Posted by: Jason Bush on January 15
It’s the kind of symbolic economic landmark Russia could probably do without. On 15 January, the Russian ruble reached its lowest-ever level against the dollar in modern history. On that day, the ruble reached 32.23 rubles to the dollar on Moscow’s MICEX currency exchange. That means that the ruble has now plummeted below 32 rubles to the dollar for the first time, below its previous low-point of 31.96, reached in 2002.
The latest slide in the ruble is far from unexpected. A dramatic fall in the price of oil, Russia’s chief export commodity, has meant that a downward readjustment of the exchange rate was unavoidable. As recently as early August, the ruble was at 23.4 rubles to the dollar.
But Russia’s political leaders evidently felt that a sharp one-off correction would have too many unpleasant echoes of 1998, opting instead for a creeping devaluation of the currency, which has been underway for weeks. Ever since November, the Russian central bank has been widening the ruble’s trading band every few days, in effect delivering death by a thousand cuts to the beleaguered Russian currency.
Continue reading "The Ruble Hits a Historic Low"
Posted by: Jack Ewing on January 15
Some investors thought the cautious European Central Bank wouldn’t cut its key interest rate as aggressively as it did Jan. 15. But with fresh data showing that European inflation is well below the ECB’s target of 2%, and daily indications that euro zone economic output is plummeting, there were no credible arguments against the 50 basis point cut that the bank delivered. The benchmark rate is now 2%, down from 4.25% when the ECB began cutting October 8.
More importantly, ECB President Jean-Claude Trichet left the door wide open for further cuts. “The level of uncertainty remains exceptionally high,” Trichet said in a statement at the ECB press conference in Frankfurt. He went on to repeat the phrase with slight variations three times, an indication that the bank is prepared to take further action as events warrant.
Continue reading "Price Data Paves Way for ECB Cut"
Posted by: Mark Scott on January 14
No one's suggesting the Jan. 14 profit warning from Germany's Deutsche Bank -- the largest bank in Europe's biggest economy -- had anything to do with an expanded $106 billion stimulus package unveiled by German authorities only the day before, but the timing certainly wasn't helpful. Indeed both announcements show just how far the economic crisis has come since the U.S. subprime mortgage problems started over 18 months ago. Now, even companies/countries that avoided toxic assets and/or highly-leveraged positions are suffering from the global slowdown. Analysts reckon further hits on so-far relatively unscathed organizations could be on the cards.
For Deutsche, that fear has become reality. In a statement, the German bank said it recorded a €4.8 billion ($6.3 billion) post-tax loss in the fourth quarter last year, compared to a €1 billion ($1.3 billion) profit over the same period in 2007. The bank is expected to unveil a €3.9 billion ($5.1 billion) yearly post-tax loss on Feb. 5. "We are very disappointed at this fourth quarter result," Deutsche's Chairman Josef Ackermann said in a statement.
Continue reading "Deutsche Bank Profit Warning -- the Start of More Problems for EU Banks?"
Posted by: Mark Scott on January 13
You just couldn't make this stuff up. Early on Jan. 13, Russian energy giant Gazprom announced it was turning back on the natural gas supplies that transit its Western neighbour Ukraine and provide Europe with roughly one quarter of its gas needs. Yet in a bizarre twist, Gazprom again shut down the supply only hours later after blaming Ukraine for keeping an essential pipeline closed. The Ukrainians responded that Gazprom had changed the transit route for the gas, which officials said had made the reopening of the pipeline impossible. European Union officials confirmed "little or no" Russian gas was arriving through Ukrainian pipelines.
These tit-for-tat accusations have become an almost daily event ever since Russia turned off the taps at the beginning of the year. Even a plan to place EU observers at both ends of the Ukrainian pipelines to monitor the in- and out-flows of gas hasn't helped solve the problem. Indeed, the European-brokered deal, which had been postponed once already, didn’t deal with the underlying dispute – how much Ukraine will pay for its gas this year. Gazprom wants Ukraine to pay $450 per thousand cubic meter, compared to the $179.50 the country forked out in 2008.
Continue reading "Russia-Ukraine Gas Conflict Takes Bizarre Turn"
Posted by: Carol Matlack on January 13
European Aeronautics Defence & Space, the parent company of Airbus, has suffered another setback in its quest to become a major player in the U.S. defense business. Speaking to a news conference in Wales on Jan. 13, EADS chief executive Louis Gallois said the company had backed away from a planned "significant" defense acquisition in the U.S., because it wanted to preserve cash in the global downturn.
The announcement follows a major disappointment for EADS in Washington last year, when it and partner Northrop Grumman were selected by the Air Force for a $35 billion refueling tanker aircraft contract--only to have the prize snatched away after the Government Accountability Office found flaws in the awards process. The Air Force is expected to seek new bids, again pitting EADS and Northrop against rival Boeing Co.
Continue reading "Another U.S. Disappointment for EADS"
