Moscow raises borrowing costs from 9.5% to 10.5% in an attempt to prop up the rouble and battle inflation.Russian central bank raises rates to 10.5%But rouble keeps falling 12.20pm GMT The financial markets are having another bad day, as a cocktail of bad news sweeps through the City.Greece is leading the selloff, with the main Athens index tumbling another 4% on fears that the government might call an early election.#Greece - Athens market widens losses. Now at -4.3%, financials at -5.3%The Greek stock market is down over 17% in 3 days.The oil-inspired selloff continues to dampen any pre-Christmas optimism, although opportunistic shorters are still keeping one eye on the oncoming ‘Santa Rally’ that is likely to kick off from next week. Retailers have hit the headlines in London, as Sports Direct (down 2%) and SuperGroup (down 7% ) posted updates. The former did well, hitting all the right notes, and in the right order, as it reported continued expansion in Europe along with a rise in earnings. However, the latter’s torrid year has seen no improvement thanks to the unseasonably warm weather of October. 12.06pm GMT Our Datablog team have put the weakening Russian economy under the microscope.They show how the weakening rouble, tumbling oil prices and rising bond yields pose major challenges to Vladimir Putin, and Russian companies.When the Soviet Union collapsed, Putin was a KGB agent stationed in East Germany. He will have experienced the USSR’s fall, and the regime change that followed, first hand.He will want to avoid a rerun.Falling oil, rising cucumber prices: how much trouble is Russia in? http://t.co/JO4vqEYP2g by @AlbertoNardelli & @SMerler via @guardian 11.54am GMT The financial markets are “clearly disappointed” that Russia’s central bank didn’t announce a large rate hike, says Andy Scott of foreign currency specialists HiFX. Scott predicts trouble ahead:“Russia’s economy looks in bad shape going into 2015 with the central bank predicting lower growth, whilst saying it would continue to raise interest rate if inflation risks strengthened – a toxic combination. Vladimir Putin might have stoked a nationalist spirit amongst Russians following the annexation of Crimea that has seen his approval ratings at an all-time high, but as inflation spirals upwards and if unemployment starts to rise, I suspect that the blame might be aimed at the West, but the anger directed at Mr Putin. A storm is definitely in the making, with the fall in the rouble just the beginning.” 11.29am GMT The fall in the rouble’s value since the rate hike is a blow to Moscow.Policymakers must must have hoped to see it strengthen and pull away from the 55-to-the-dollar mark, rather than hitting new record lows.Bad news for #Putin, #Russia central bank raises interest rate by 100bps, currency shrugs off intended effect $USDRUB http://t.co/TtdhVeKOHk 11.26am GMT 11.02am GMT So, if raising interest rates doesn’t bring the rouble any relief, what can Moscow do?One option would be capital controls, limiting the amount of money that people can take out of banks and transport over the border.With the rouble having just shrugged off a 100bps rate hike, here's one prediction for 2015. Russia tries capital controls next year.“We know that voices close to president Vladimir Putin want capital controls, and we cannot rule this out.” 10.51am GMT Nicholas Ebisch, currency analyst at Caxton FX, fears that raising interest rates is “too little too late” to help the rouble: “A combination of low oil and commodity prices has damaged the country’s economic outlook, as the economy depends on oil and gas for 16% of the GDP, and the oil and gas sector makes up over 70% of the country’s exports. Combine the poor outlook with economic sanctions from the west, and it is a recipe for disaster for the Russian currency.” 10.47am GMT Our economics editor Larry Elliott says hiking Russian interest rates by one percentage point isn’t enough to strengthen the rouble or fight inflation.Clearly the Russian central bank is worried that the impact of high borrowing costs on its “already crumbling economy”, he adds. 10.44am GMT Look how the rouble has weakened against the US dollar, hitting 55.22 roubles to the $1. 10.43am GMT The Russian central bank has also warned that inflation could exceed 10% in the first quarter of 2015.And it has also cut its growth forecasts for 2015-16 to almost zero. Russian central bank hikes rates by 1% to 10.5%, says Q1 inflation could exceed 10%, GDP could be zero in 2015/16 #russia 10.39am GMT The rouble is hitting fresh record lows as the news of the 1% rate hike breaks.It just hit 55.12 against the US dollar, a drop of around 0.5% today. 10.34am GMT BREAKING: The Russian central bank has hiked the country’s interest rates by a full percentage points.The Central Bank of the Russian Federation has just announced that borrowing costs will rise to 10.5%, up from 9.5%.11-Dec-2014 04:30 - RUSSIA CENTRAL BANK RAISES KEY RATE BY 100 10.27am GMT Breaking: Eurozone banks have borrowed almost €130bn from the European Central Bank, through its offer of cheap loans.That’s roughly in line with expectations, and is also short of the ECB’s hopes when it announced the TLTRO plan last summer. Total of first two TLTROs EUR212.44bn. Only just over half the EUR400B the ECB flagged at the start.Sovereign QE argument commencing in 5.. 4.. 3..2nd TLTRO demand (EUR130bn) not enough. Both ECB contingencies likely to be triggered by March at the latest.Roll on QE 10.21am GMT George Osborne has welcomed the proposals to make the Bank of England more transparent by releasing minutes on the same day as a rate decision, and by releasing transcripts (rather than wiping them) after eight years.The Chancellor said:“Ensuring the Bank is well positioned to fulfil its vital role of overseeing monetary policy and financial stability is a key part of the Government’s long term economic plan. 10.09am GMT Just in. The Bank of England is proposing cutting the number of interest rate-setting meetings to eight per year, down from 12, starting in 2016.It is also planning to publish the minutes of the meeting on the same day, from August 2015. 9.42am GMT The weakening rouble puts more pressure on the Russian central bank to act today with a rate rise.Pressure on #Russia Central Bank rises to raise rates as Ruble drops below RUB55 per Dollar ahead of CenBank Meeting. pic.twitter.com/tB8idn9XhF“At today rate decision, we are looking for a conclusive 125bp hike to 10.75%. This will provide a clear message that policymakers have not completely abandoned control and provide temporary stability. However, a lack of action or even a marginal hike will clearly disappoint the market and accelerate the Ruble collapse.” 9.27am GMT Reminder, we get the Russian interest rate decision in an hour’s time.... 9.26am GMT The Russian rouble has just hit a new record low against the US dollar.The rouble slipped through the 55 roubles to the dollar mark for the first time ever, as Russia’s top central bankers debate whether to raise borrowing costs.Russian #rouble hits new historic low versus dollar on #Moscow exchange at 55 roubles per dollar - @Reuters 9.15am GMT Norway’s central bank has warned that the country’s economy has weakened, as it outlines the reasons for the shock interest rate cut to 1.25% that just rattled the markets.The bank said that lower oil prices and the weak eurozone economy are hurting the Norwegian economy.“Growth prospects for the Norwegian economy have weakened....Activity in the petroleum industry is softening and the sharp fall in oil prices is likely to amplify this tendency.”“This will have spillover effects on the wider economy and unemployment may edge up ahead.” 9.06am GMT chart says it all (h/t @NicTrades) pic.twitter.com/ExjAU1fZdA 9.04am GMT ....and the Norwegian Krone is sliding, hitting a five-year low of 9 Krone to the euro. 9.03am GMT The recent tumble in the oil price appears to have prompted the Norwegian central bank into today’s rate cut.Norges Bank: Activity in Petroleum Industry is Softening Gotta get up pretty early to get one past these guys 9.01am GMT Norway has just cut interest rates, by a quarter of one percent to 1.25%.*NORWAY CENTRAL BANK CUTS KEY RATE BY 0.25% POINT TO 1.25% 8.59am GMT The first central bank decision of the day is in -- the Swiss National Bank has left interest rates unchanged at 0%, and reiterated that it will not allow the franc to appreciate above €1.20.*SNB MAINTAINS FRANC CEILING OF 1.20 VS EUROSNB keeps doing it pic.twitter.com/Nbf231dx3Y 8.53am GMT Europe’s main financial markets are pretty calm this morning. The FTSE,. German DAX and French CAC are all up around 0.3%.But shares in SuperGroup, the company behind fashion brand Superdry, fell 7% at one stage after posting a 30% drop in profits. It’s a disappointing debut for its new chief executive, the former Co-op boss Euan Sutherland.The company, whose clothes are worn by David Beckham and Pixie Lott, has been hit by the unusually warm autumn weather which put shoppers off buying coats and knitwear. Underlying profits before tax fell to £12.5m for the six months 25 October, from £17.9m a year earlier. Overall revenues climbed 8.4% to £208m but like-for-like sales dropped 4.1%. 8.45am GMT 8.42am GMT The rouble is calm in early trading, around 54.87 roubles to the US dollar .A year ago, before the Ukraine crisis erupted, one dollar was worth 32 roubles. 8.34am GMT The City’s finest minds don’t have a clue about how the Russian central bank will react to the deteriorating economy, weakening ruble and rising inflation: The Wall Street Journal has done a great job rounding up all the forecasts; showing a wide range of views.“We reckon the central bank will hike rates by 50 basis points Thursday. Will it help? I am not sure. They have done other hikes so far this year and they did not do much.”“I expect the Bank of Russia to raise its base rate to 12% from 9.5%. The ruble rout not only worsened the outlook for inflation, but more importantly poses a major threat to financial stability in Russia. Fairly aggressive interest rate hikes should prove a far more efficient tool to finally discourage speculators and stabilise the battered ruble rather than large scale FX interventions. “My base case is that the CBR will sit on its hands this time as they hiked by 150 basis points six weeks ago and the full impact of that hefty hike has not been fully realised. However I see an about 25% chance of another 50 basis point hike given that the fresh inflation numbers continue to exceed official forecasts. 25 basis points? 250? On hold? God knows. #CBRguesses are all over the place http://t.co/cUuESrgW2y 8.25am GMT Business Insider has nailed it -- writing that “Russia’s Central Bank Is Meeting On Thursday — And It Only Has Terrible Options”.They provide these charts, showing how Russian inflation has risen, despite a series of rate hikes earlier this year:The Russian government has been defiant in the face of a declining ruble and an economy that appears headed towards recession in 2015. The official word out of Moscow has been that the declining value of the ruble, the increase in inflation, and the tumbling price of oil are all things Russia can overcome.And maybe they are. 8.17am GMT Today’s Russian central bank rate decision is a “thriller”, say Fredrik Skoglund, analyst at SEB (Skandinaviska Enskilda Banken).Skoglund, who expects rates to go up by 100 basis points (1%), says the Bank is being pulled in two opposite directions.One the one hand, the bank is losing credibility that it is serious about fighting inflation and providing stability to the rouble precisely when it is moving to an inflation-targeting policy regime.On the other hand, a rate hike in the area of 250bp would further slow economic growth, which is already suffering from the deteriorating investment climate. 8.11am GMT On balance, economists polled by Bloomberg predict that the Russian central bank will raise interest rates by a full percentage point today, from 9.5% to 10.5%. But there’s no real consensus. Nine analysts predict a bigger increase -- one even reckons we could see a 400 basis point move, to 13.5%! 7.57am GMT Good morning, and welcome to our rolling coverage of the financial markets, the world economy, eurozone and business.“The worst ruble rout since the 1998 default implies that inflation will continue to rise in the coming months and also poses a major risk to Russia’s financial stability,” “Preventing a full-scale financial crisis is far more important than avoiding recession.”german nov cpi rises 0.6% y/y; ex–energy 1.0%. unchanged m/m. lowest since feb 2010France Consumer Price Index (EU norm) final (MoM) registered at -0.2%, below expectations (-0.1%) in November: http://t.co/2VS4QiWdsC. Continue reading...
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