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

  • 2009-12-02


The discussion over the financial system reforms is gathering strength. Federal Reserve Chairman  Ben S. Bernanke asserts that curbing the central bank’s authority to supervise the banking system and tampering with its independence would “seriously impair” economic stability in the U.S. “A number of the legislative proposals being circulated would significantly reduce the capacity of the Federal Reserve to perform its core functions,” the Fed chairman said in a commentary to the press. Bernanke has presided over the most expansive use of Fed powers since the Great Depression. While the 55-year-old Fed chairman has said he averted a financial meltdown, lawmakers have voiced concern about taxpayer-sponsored bailouts and proposed the most sweeping dismantling of Fed authority since the creation of the institution in 1913.

Euro zone

European consumer prices increased for the first time in seven months in November led by energy costs as the economy recovered from the worst slump since World War II.  The European Union statistics office in Luxembourg witnesses that prices in the 16-nation euro region rose 0.6 percent from a year earlier after falling 0.1 percent in October, while economists had projected a gain of only 0.4 percent. Oil prices have risen 9 percent in the past three months as the economy has gathered strength. While the euro-area economy returned to growth in the third quarter, companies continue to cut costs and eliminate jobs to bolster earnings. The European Central Bank has signaled it sees “moderate” inflation and is in no rush to withdraw stimulus measures. At the same time, European households anticipate prices will slowly go down in coming months. The European Commission said that a gauge of consumers’ price expectations over the next 12 months rose to minus 11 in November from minus 14 in the previous month. Experts agree to that stating that economic activity is unlikely to be strong enough to generate significant inflationary pressures for some considerable time to come.
CIS countries

Russia’s international reserves rose to the highest level in almost a year as the central bank pledged more currency purchases to stem speculative ruble bets. The third-largest stockpile in the world rose $2.1 billion in the week to Nov. 20 to $443.8 billion after a $7.8 billion gain.  An 84 percent rebound in the price of Urals crude this year has lured foreign capital back to the world’s biggest energy exporter. The stronger currency is hurting Russian exporters that have costs in rubles and may stall a recovery, as the world’s biggest energy supplier tries to get back on its feet after a record 10.9 percent drop in gross domestic product in the second quarter. Energy products make up about 70 percent of Russia’s export revenue.

Moody’s Investors Service reported that in their view Ukraine’s bank industry faces a surge in non-performing loans as the economic decline depletes asset quality. The outlook for the country’s lenders remains negative, reflecting the vulnerable state of the credit fundamentals of domestic banks in the medium term amid the ongoing financial and economic crisis. Particular concerns relate to downward pressure not only on banks’ capitalization and profitability as a result of deteriorating asset quality but also on their liquidity due to weak depositor confidence. According to Moody’s “Political uncertainty and potential currency volatility is adding to risks in the banks’ operating environment.”

Written using the materials by Bloomberg and Reuters