But amid all the sniping, the US president-elect will have been pleased to receive an endorsement from the Organisation for Economic Co-operation and Development (OECD). The Paris-based research agency predicts that his public infrastructure plans will revive growth expectations, allowing monetary policy to return to normal. During the election campaign, Trump committed to spend $1 trillion on infrastructure. The OECD said spending on such as scale would boost US economic growth over the next two years, with global spin-off benefits as US demand for imports rises. However, it also warned that any slide towards protectionism could offset the advantages.
Crude awakening
Commodity prices received a fillip after a long-overdue Opec agreement to cut oil supplies. The energy cartel, which controls more than 30% of the world’s oil, said on Wednesday that it would reduce production by 1.2 million barrels per day (b/d) for the next six months. Non-Opec producers also agreed to participate; Russia says it will reduce supplies by 300,000 b/d. The news sent crude oil prices soaring above $50 a barrel – an 8% increase on the day. Saudi Arabia, which will shoulder most of the burden, was the instigator two years ago of an attempt to undermine the high-cost North American shale industry. Saudi raised production, leading to a global price collapse, but shale proved remarkably resilient. While the agreement is good news for some of the more cash-strapped Opec members, whether it holds remains to be seen.
Signs of stress at RBS
The Royal Bank of Scotland (RBS) was exposed as the UK’s weakest bank after failing the latest Bank of England stress test. The state-backed lender must make up a capital shortfall of around £2 billion to render it fit to survive another financial crisis. The test applied a hypothetical adverse scenario to RBS’ balance sheet, combining a 1.9% fall in the global economy, a crash in the UK property market and the effects of potential misconduct fines. RBS says it will act to make up the shortfall. Such actions could include asset sales and a cost-cutting plan which may include job losses and branch closures.
In the week to Thursday’s close, equity markets fell. The FTSE 100, the S&P 500 and the FTSE Europe (ex-UK) were down 1.28%, 1.01% and 0.62% respectively.
And finally…
Iceland’s dispute with, er, Iceland bubbled over into legal action this week. The country – famous for cod, hot springs and a cold, cold climate - has a long-standing grievance with the cheap-as-frozen-chips retailer that shares its name. The UK-based supermarket chain owns the European trademark for Iceland, the brand. That means companies like fish retailer Iceland Gold and wholesaler Clean Iceland are unable to register their trade names with the European Union. A government statement frostily described the situation as “untenable”, adding that multiple efforts to negotiate with Iceland Foods had been unsuccessful. While the opposing parties’ positions might seem poles apart, the supermarket chain denies that it had given the cold shoulder to the Nordic nation. It pointed out that it sponsored the Icelandic football team at this year’s European Championships (remember that, sports fans?). In a bid to thaw relations, it is sending a high-level delegation to meet with cabinet ministers. Let’s hope they can break the ice.
