All the latest economic and financial news, as Russia central bank steps in to rescue Trust Bank, fronted by Bruce Willis
- First Russian bailout since rouble crisis began
- Bank advertised by Bruce Willis hits trouble
- Former finance minister predicts full-blown crisis
- European markets rally
5.35pm GMT
Shares moved ahead again despite a turnaround in the oil price which saw early gains eroded, on renewed fears of oversupply and falling demand as well as comments from the Saudi Arabian oil minister that his country would not intervene to support the crude price. So energy shares fell back but consumer shares were stronger – on the basis that lower petrol prices could mean more money to spend. So the final scores showed:
4.15pm GMT
The recent drop in oil prices should persist and could boost global economic activity by 0.3% to 0.7% next year, according to two senior IMF economists in a new blogpost. Reuters reports:
Brent crude prices have fallen more than 46% since the year’s peak in June of above $115 per barrel, sped up by the November decision of the Organization of Petroleum Exporting Countries (OPEC) not to reduce production.
“Overall, we see this as a shot in the arm for the global economy,” Olivier Blanchard, the IMF’s chief economist, and Rabah Arezki, the head of the commodities research team, said in the blog, adding that futures markets suggest oil prices will stay lower than levels in previous years.
3.43pm GMT
The risk of default in Ukraine is rising and there is a high likelihood of a bond restructuring next year for the country, which has $28bn of external debt due next year, according to ratings agency Moody’s. It said:
Political turbulence and fragile external finances weigh on Ukraine’s (Caa3 negative) economic prospects and will hinder its ability to cover its upcoming debt maturities in the coming years. The rating agency notes that there is a high likelihood of a Ukrainian bond restructuring next year.
Moody’s expects Ukraine’s economy to contract by 7.5% in 2014 and by a further 6% in 2015, although the latter is subject to a high level of uncertainty depending on if and how the crisis is resolved. The 2014 result is in part due to a drop in domestic demand following the steep hryvnia depreciation of more than 50%, which caused inflation to rise to over 20%, as of early December this year. Moody’s expects the central government deficit to come in at around 5% of GDP in 2014.
The risk of default is rising as the government faces roughly $28 billion in external debt maturities next year, with new credit from the IMF, EU and other official lenders likely to be insufficient to cover these payments, says Moody’s. External financing needs of banks and companies — state-owned oil and gas company Naftogaz especially –also remain substantial.
To meet these needs, the rating agency expects that the government will seek other sources of funding, including privatization of state assets, in the near future. These will likely include companies in the energy sector, which remains a drag on the economy.
3.21pm GMT
The National Association of Realtor’s chief economist Lawrence Yun said trading was choppy throughout the country in November:
Fewer people bought homes last month despite interest rates being at their lowest levels of the year. The stock market swings in October may have impacted some consumers’ psyche and therefore led to fewer November closings. Furthermore, rising home values are causing more investors to retreat from the market.
Larry Yun blames tumble in home sales on volatile October stock market which "impacted some consumers’ psyche"
3.15pm GMT
US existing home sales and inventory pic.twitter.com/BcjGmqYlQK
3.13pm GMT
The US housing market recovery is looking a little bumpy.
After two months of increases, sales of existing homes fell to a six month low in November. According to the National Association of Realtors, they dropped 6.1% to an annual rate of 4.93m units. Analysts had been expecting a figure of around 5.2m.
3.07pm GMT
Eurozone consumer confidence figures have come in slightly better than expected, although still in negative territory.
According to an initial estimate from the European Commission, consumer confidence in the eurozone rose to -10.9 from a revised -11.5 (previously -11.6) in November. (The revision came from a change in Italian consumer survey data).
2.48pm GMT
Wall Street is keeping the market rally going in the shortened Christmas week.
The Dow Jones Industrial Average is up around 80 points in early trading, while the FTSE 100 is currently around 36 points or 0.56% higher. Germany’s Dax is up 0.8% and France’s Cac up nearly 0.5%.
2.44pm GMT
Another sign of the times…
New iPhone 6 prices in Russia will start at 54,000 rubles (were at 34,990 rubles in November) http://t.co/xhANb8Xnu3
2.10pm GMT
Time for a recap.
“Today, I can say that we have entered or are entering a real, full-fledged economic crisis. Next year we will feel it clearly.”
“The government has not been quick enough to address the situation … I am yet to hear … its clear assessment of the current situation.”
2.02pm GMT
Russia’s biggest bank, Sberbank, has denied a report that it has suspended taking new requests from retail clients for car and mortgages loans until February.
1.42pm GMT
Trust Bank’s bailout was announced as Moscow was digesting a grim warning from one of the country’s most experienced and well-regarded politicians
“Today, I can say that we have entered or are entering a real, full-fledged economic crisis. Next year we will feel it clearly.”
“The government has not been quick enough to address the situation … I am yet to hear … its clear assessment of the current situation.”
“If the oil price is $80 a barrel, GDP will fall 2 percent or more. If it’s $60 a barrel, the GDP decline will be 4 percent or more.”
1.02pm GMT
News that the rouble crisis had claimed its first banking casualty has not shaken the Moscow markets.
The rouble has strengthened further, up over 5% at 55.2 roubles to one US dollar. Perhaps traders are encouraged to see the Central Bank taking action.
12.43pm GMT
*BANK OF RUSSIA TO BAIL OUT NB TRUST BANK – effects of #rouble drop starting to come through
12.39pm GMT
Trust signed up Bruce Willis back in 2010. Reuters reported that:
Trust bank, a top-30 lender by assets, hung pictures of the “Die Hard” star on the streets of Moscow on Monday with the phrase “Trust is just like me, but a bank.”
The “Die Hard” star replaces Trust’s previous frontman, Russian weight-lifter Vladimir Turchinsky, who unexpectedly dropped dead last year at age 46.
How the bank came to choose Bruce Willis is beyond my comprehension. I find it particularly interesting (and kind of funny) considering Willis’ role as a bank robber in the 2001 movie Bandits.
12.18pm GMT
Today’s bailout shows how far Trust Bank has fallen since it signed up Hollywood star Bruce Willis to advertise its wares:
The lender is active in Moscow and other large cities, offering high interest on deposits and easy consumer loans. Presently the bank is offering up to 21% annual interest on ruble accounts and up to 8% on the deposits nominated in foreign currency.
Trust Bank had prospered on burgeoning consumer spending. But with the economy grinding to a halt and approaching a possible contraction in 2015, consumer spending has slowed causing a rise in the volume of nonperforming loans across the banking system and a slowdown in consumer lending.
11.50am GMT
A Russian bank has just been bailed out; the first since the currency crisis began.
The decisions were taken at an emergency meeting and were designed to provide Trust with sufficient liquidity to continue operations without any repercussions for clients.
Unable to borrow on Western markets due to US and EU sanctions over Moscow’s role in the Ukraine crisis, Russian banks have found themselves pressed by the plunge of the rouble, that has lost nearly half its value in the past year.
Rouble Crisis Sparks Russia Bank Bailout http://t.co/yHKyyEqnTl
11.22am GMT
Oil analysts have slashed their forecasts for the oil price in 2015, but still reckon it will pick up from its current lows.
A Reuters poll found that Brent crude is expected to average $74 per barrel, down from $82.50 in a poll in November.
11.08am GMT
While we were offline, the Bank of England’s financial policy committee revealed that it’s worried that the fall in crude prices could fuel geopolitical risks (Russia, anyone?).
It could also drive the eurozone closer to deflation, they point out.
The Committee noted the positive impact on global growth and concluded that the decline in oil prices seen to date was unlikely to pose an immediate, significant risk to UK financial stability.
If the fall in oil prices were to be sustained, it could impact the ability of some businesses, such as US shale oil and gas exploration firms, to service their debt. US oil and gas firms accounted for 13% of the outstanding debt in US high-yield bond markets; an increase in their perceived or realised credit risk could lead to sales by investors and potentially illiquidity in the broader high-yield bond market. A sustained lower oil price also had the potential to reinforce certain geopolitical risks. There was also a risk that, in economies where core inflation was already weak, particularly some parts of the euro area, low headline readings would further depress expectations of future inflation. This, in turn, could result in slower rates of growth of nominal incomes, increasing the burden of existing debts.
11.06am GMT
Apologies for the silence, a few IT Gremlins have invaded the office…
We’re having some internet problems at Guardian HQ. Apologies for any inconvenience.
9.52am GMT
The rouble crisis has had a nasty knock-on effect on one of the USSR’s former satellite states, the Republic of Belarus.
Last night, Belarusians found they were blocked from using various internet shopping sites. The move came after the Belarus ruble hit a 16year low against the US dollar.
9.23am GMT
After 15 years, DIY chain Kingfisher has realised that it can’t crack the Chinese market on its own.
It has sold 70% of its B&Q China, after struggling to transfer its ‘do it yourself’ model into the fast-growing Chinese market.
B&Q opened its first store in China in 1999 and now has 39 outlets employing 3,000 people, but the London-listed group struggled to transplant its business model to a country where doing odd jobs around the house is not seen as a leisure activity.
Chinese consumers have not embraced DIY, partly because low wages mean there is a plentiful supply of people to do household jobs. The US chain Home Depot shut its big box stores in 2012, after finding not enough Chinese consumers had caught the DIY bug.
China retail – it’s harder than you think: B&Q owner Kingfisher to sell controlling stake in its China business to Wumei Holdings for £140m
Kingfisher to sell 70% stake in B&Q China to Wumei Holdings for £140m. It wants to concentrate investment in its core European market.
9.03am GMT
Despite today’s rally, the recent slump in the oil price would make a big dent in the finances of an independent Scotland.
The Financial Times reports that:
Scotland’s North Sea revenues would have slumped to one fifth of Holyrood’s preferred forecasts in its first year of independence if Scots had voted Yes in September, according to an Office for Budget Responsibility simulation using current oil prices.
Oil revenue for Scotland’s first year as an independent country would have been £1.25bn instead of £6.9bn http://t.co/Xr3hN6ESpl
8.56am GMT
A Bank of England policymaker has warned against assuming that the recent oil price falls means inflation will be low in the medium term.
“What we have seen over the last few months is a very sharp fall in oil prices that has a direct first-round effect on the rate of inflation.
“But it’s a separate issue to where inflation is going to be in, say, two years’ time.”
8.46am GMT
Stan Shamu of IG says investors are speculating that crude oil prices may be about to recover:
After seeing a rebound on Friday, many have been calling a bottom in oil prices and feel this is a beginning of a recovery. With Saudi Arabia pledging its commitment to seeing stability in oil prices (see yesterday’s story), many took this as a catalyst for a recovery.
8.42am GMT
8.36am GMT
The jump in the oil price is also giving European stock markets a lift, as the Santa Rally continues.
All the main European stock markets are up this morning, led by energy companies.
8.28am GMT
Rouble up 3.5% to 56.5 against the dollar in early trading, recovering from last week’s 80 per dollar low with Brent crude up 2.15% to $62.6
8.20am GMT
Russia’s stock markets is on a charge this morning, helped by the rouble and the oil price.
Moscow’s RTS index has jumped by 5.4% to 809 points. That’s almost a third higher than last Tuesday’s crash, when the currency crisis exploded:
8.02am GMT
The overnight jump in the oil price has helped to push the Russian rouble higher.
“The easing of the situation on the oil market … can help improve the situation on the Russian (currency) market in early trade as well as provide the basis for further firming of the rouble.”
The #ruble has appreciated more than 25% from its intraday low last week. pic.twitter.com/V2eINLGaVs
8.01am GMT
Good morning, and welcome to our rolling coverage of the financial markets, the world economy, the eurozone and business.
Christmas time is nearly here, by golly, and that means it may be a quiet day. Shares in Europe are expected to rise, as traders get into the festive spirit.
This stabilisation in the oil price has, raised the expectation that we may well have found a short term base, and mitigating concerns that further declines could well prompt large scale losses on highly leveraged oil producers and governments.
The Saudi oil minister, Ali al-Naimi, said in Abu Dhabi on Sunday: “The kingdom of Saudi Arabia and other countries sought to bring back balance to the market, but the lack of cooperation from other producers outside Opec and the spread of misleading information and speculation led to the continuation of the drop in prices.”
Referring to producers outside Opec, he said: “If they want to cut production, they are welcome: We are not going to cut; certainly Saudi Arabia is not going to cut.”