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

USA

Industrial production unexpectedly rose in February, due in part to gains in demand for computers and semiconductors that signal the pickup in U.S. business investment is being sustained. Output climbed 0.1 percent, the eighth consecutive increase, as utility use and mining increased, figures from the Federal Reserve showed last week in Washington. Another Fed report showed factories in New York kept expanding in March as orders and employment grew. Bad weather and a slump in auto output that may reflect the fallout from recalls at Toyota Motor Corp. held back manufacturing nationally last month, pointing to a March snapback that underscores factories are at the forefront of the economic recovery. Businesses are stabilizing inventories and buying equipment in a bid to meet growing global demand. Economists forecast industrial production would be unchanged after increasing 0.9 percent the prior month, according to the median of 60 projections surveyed by Bloomberg.

Euro zone

German investor confidence dropped for a sixth month in March amid signs the economy is struggling to expand and as Greece’s fiscal crisis shakes financial markets. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations slipped to 44.5 from 45.1 in February. Economists had expected it to fall to 43.5. The report aims to predict developments six months ahead. Latest data suggest Germany’s economy, which failed to grow in the final three months of 2009, may continue to stagnate this quarter as the coldest winter in 14 years curbs construction and keeps consumers at home. Concern that Greece won’t be able to rein in its soaring budget deficit has also undermined confidence in the euro area. Still, Germany’s benchmark DAX share index has rallied 7 percent in the past three weeks. ZEW’s gauge of current economic conditions rose to minus 51.9 from minus 54.8 last month. The euro initially rose on the report before retreating to $1.3683 at 11:36 a.m. in Frankfurt, little changed.

CIS countries

Russia’s central bank is planning to tighten reserve requirements for banks this year as it scales back emergency liquidity measures deployed at the peak of the credit crisis. The regulator is preparing to restore reserve requirements to 2008 levels. The transition will happen in a way that “won’t allow significant one-time swings in the level of formed reserves,” the bank said. The central bank relaxed reserve requirements on Jan. 1, 2009, allowing lenders to categorize as ‘good’ all corporate loans that are up to 30 days overdue and consumer loans up to 60 days overdue. Previous rules had required banks to categorize corporate loans as non-performing once they were more than 5 days overdue, with the same category applying to consumer loans that were 30 days overdue.

Ukraine’s sovereign credit rating was raised one level by Standard & Poor’s Ratings Services after the appointment of a new government reduced political risk and improved prospects for the country to get its bailout loan. The foreign-currency sovereign ratings were raised to B-/C from CCC+/C, S&P last week. Its local- currency rankings were increased to B/B from B-/C. The rating company’s outlook on Ukraine is positive. A government under Mykola Azarov was appointed by the parliament last week, bringing Ukraine closer to receiving the next tranche of an International Monetary Fund loan, which has been frozen since November. The IMF last year withheld $6.2 billion in disbursements and is due to release more payments this year if its economic program is resumed.

- Written using materials from Bloomberg and  Reuters Research