World set to end year in brittle economic state

Tue Dec 16, 2014 6:31am EST
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By Jonathan Cable and Wayne Cole

LONDON/SYDNEY (Reuters) - The global economy is ending the year in a fragile state with factory activity shrinking in China, euro zone business growth remaining weak, and emerging market giant Russia in a spiraling currency crisis.

"These are uncertain times again and there is a risk of another global downturn," said Stephen Webster, chief European economist at 4CAST.

Poor to mediocre business surveys in Asia and Europe released on Tuesday are likely to put pressure on both the European Central Bank and People's Bank of China to come up with more stimulus.

They also threaten the overall 2015 outlook give the two economies' huge global reach. Data for the United States was due later in the day.

But it was events in Russia that were most eye-catching.

Russia's central bank took drastic action to defend its rouble currency in a surprise midnight raising of interest rates by 650 basis points to 17 percent.

But despite that the rouble was some down 4 percent against the dollar, having opened about 9 percent stronger, and the dollar-denominated RTS share index fell more than 11 percent.

It has lost around 50 percent to the dollar this year.   Continued...

A man uses a cash dispenser to receive roubles in central Moscow, September 2, 2014. REUTERS/Maxim Zmeyev