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.

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 conflict in Ukraine’s Eastern regions and the economic downturn have also caused Ukraine’s public finances to deteriorate. Foreign exchange reserves fell to $8 billion in November, which is about one month’s worth of import cover using reduced 2014 estimates of import levels.

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.

Depending on the cost and volumes of gas imports and the flexibility of Gazprom, the Russian state-owned gas company, with regard to payment arrears for previously supplied gas, and assuming little or no capital flight -- which is unlikely -- Ukraine will need to borrow at least another $15-$20 billion beyond what is provided by existing programs over the next 12 months, the rating agency notes. In the estimate, Moody’s assumes that the Russian government will not call for the early repayment of its $3 billion Eurobond due in December 2015.

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.

The full release is here:

Existing-Home Sales Lose Momentum in November as Inventory Slightly Tightens

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.

October’s sales rise was revised slightly down from 5.26m units to 5.25m.

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).

Analysts had been expecting a figure of -11.

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%.

Back with Russia and the rouble has gained more than 6% to around 54 to a dollar, while the RTS index is up 8%.

Another sign of the times...

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.

• RUSSIA’S SBERBANK DENIES RIA NEWS AGENCY REPORT IT HAD SUSPENDED TAKING NEW REQUESTS ON AUTO LOANS, MORTGAGES - DEPUTY CEO TO REUTERS
  

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.

The RTS share index continues to rally, up over 7% today, with bank stocks among the biggest risers:

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.

The choice of all-American action hero Willis as the face of a Russian mid-size bank did raise some eyebrows; banking analyst Jacob Jegher blogged that:

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.

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.

Apologies for the silence, a few IT Gremlins have invaded the office...

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.

The ripples from Russia’s currency crisis had already prompted the government to impose capital controls, including a 30% tax on buying foreign currency, on Friday night.

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.

As Jennifer Rankin explains:

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.

More here: Kingfisher sells B&Q China stake as DIY fails to take off

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.

The Yes Campaign, which lost September’s referendum on independence, had budgeted for oil to be around $110 per barrel, not today’s $62 level.

More here: Oil rout would have wrecked an independent Scotland’s finances

A Bank of England policymaker has warned against assuming that the recent oil price falls means inflation will be low in the medium term.

Speaking on BBC Radio 5 this morning, Martin Weale argued:

“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.”

Weale has been voting for UK interest rates to rise since August, despite inflation dropping to just 1.0% this month.

Many other economists are less convinced that inflationary pressure are going to rise in 2015 and 2016, pointing to signs of weakening economic growth in China and Europe.

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.

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.

London’s FTSE 100 has jumped 64 points to 6610, led by Royal Dutch Shell (up 2.7%), Tullow Oil (+2.5%) and BP (+2.2).

Traders are also taking comfort in last week’s Federal Reserve meeting, where the US central bank promised to show patience when raising interest rates.

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: