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

USA

Claims for U.S. jobless benefits dropped last week from a three-month high, pointing to an improvement in the labor market that is slow to develop. Initial jobless applications fell by 29,000 to 469,000, in line with the median forecast of economists surveyed by Bloomberg. The number of people receiving unemployment insurance decreased to the lowest level in a year, while those receiving extended benefits climbed. Some companies are still trimming payrolls to contain costs amid weak sales as the U.S. emerges from the worst recession since the 1930s. An unemployment rate that’s forecast to average 9.8 percent this year may restrain consumer spending, which accounts for about 70 percent of the economy. Economists forecast weekly claims would fall to 470,000, from a previously estimated 496,000. Estimates ranged from 440,000 to 515,000.

Euro zone

French President Nicolas Sarkozy said the European Union must support Greece or risk destroying the euro as Prime Minister George Papandreou heads for Paris to lobby support for the debt-laden country. “If we created the euro, we cannot let a country fall that is in the eurozone,” said Sarkozy last week before a meeting with Papandreou in Paris. “Otherwise there was no point in creating the euro. We must support Greece because they are making an effort.” EU leaders have so far refused to give financial aid to Greece and have ordered the government to cut its budget deficit, the EU’s highest, on its own. While Papandreou says steps taken this past week to slash the shortfall warrant more help from the EU, German Foreign Minister Guido Westerwelle said that his country is “not going to write a blank check.”

CIS countries

Russia’s central bank may lower the benchmark interest-rate this month after bank lending shrank in January and a ‘fragile’ manufacturing recovery signaled businesses may continue eradicating jobs, a survey showed. Bank Rossii will cut the refinancing rate a quarter-point to a record low 8.25 percent, according to the economists survey. The bank has indicated it may reverse its easing cycle in the second half and it will probably bring the rate to 8 percent by year-end. The bank doesn’t publish a timetable for rate meetings. Experts say that the economy must get a boost to move forward and a deeper rate cut would provide just such a boost. Russia’s emergence from the credit crisis is slow and gradual as high unemployment and slack demand for credit curb growth. While Bank Rossii has cut rates 11 times since April, corporate loan books slid for a second month in January and lending to consumers posted a 12th consecutive monthly drop.

Kazakhstan’s foreign currency and gold reserves advanced 4.3 percent in February from the previous month to a record $27.6 billion, according to the central bank. The National Oil Fund increased 2.2 percent in the period to $25.2 billion. However, economy of Kazakhstan may expand as little as 1.5 percent this year, the government said in a statement published last week. On March 1, the government cut its 2010 gross domestic product forecast by 0.4 percentage point to 2 percent even as it said the average oil price this year will increase by $15 a barrel to $65. In the end of last week, the government further trimmed its forecast, saying the economy will expand 1.5 percent to 2 percent. The government expects consumer demand to resume gradually in 2010, though growth of agricultural output will slow. Economic growth in Kazakhstan, which holds 3.2 percent of the world’s oil reserves according to BP Plc, slowed to 1.2 percent last year from 3.2 percent in 2008. The economy grew 10 percent on average each year between 2000 and 2007 as energy and commodity prices rose.

Written using materials from Bloomberg and  Reuters Research