Weekend Economic Glance, Dec. 1-6

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Russia’s credit rating outlook is being reverted to “stable”. The efforts for the Russian-Turkish gas project “Turkish Stream” are being put on hold. Meanwhile the OPEC holds its production steady while the head of the ECB irritates the markets by betraying his announcement to print more money.  

Weekend Economic Glance, Dec. 1-6

Russian credit rating outlook changed to stable. The Moody’s credit rating agency has changed Russia’s outlook from “unstable” to “stable”. The main reason for the organization lay in “the diminished likelihood of the Russian economy or finances facing a further intense shock in the next 12 to 18 months, such as from additional international sanctions given some easing of the conflict in Eastern Ukraine“. Russia currently holds a Ba1 rating. The move comes amid a change in prospects for ruble. Market experts are expecting a steep rise of the currency with Goldman Sachs even advising their customers to buy rubles in order to profit from the upcoming development.

Negotiations over Turkish-Stream pipeline suspended. Russia has stopped the efforts for Turkish Stream following the downing of a Russian jet by Ankara. The project was intended to connect both countries by building a pipeline through the Black Sea. This would have ensured gas supply for Turkey as well as all of southern Europe. Russian Energy Minister Aleksandr Novak stated his hopes that the suspension was only temporary and that the pipeline would only be delayed instead of being scrapped. However, he pointed out that if Turkey really wanted the project to be realized then they would have to step up and come forward with an offer.

Weekend Economic Glance, Dec. 1-6

OPEC not able to agree on new quotas. The members of the Organization of Petroleum Exporting Countries (OPEC) met on Friday but were unable to find a solution that satisfied all participants. Especially the poorer countries demanded that the production would be cut in order to increase the price on the world market. At the end of the meeting the cartel announced that the production would remain as before and that an increase in demand due to an estimated global economic growth of 3.4 percent for 2016 is to be expected. The price for crude fell on Friday by two percent to $ 43.18, reacting to the news.

Head of ECB criticized for his monetary policy. Mario Draghi, head of the European Central Bank, has been heavily criticized by his colleagues for his announcements on Thursday. Global Times cited a source close to the banks leadership saying: “The ECB president and his chief economist Peter Praet stoked expectations with dovish speeches in the weeks before the meeting, but the ECB’s Governing Council concluded that markets needed to be disappointed this time because the economic outlook has improved”. Despite his big announcements, Draghi’s move backfired simply because the markets were expecting more. He promised to print more money but then backed away from it. The Italian central banker has been under criticism for a long time especially from the German government. The low Euro rates are being blamed on his open monetary policies, printing money in order to buy government bonds and therefore breaking ECB rules. The Euro is expected to hit parity with the US dollar in 2016, a historic occurrence never witnessed before.

Weekend Economic Glance, Dec. 1-6

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