increased 5.5%.

European Union’s Olli Rehn indicated the EU could ease Spain’s budget deficit target next month after assessing its budget consolidation process. Bank of Spain said the country’s austerity programme needs to be intensified if it is to meet this year’s target of lowering the budget gap to 4.5% of GDP. It also mentioned the economy probably shrank 0.6% in Q4 2012, twice the rate of contraction vis-a-vis the previous quarter.

Japan’s real GDP is estimated to grow 2.5% during fiscal year 2013-14 starting April, the Cabinet Office said today. Prime Minister Shinzo Abe’s bold fiscal and monetary measures are expected to boost domestic demand, while a rebounding overseas economy would aid exports. For the current year, the growth forecast has been lowered to 1% from 2.2% earlier. The consumer price index is expected to rise 0.5% in the next fiscal, after an anticipated 0.1% fall this year.

Apple shares have tumbled 12% as investors fret over whether the company could lose its dominance in the smartphone market. About $50bn (£32bn) was wiped off Apple’s value after the biggest daily drop in the firm’s stock in four years. Flat profits and record quarterly revenue of $55bn were not enough to overcome disappointment over sales of the company’s new iPhone 5. Analysts said the firm was in danger of becoming a victim of its own success. Earlier, shares in some of Apple’s key Asian suppliers also fell. LG, which provides displays for Apple products, fell 3.1%, and Hon Hai, which assembles iPhones and iPads, dropped 3.2%.

The International Monetary Fund (IMF) has warned again of a weakening global economic recovery despite government efforts to stimulate growth. The global economy is likely to grow at a slower rate than previously forecast over the next two years, the organisation said in its latest report. It said it now expected the eurozone to remain in recession in 2013, having previously predicted growth. The UK’s growth forecasts have also been revised down.

The Spanish Treasury aims to raise almost 13% of its funding target for 2013 in January, after investors purchased its new 10-year bonds (worth €7bn) through a syndicated sale which witnessed a record demand. The Treasury could end the month with a total issuance of €27bn, the Economy Ministry said. However, the European Commission said yesterday Spain probably missed its deficit reduction target for 2012, although it is broadly on track with its economic reforms programme.

Bank of Japan doubled its inflation target to 2% and has committed to an open-ended purchase of assets in its bid to fight deflation. The bank would start purchasing assets worth ¥13tn ($145bn) per month, starting January 2014. This includes the purchase of Japanese government bonds (¥2tn) and Treasury bills (¥10tn).

Italy’s central bank expects the economy to contract 1% in 2013, sharply higher than the 0.2% contraction forecasted in July. As per the bank’s estimates, GDP shrank 2.1% in 2012; it forecasts the economy to grow a mere 0.7% in 2014. Given the growing economic challenges, the bank expects unemployment to reach 12% by 2014 from 8.4% in 2011. The central bank’s report also estimated public deficit declined to around 3% of GDP in 2012 from 3.9% in 2011.

China’s GDP expanded 7.9% y-o-y in Q4 2012, rebounding from seven straight quarters of a slowdown, the National Bureau of Statistics said today. However, growth for the full year was lower at 7.8%, the weakest year of economic expansion since 1999. Separately, industrial output rose 10.3% y-o-y in December, while retail sales increased 15.2% y-o-y vis-à-vis the estimate of 14.9%. Fixed-asset investment grew 20.6% in 2012.

After months of uncertainty over Greece’s debt sustainability, the IMF agreed to disburse €3.2bn to Athens under the country’s €240bn international bailout, after Greece enforced structural reforms, budget cuts and a bond buyback.

The World Bank estimated global growth at 2.4% in 2013, a sharp reduction from the forecast of 3% in June. It lowered forecast for developing countries to 5.5% in 2013 from 5.9% earlier. The bank projected growth in advanced economies to be 1.3% this year, strengthening to 2% in 2014 and 2.3% in 2015.

Japanese Economy Minister, Akira Amari, told reporters in Tokyo today the country faces risks from any excessive decline in the yen. Separately, Bank of Japan Governor, Masaaki Shirakawa, said the central bank would continue with monetary easing to revive the world’s third-largest economy from technical recession. The bank would be holding a meeting on Jan 21-22 to decide on raising the stimulus.

According to the Economy Ministry, lower factory output and weak investment climate due to subdued demand for exports and lingering uncertainty in the Eurozone impacted Germany’s GDP in Q4 2012. Economic indicators indicated a significant decline during the last quarter; however, the ministry is optimistic growth would pick up in 2013.

The Japanese cabinet announced an allocation of ¥10.3trln for public works, incentives for corporate investment and financial aid for small companies in an effort to boost the economy and end deflation. The stimulus is a part of the ¥13.1trln surplus budget for the current fiscal year which is expected to be approved by the cabinet next week. The government expects the stimulus to spur real economic growth by 2% and generate 600,000 jobs.

China’s exports grew 14.1% y-o-y in December, expanding at the fastest rate in seven months and increasing sharply from the 2.9% gain in November. Imports rose 6% y-o-y in December compared to the zero growth in November. However, despite the rebound, China missed its 10% growth target for trade for 2012. As per a separate release by the central bank, China’s M2 measure of money supply rose 13.8% y-o-y in December, in line with the 13.9% gain recorded last month.

German imports fell 3.7% in November, while exports declined 3.4%, narrowing the trade surplus, as per data from the Federal Statistics Office. Separately, Spain announced plans to issue government bonds worth a record €121.3bn in 2013, 7.6% more than in 2012. The country seeks to benefit from the recent improvement in investor appetite for risky Eurozone debt.

As per a survey by the British Chambers of Commerce, business sentiment improved markedly in Q4, and the economy is set to experience a modest recovery this year. Manufacturers’ export orders rose to 11% from 8% in the previous three months, and services export orders were up to 18% from 15%. Separately, the British Retail Consortium announced like-for-like retail sales grew 0.3% y-o-y in December, with a 1.5% y-o-y increase in total sales.

The Japanese government will announce fiscal stimulus worth around ¥12trln (US$136bn) in January to bolster the country’s shrinking economy, the Yomiuri newspaper said today. The surplus budget allocated for the fiscal year through March would include ¥5-6trln of public works spending.