After months of haggling OPEC members agreed to the first cut in oil production in eight years. Non-OPEC members are expected to chip in with a cut of their own. Iran, which had been reluctant to reduce output so soon after returning to international markets, agreed to a token increase. The deal will reduce global production by almost 2%. Oil prices jumped in response. See article.
The Case-Shiller national index of home prices in America rose to a new peak in September, climbing 0.1% above the previous peak reached in July 2006, before the bust in the housing market (adjusted for inflation, the index is still 16% below that mark). The index increased by 5.5% in the 12 months to September, helped by buoyant markets in Dallas, Denver, Portland and Seattle. But house prices in cities in the forefront of the previous boom, such as Las Vegas, Miami and Phoenix, remain well below their all-time highs.
The OECD gave the thumbs up to Donald Trump’s plan to boost infrastructure spending, saying it would boost America’s economy, which is projected to grow by 2.3% next year, well above the 1.5% forecast for this year. But the organisation also warned that “an increase in protectionism could risk impairing already weak growth in global trade”.
Meanwhile, America’s economic growth rate in the third quarter was revised to an annualised 3.2%, up from an initial estimate of 2.9%. Consumer spending was stronger than had been thought. Rising workers’ incomes also helped.
Mark Carney, the governor of the Bank of England, warned about the increasing level of household debt in Britain. The debt-to-income ratio is the highest since 2013. Unsecured debt accounts for a bigger chunk of this. The share of high loan-to-value mortgages (those greater than 90%) has nearly doubled since 2012. Over that same four-year period outstanding credit-card loans rose by £10bn ($15bn), hitting £66bn in October.
A suspected cyber-attack caused almost 1m customers of Deutsche Telekom to lose their broadband connection. Hackers are thought to have targeted households’ internet routers with a software virus that disrupted their service. The code for the virus has been used before in other attacks on devices that retain the same passwords issued by their manufacturers.
The European Court of Justice began hearing legal arguments about whether Uber is a transportation firm or a digital service. The closely watched case has been taken to the EU’s highest court by Barcelona’s established taxi drivers, who, like taxi drivers the world over, complain that Uber has muscled into their market by circumventing local transport regulations. Uber says it is an “information-society services provider”.
Pilots at Lufthansa went on strike again, causing the German airline to cancel thousands of flights. A dispute between management and cockpit and cabin crews over pay and conditions has dragged on for years. The strikes cost Lufthansa up to €15m ($16m) each day they are held. Siemens, an engineering company, this week called on both sides to reach an agreement because the strife was damaging Germany’s image.
In a surprise move, India’s central bank ordered the country’s banks to transfer what amounts to half the cash deposited with them since the withdrawal of 500- and 1,000- rupee banknotes to its reserves. As people rush to beat a year-end deadline to deposit the notes in accounts, the banks have used their newfound wealth to buy bonds, unsettling the central bank’s inflation hawks.
Banca Monte dei Paschi di Siena, a distressed Italian bank, took the first step in its recapitalisation plan by offering to swap €4.3bn ($4.6bn) in subordinated bonds for equity. The bank is trying to raise capital amid uncertainty about the outcome of Italy’s constitutional referendum on December 4th. If the government loses the vote, Italy’s banks are likely to be hit hard in the markets.
Must do better
The Bank of England’s latest stress tests for British banks found that Barclays, Royal Bank of Scotland and Standard Chartered had “some capital inadequacies”, but that all three now have “plans in place to build further resilience”. RBS’s new plan was submitted at the last minute and includes adding another £2bn ($2.5bn) to its capital cushion. The government still owns a majority stake in the bank eight years after bailing it out. The stress tests judged whether banks could withstand five years of financial turbulence. Conducted in March, they did not weigh up the scenario of Britain leaving the European Union.
This article appeared in the The world this week section of the print edition under the headline "Business this week"
Iran, which had been reluctant to reduce output so soon after returning to international markets, agreed to a token increase. The deal will reduce global production by almost 2%. Oil prices jumped in response. See article.
The OECD gave the thumbs up to Donald Trump’s plan to boost infrastructure spending, saying it would boost America’s economy, which is projected to grow by 2.3% next year
But the organisation also warned that “an increase in protectionism could risk impairing already weak growth
America’s economic growth rate in the third quarter was revised to an annualised 3.2%, up from an initial estimate of 2.9%
The Bank of England’s latest stress tests for British banks found that Barclays, Royal Bank of Scotland and Standard Chartered had “some capital inadequacies