Aurelia Butler

Europe’s largest economy suffered a recession at the turn of the year and produced flat growth in the second quarter, so a fresh contraction would mean four straight quarters with negative or flat growth.This likely made Germany one of the weakest performers in the 20-nation euro zone and its vast industrial sector, normally the motor of growth, has been a drag on the entire bloc all year.”External demand for industrial products continued to be weak,” the Bundesbank said. “The increased financing costs also dampened investments and this depressed domestic demand especially in construction.”While employment remains strong, buffering the economy amid an extended period of weakness, the bank said it expected a slow uptick in the jobless rate towards the end of the year.Financing costs have increased sharply over the past year as the European Central Bank lifted interest rates at the fastest pace on record in the hopes of stopping runaway inflation. While interest rate hikes are likely over now, policymakers are preparing public opinion for rates to stay “high for longer”, suggesting that any reversal is likely to be far into the future. Policymakers want to make sure that inflationary pressures are fully extinguished and they need to see underlying inflation coming down towards their 2% target, which may take well into 2025.”The core rate is likely to remain slightly above 4% (in Germany) in the near future, primarily because of the continued strong momentum in service prices,” the Bundesbank added. More

Fried rice is normally a popular choice among diners in Lagos, the economic capital of Nigeria. Yet lately many people have stopped ordering it, says restaurant manager Toni Aladekomo. With the price of the dish shooting up to N4,000 ($5.20) from N1,500 a year ago, it has “stopped being affordable for most”, says Aladekomo, general manager of Grey Matter Social Space, a restaurant in the upmarket business district of Victoria Island. In Nigeria, rice is the most commonly consumed meal — and the bedrock of the national dish jollof rice. But the price of 1kg of the imported grain was up by 46.34 per cent in August compared with the same period last year, according to the most recent data from the country’s statistics agency.While prices have risen across the board as Nigeria grapples with its highest rate of inflation in two decades, the sharp increase in the cost of this everyday staple can be traced to a crackdown by India, the world’s largest rice exporter, in response to fears of a production shortfall and rising domestic prices. It started last year when the government of Prime Minister Narendra Modi imposed export restrictions on broken rice — a cheap variety imported particularly by poorer countries from Bangladesh to Benin — which is still in place. By the end of July, India had banned exports of non-basmati white rice and followed this in August with a minimum sale price for basmati rice and a 20 per cent tariff on parboiled rice, extended until March.“It’s tough when a country that accounts for 40 per cent of global trade slaps a ban on half of what they export, and duties on the other half,” says Joseph Glauber, senior research fellow at food security think-tank International Food Policy Research Institute (IFPRI) and a former chief economist at the US Department of Agriculture.The immediate consequences of the July ban have been panic-buying among consumers in Asia and North America and responsive measures from other governments in major rice-producing nations.Now, with India’s rice harvest under way, net importers are hoping for better than expected yields that could prompt the government to ease restrictions. But an election is looming in the south Asian country and food prices are a red-button issue for Modi. The El Niño weather phenomenon, associated with heat and drought across the Pacific Ocean, also threatens to damage output next year as growing conditions may be too dry.Analysts warn that if India maintains its current restrictions, and other producers follow, the world is on track for a repeat of the 2008 rice crisis, when a contagion of protectionist policies contributed to rice prices tripling in six months, driving inflation across the globe and sparking civil unrest in north Africa, south Asia and the Caribbean.A man eats a breakfast of rice and plantain at a market in Abuja, Nigeria. The price of staple foods has shot up as the country struggles with its highest rate of inflation in two decades More

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SINGAPORE (Reuters) – Japan’s yen took the spotlight in Asia on Monday, circling near the 150-per-dollar level in a tug of war between investors betting on a further rise in dollar yields and those expecting Japanese authorities will intervene in markets.The week kicks off with growing worries about the Middle East conflict as Israel bombarded Gaza with air strikes early on Monday, extending a two-week bombardment that began after an Oct. 7 rampage by Islamist group Hamas on southern Israeli communities, and as the United Statese dispatched more military assets to the region.U.S. Treasuries were subdued as investors hunkered down for a European Central Bank meeting and U.S. GDP data later in the week. Ten-year yields had briefly blipped above 5% last week after Federal Reserve Chair Jerome Powell said the U.S. economy’s strength and tight labor markets might warrant tighter financial conditions.The dollar index added 0.02% to 106.19, with the euro down 0.07% at $1.0586.The Japanese yen last traded at 149.83 per dollar, after a brief trip early on Monday to 150.14, a level last seen on Oct.3 when traders had suspected the Bank of Japan intervened to nudge it to the stronger side of 150.Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo, said a set of investors are betting the Bank of Japan will defend the 150 level, even as others see rising U.S. yields as a reason to keep pushing the dollar up.”Potentially there are two camps out fighting around 150, so that’s why dollar-yen doesn’t move from here,” Yamamoto said.Investors are also wary of a further rise in the long end of the U.S. Treasuries curve, driven by widening term premiums on expectations of stronger growth and fiscal slippage. Oil prices dipped on Friday after Hamas released two U.S. hostages from Gaza, leading to hopes the crisis could de-escalate without engulfing the rest of the Middle East region and disrupting oil supplies. Brent crude futures were 0.6% lower at $91.55 a barrel, but are still up 10% over 10 days.The ECB meets on Thursday. Its rate hiking cycle is over, according to all 85 economists polled by Reuters, but it won’t be until at least July 2024 before it begins easing as the battle against elevated inflation continues.The ECB raised its key interest rates by 25 basis points in September, taking the deposit rate to 4.00% and the refinancing rate to 4.50%, but signalled its 10th hike in a 14-month-long streak was likely to be its last. More

The report was compiled before the recent attacks by Hamas in Israel. Despite these recent developments, the conflict between Russia and Ukraine was placed as the 11th concern in the report. This positioning suggests that while geopolitical tensions remain a factor for consideration, the focus remains on economic indicators and their potential impact on financial stability. The Federal Reserve’s semi-annual report serves as a key barometer of potential risks to financial stability. The identification of inflation persistence and a downturn in commercial real estate as imminent threats reflects an increasing concern about these issues among financial institutions and policymakers. The report’s emphasis on bank instability resulting from the failure of three major firms indicates a heightened level of concern for the banking sector’s resilience amidst challenging global economic conditions. This is further compounded by China’s economic frailty, which could have far-reaching implications for global financial markets.The geopolitical conflicts, such as those in Israel and between Russia and Ukraine, while noted in the report, were not ranked among the top ten concerns. This suggests that economic factors are currently viewed as posing more immediate risks to financial stability than geopolitical tensions.The Federal Reserve’s semi-annual report provides valuable insights into the current state of financial stability and potential risks. It serves as a guide for policymakers, financial institutions, and investors in navigating the complex global economic landscape.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

This situation could necessitate additional monetary tightening, which could have adverse effects on short-maturity government bonds. This viewpoint contrasts with swaps pricing predictions, which currently forecast a pause by the ECB and only a 10% probability of a 25 basis-point increase in the near term. These firms, however, contend that an overshoot might be necessary considering Europe’s heightened risk.In contrast to the ECB’s forecasted pause, swaps pricing indicates a 40% likelihood of another quarter-point increase by the Federal Reserve in the United States. The differing views on monetary policy directions between two of the world’s most influential central banks highlight the unique economic challenges each region is facing. For Europe, it is primarily the energy crisis and its implications on inflation and growth rates. Meanwhile, in the US, despite similar inflationary pressures, robust economic recovery from COVID-19 seems to be steering towards further tightening measures.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

SYDNEY (Reuters) – Asian shares drifted lower on Monday as the risk of a wider conflict in the Middle East clouded sentiment in a week laden with data on U.S. growth and inflation as well as earnings from some of the world’s largest tech companies.Washington warned over the weekend of a significant risk to U.S. interests in the region as ally Israel pounded Gaza and clashes on its border with Lebanon intensified.The European Central Bank and Bank of Canada also hold policy meetings and, while no hikes are expected, investors will be sensitive to guidance on futures moves.A recent surge in bond yields has tightened monetary conditions without the central banks having to do anything, allowing the Federal Reserve to signal it will likely stay on hold at its policy meeting next week. Indeed, futures imply around a 70% chance the Fed is done tightening for this cycle and are flirting with the chance of rate cuts from May next year. The jump in yields has challenged equity valuations and dragged most of the major indices lower last week, while the VIX ‘fear index’ of U.S. stock market volatility hit its highest since March.Early Monday, both S&P 500 futures and Nasdaq futures added 0.3%, though U.S. 10-year Treasury yields were up at 4.946% and edging back toward 5.0%.MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.1% to be near its lowest in almost a year. Japan’s Nikkei eased 0.4%, as did South Korea’s market.Investors will be hoping earnings from U.S. tech majors will provide some relief this week with Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN) and Meta Platforms (NASDAQ:META) all reporting. IBM (NYSE:IBM) and Intel (NASDAQ:INTC) are also on the docket.Profits should be supported by the strength of consumer demand with figures on U.S. gross domestic product this week expected to show annualised growth of a heady 4.2%, and nominal growth possibly as high as 7%.”At the same time, last quarter’s modest rise in hours worked points to a strong productivity gain and surge in corporate profits,” wrote JPMorgan chief economist Bruce Kasman in a note.”As corporate and household income share the benefits of this nominal activity surge, the underlying resilience of the U.S. private sector is being reinforced.”This U.S. outperformance has underpinned the dollar, though the threat of Japanese intervention has capped it around 150.00 yen at least for the moment. The dollar was last trading at 149.85 yen, just below the recent peak of 150.16.The euro was flat at $1.0588, while the Swiss franc held firm at 0.8927 per dollar having benefited from safe haven flows over the past couple of weeks.Gold has likewise attracted a safety bid to stand at $1,976 an ounce, having hit its highest since May last week. [GOL/]The risk of disruptions to supplies from the Middle East has underpinned oil prices, though Brent did run into resistance around $93.80 last week. [O/R]Brent was last down 43 cents at $91.73 a barrel, while U.S. crude eased 39 cents to $87.69. More