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

  • 2009-11-11

A monthly economists' survey indicated that economic growth in the U.S. will be stronger over the coming quarters than previously anticipated as manufacturing, business spending and exports pick up while consumer spending cools off. The world's largest economy will expand at a 3 percent annual rate in the last three months of the year, compared with the 2.4 percent estimated last month, according to the median of 64 forecasts in a survey organized by Bloomberg.

The jobless rate is projected to exceed 10 percent through the first half of 2010, giving households reason to be prudent spenders. Economists surveyed also boosted their gross domestic product forecasts for next year and 2011 as $2 trillion in global government stimulus spurs sales and companies invest in new equipment. Elevated joblessness will prevent Federal Reserve policy makers from raising the interest rate target until their meeting in August 2010 at the earliest. Short-term interest rates near zero will weigh on the dollar, which weakened to a 15-month low against the currencies of major U.S. trading partners.

Euro zone

This week the euro area Q3 "flash" GDP data are published and are set to mark the first quarterly expansion since Q1 08, averaging about a 2 percent annualized rate. Analysts look for the improvement to be led by Germany (which we see growing around 4 percent saar), while France also looks set to report an acceleration to a growth rate of 2 percent saar. Italy is also likely to report positive expansion, the first since Q1 08, though a good part of its growth in Q3 may be purely statistical (related to the statistical adjustment processes deployed by ISTAT).

Spain, in contrast, is still beset by a collapsing construction sector, and looks likely to record its sixth successive quarter of contraction. At a sectoral level, manufacturing continues to lead the way, particularly as signaled by the gap between new orders and finished goods inventories in the PMI data, as well as the ongoing surge in German new orders (which in September had risen 19 percent from their February low).

CIS countries

Russia's central bank will probably cut its key interest rate a further half a point this year to a record low as the regulator tries to stimulate banks to lend more and to stem ruble gains that threaten an export recovery. Bank Rossii, which has reduced rates eight times in the past six months, may lower the refinancing rate a quarter point to 9.25 percent this month, according to the median estimate of nine economists surveyed by Bloomberg. The rate may fall to 9 percent by the end of the year, the survey showed. The bank, which doesn't publish a timetable for rate meetings, began relaxing policy on April 24 for the first time since 2007. As was said last week by Bank Rossii First Deputy Chairman Alexei Ulyukayev "We still have some room for additional easing of our policy rate." Last month, he said the refinancing rate may be lower than 9 percent next year.

Ukraine's inflation rate, Europe's highest, slowed in October for a third month as the country's recession blunted price pressures, which may allow the central bank to resume reducing interest rates. The consumer price index fell to 14.1 percent from 15 percent in September, the Kiev-based state statistics committee said last week in a statement on its Web site. On the month, prices increased 0.9 percent after growing 0.8 percent in September. Economic contraction, including a record annual 20.3 percent shrinkage in the first quarter, is helping subdue inflation, which the government has failed to push under 10 percent since 2003. The central bank cut its key rate twice since June as the recession curbed consumer demand. 

Written using material from Reuters and Bloomberg