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

  • 2010-04-01


Confidence among U.S. consumers climbed in March as Americans perceived employment was starting to improve. The Conference Board’s confidence index rose to 52.5, exceeding the median forecast of economists surveyed by Bloomberg, from 46.4 in February, the private research group’s report showed. Another report showed home prices rose in January. Gloom is lifting as firings slow and the expansion that began in the middle of 2009 is on the cusp of prompting companies to boost payrolls. Consumer spending, which accounts for about 70 percent of the economy is strengthening as households gain confidence the recovery will be sustained. Another report came out last week showed that  home prices in 20 U.S. cities unexpectedly rose in January, indicating the housing market is stabilizing as the economy expands.

Euro zone

Greece, the European Union’s most indebted member, offered more than five times the yield premium of comparable Spanish debt to lure investors to its first bond sale since a bailout was agreed to for the nation. Greece priced the 5 billion euros ($6.7 billion) of seven- year bonds to yield 310 basis points more than the benchmark mid-swap rate. The bonds’ 6 percent yield equates to 334 basis points more than seven-year German bunds, Europe’s benchmark government securities. That compares with a yield premium, or spread, of 61 basis points for similar-maturity Spanish debt and 114 basis points on Portugal’s government bonds due 2017. Italy’s seven-year bonds yield 45 basis points more than bunds. Prime Minister George Papandreou’s government must raise about 53 billion euros this year, 15.5 billion euros of it by the end of May. Failure to do so could spark a new round of the fiscal crisis and trigger the use of the aid plan to help Greece finance its budget deficit by standing behind the nation’s debt crafted by EU leaders in Brussels March 25.

CIS countries

Russian bank lending will expand less than previously predicted this year as demand remains weak, according to VTB Capital, a unit of Russia’s second-biggest bank. Lending may rise 13 percent this year, compared with an earlier forecast for 17 percent growth. Lending shrank in February even after a string of central bank rate cuts. Corporate loans contracted 0.7 percent in the month and retail loans shrank 0.6 percent, according to Bank Rossii data released yesterday. The bank cut its main interest rates for the 12th time in less than a year on March 26 to resuscitate lending and contain the ruble’s gains. Economic growth slowed to an annual 3.9 percent in February from 5.2 percent the previous month, Deputy Economy Minister Andrei Klepach said on March 22, citing preliminary estimates. Household consumption is set to recover this year, bringing retail deposit growth down to 14.9 percent, VTB Capital said. Overall deposits may expand 16 percent, driven by corporate account growth.

International Monetary Fund Managing Director Dominique Strauss-Kahn said he’s “optimistic” Ukraine’s loan program will be unfrozen and talks will be aimed at reevaluating the country’s economic outlook. “I’m rather optimistic that we will resume the relationship with Ukraine,” which “during the election period was put between parentheses,” Strauss-Kahn said in an interview. “The situation has changed over the last month, we have to reassess the situation and see what we can do together.” An IMF team is in Ukraine having talks with authorities after President Viktor Yanukovych took office and managed to get a prime minister allied to him elected. Mykola Azarov’s government is seeking a new loan program with the International Monetary Fund to help reform the economy.

- Written using materials from Bloomberg and  Reuters Research