The week's top news in world financial markets from Maximus Capital

  • 2009-10-22

Industrial production in the U.S. rose more than anticipated in September, putting manufacturing at the forefront of the emerging economic recovery. The 0.7 percent increase in production at factories, mines and utilities exceeded every forecast of economists surveyed by Bloomberg and followed gains of 1.2 percent in August and 0.9 percent in July. The recent burst of activity on factory floors, spurred in part by a rebound at automakers, will likely give way to more moderate and sustainable gains in coming months as companies rebuild inventories and exports grow. "Cash for clunkers," which offered incentives of as much as $4,500 for consumers to trade in old cars for more fuel - efficient ones, helped automakers trim stockpiles as sales climbed in July and August. Industry data showed sales plunged in September after the plan expired on Aug. 24.

Euro zone

European finance chiefs expressed "worries" about foreign-exchange movements and backed the U.S. administration's stated preference for a strong dollar after the euro climbed to a 14-month high against the American currency. "Excessive volatility" in currency rates is "bad for economic development," European Central Bank President Jean-Claude Trichet said in an unscheduled appearance at a press conference late yesterday after a meeting of euro-area finance ministers in Luxembourg. "It's a problem which worries us," said Luxembourg's Jean-Claude Trichet, who led the talks. The euro has gained almost 20 percent against the dollar since February, making the region's exports more expensive to overseas buyers and threatening the recovery from the worst recession since World War II.

CIS countries

The Economy Ministry reported that Russia's economy contracted 9.4 percent in the third quarter from a year earlier, less than the previous quarter's decline. Gross domestic product rose 0.6 percent in the quarter from the previous three months, the Ministry said. GDP grew a seasonally adjusted 0.5 percent last month from August and on an annual basis the decline slowed to 8.6 percent in September from 10.5 percent the month before. The month-on-month growth was due to a "good grain harvest," increased meat production and an improvement in manufacturing output. Construction and trade continued to shackle expansion. Finance Minister Alexei Kudrin said that Russia has "exited" its recession as the economy expanded in the third quarter compared with the previous quarter. The economy of the world's biggest energy exporter contracted a record 10.9 percent in the second quarter from the same period last year after demand for its oil, gas and metals exports tumbled in the global slump.

The IMF team arrived in Kiev last week to assess whether Ukraine meets the terms of the new portion of the loans ($3.4 billion payment under the agency's $16.4 billion lending program to the country). Analysts think that Ukraine is at "serious risk" of veering off track ahead of the country's next review in November as the government of Prime Minister Yulia Timoshenko "abandoned" commitments made at the second review of the country's program with the IMF, including a failure to increase prices for natural gas paid by households and utilities.

Kazakhstan's financial-services regulator is examining proposals to require banks to put aside extra provisions to cover an increase in bad loans in a future economic slump. The Agency for Financial Supervision's technical committee recommended that Kazakh banks should put aside "dynamic provisions" during an economic pickup that may start in 2011, so they are prepared for a possible downturn.

Written using materials from Bloomberg and  Reuters Research