World Stock Markets Revive

Russian finance minister says the ruble can be trusted today

The end of spring was marked in Russia with abrupt fluctuations of the world's major currencies. A Russian hysteria about the fall of the dollar and the devaluation of their savings is in full swing.

Yet, nothing lasts forever, as they say. To all appearances, the US dollar is very close to achieving a certain level of stabilization. Having passed the peak of its cost, the euro may come to rest at a lower spot under the sun. The European economy needs to grow, but the euro’s exchange rate is too high to provide economic development. The best thing that the high euro can bring to Europe is long stagnation.

In Moscow, the basic currencies are approaching more realistic and expected levels at the moment. The weighted average euro exchange rate dropped by 56.24 kopecks and came to 35.94 rubles to the euro, according to the results of a tender at the United Trade Session of the Moscow Inter-Bank Currency Exchange (MICEX). The US dollar gained 8.34 kopecks and came to 30.64 rubles to the dollar, the MICEX press service reported.

European export companies became livelier at the end of last week. They have been experiencing sales problems on account of the high euro for quite a long time. Optimistic expectations have been caused by encouraging news from the United States. It seems the development of the largest economy in the world is gathering pace, which means that economic revival will occur in the rest of the world as well. Furthermore, European countries expect that the Central Bank of Europe will reduce interest rates. As a result, the euro’s exchange rate will drop, which will definitely activate European exports.

The stocks of Europe's largest companies - Philips, Aegon, Volkswagen - started growing at the end of the last week. Good news from American microchip producers, particularly from Novellus, and a report from Goldman Sachs exerted a positive influence on microchip-makers' stocks. Pharmaceuticals companies did not give a good impression against such a background, though: Aventis (which went down by 2.6%), Merck (by 3%) and Novo Nordisk (by 3.7%). All of them are experiencing problems with the production and sale of new medicine. Friday, May 30th, ended with the following results: The FTSE 100 dropped by 0.87%, CAC 40 went up by 0.76%, DAX by 2.61% and DJ Stoxx 50 by 0.21%, the RBC news agency reported.

Investors were encouraged by the news of industrial output in the area of Chicago, and continued to buy the stocks of companies whose profits depend on sales in North America. Asian markets were also optimistic about world leaders' statement at the G8 summit in Evian, France. Officials of the world's leading superpowers said that they were going to consider the issue of the correlation of the dollar, euro and yen.

In Japan, the Nikkei index has already approached a three-month maximum owing to a rise in major exporters' stocks (Canon Inc, Toshiba Corp and others). The index reached the level of 8,578.5 points, despite a negative macroeconomic report on the industrial output in Asia-Pacific region.

The disagreement we see in Russia that are predicting the dollar-ruble exchange rate for the coming six or twelve months looks rather strange against such a positive background. Last week, the Russian Finance Ministry and the Economic Development and Trade Ministry reconsidered the forecast diminishing dollar exchange rate. However, Russian Finance Minister Aleksey Kudrin stated today that the ruble rate against the US dollar is predicted to be 31.90 for next year. The finance minister believes that the euro will become cheaper by the beginning of next year, with an exchange rate of not less than $1.2 to the euro. However, the Central Bank of Russia has recently announced that a considerable part of Russia's gold and forex reserves will be converted into the European currency. There is the impression that Russia's financial policy is taking another direction. The main idea that is contained in the words from the finance minister is that "one can trust the ruble today." On the other hand, it is not clear if one will be able to do so tomorrow.