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New Europe countries extend their output gains in Q1, after stabilizing last year. Local currencies and major stock markets extend their losses amid rising worries over the outlook of the global economy and the lingering euro area sovereign debt crisis. In contrast, external debt markets continue to display impressive resilience in spite of persisting debt jitters in the euro area, with 5-year CDS spreads standing close to their tightest levels in months. Local rates markets we believe that risks loom ahead as higher inflation becomes more evident and we continue to prefer staying broadly sidelined in this asset class.