Aurelia Butler

BRUSSELS (Reuters) – Euro zone governments will try to bolster their public finances next year by withdrawing expensive energy price subsidies but slower economic growth and fear of angering voters are likely to limit fiscal tightening, officials said.The European Central Bank has called for governments to roll back subsidies introduced to help people cope with the spike in energy prices that followed the start of the Ukraine war, saying doing so will help it stabilise inflation over time. Withdrawing them is politically sensitive, however, as in the short-term it will push up prices for consumers already struggling with the cost of living. The 20 countries that share the euro currency have to submit their 2024 budget drafts for European Union inspection by Oct. 15. EU law says budget deficits, if in excess of 3.0% of GDP, must shrink by 0.5% each year until they comply with the limit. The European Commission has also promised to start disciplinary steps against those with budget gaps above 3.0% next year, which could in theory lead to fines.But it is already clear that some countries, like France or Italy, will remain well above the 3% ceiling next year and that the scope of fiscal tightening, while in line with the minimum requirement, will be smaller than it could be.France expects its fiscal shortfall to fall from 4.9% of GDP this year to 4.4% in 2024, before only gradually dropping to 2.7% in 2027. Paris will raise welfare and pension payouts next year to help households fight inflation that is still way above the ECB’s 2% target. The French fiscal watchdog has said these plans are built on optimistic assumptions and lack ambition.Italy plans to raise its 2024 budget deficit target to between 4.1% and 4.3% of GDP from the 3.7% goal set in April, and revise upwards its deficit this year to 5.5% from 4.5%, sources told Reuters on Monday. This is partly because Prime Minister Giorgia Meloni wants to extend to 2024 tax cuts that have helped middle and low-income workers cope with high consumer prices this year, even though euro zone ministers agreed in July to end them. Markets have already reacted by raising Italy’s risk premium. Germany, while planning to cut the deficit to 2.0% next year from 2.5%, is still considering how long to keep energy subsidies for industry and whether a new scheme is needed.INFLATION FIGHTEU rules aside, the 2024 fiscal tightening is also crucial for the ECB, which after a streak of interest rate rises since mid-2022 may be reaching the limits of fighting high inflation without strangling the economy. The euro zone’s central bank has been calling on governments to help curb price growth that is still more than 5%. While euro zone finance ministers agree, the ECB’s inflation problems are not always their top priority. “I don’t think anyone has the ECB in mind when they decide on their budgets,” one senior euro zone official said. “Some are having elections, others feel the economic contraction – preliminary data shows that the economy has been worse than previously thought.”Belgium, Austria, Lithuania, Croatia all have elections next year, making their governments wary of slashing spending. Spain, where parties are still trying to form a government after inconclusive July elections, may extend some of the measures introduced to alleviate the impact of inflation or even implement new ones, by the end of the year.Slower economic growth does not help. The Commission has cut its euro zone growth forecast to 0.8% in 2023 from 1.1% and to 1.3% in 2024 from 1.6%. The ECB is even more pessimistic, with a GDP forecast of 0.7% for 2023 and 1.0% for 2024.”One issue that may change fiscal planning somewhat is the worsening economic outlook,” a second senior euro zone official said.The ECB, which is monitoring more than 500 temporary fiscal measures introduced by euro zone governments mainly to reduce energy costs for households, says most countries are complying with the July agreement to end subsidies.”We are saying to member states: roll back, remove those programmes, those subsidies, those shields, those grants that you had put in place. And by a large account, members states are actually doing that,” ECB President Christine Lagarde told the European Parliament on Monday.Paradoxically, the removal of the subsidies will boost prices for consumers in 2024, keeping inflation at 3.2% according to the ECB, rather than 2.9% as forecast by the Commission. But in the longer-term, this will help prices stabilise, the ECB says. More

(Reuters) -Major U.S. stock indexes were set for a higher open on Wednesday as easing Treasury yields boosted megacaps, while investors awaited developments on a U.S. funding bill and inflation data this week to gauge the Federal Reserve’s policy outlook.A pullback in the two-year and 10-year Treasury yields provided some relief to megacap growth stocks including Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Tesla (NASDAQ:TSLA), Nvidia (NASDAQ:NVDA) and Alphabet (NASDAQ:GOOGL), up between 0.4% and 0.8%, in premarket trading.At 8:43 a.m. ET, Dow e-minis were up 94 points, or 0.28%, S&P 500 e-minis were up 15.5 points, or 0.36%, and Nasdaq 100 e-minis were up 50.75 points, or 0.34%.”When the market declines rather rapidly and it has for quite some time, bargain hunters will step in and periodically buy things,” said Randy Frederick, managing director of trading and derivatives for Charles Schwab (NYSE:SCHW).All the three major stock indexes closed over 1% lower on Tuesday as 10-year Treasury yields held their multi-year highs, with investors wrestling with prospects for a long period of high interest rates and an economic fallout.However, markets are bracing for some more volatility, with policymakers projecting elevated rates until the end of 2024, boosting Treasury yields, which are sensitive to interest rate expectations and seen as risk-free due to government backing.”The longer-term momentum is still positive even though we are in a period of short-term pullback and that’s driven by a lot of things- high interest rates, high crude oil prices and the prospect of a government shutdown at the end of this week,” Frederick added.The S&P 500 and the Nasdaq are set for their worst monthly showing so far this year, while all the three indexes including the Dow are eyeing their first quarterly decline in 2023.Data showed orders for long-lasting U.S. manufactured goods unexpectedly rose in August and there were signs that business spending on equipment retained some momentum after faltering early in the third quarter.For the rest of the week, investors will monitor second-quarter GDP and the monthly personal consumption expenditures price index, along with Federal Reserve Chair Jerome Powell’s remarks.Traders’ bets on the benchmark rate remaining unchanged in November and December stood around 80% and 64%, respectively, according to CME’s FedWatch tool. Meanwhile, a 25-basis-point rate cut is being priced in as early as March, growing to over 33% in June and July.On the political front, the U.S. Senate on Tuesday took a step forward on a bipartisan bill to stop a government shutdown on Sunday, while the House sought to push ahead with a Republican-backed measure. The current partisan gridlock has begun to darken Wall Street’s view of U.S. government credit.Among single stocks, Rivian (NASDAQ:RIVN) Automotive gained 1.6% on plans to use subscription models for monetizing various features in cars.Costco (NASDAQ:COST) dipped 1.8% even though the wholesale retailer reported better-than-expected fourth-quarter results, with analysts pinning the fall on broader market concerns. More

The South Korean petrochemicals maker plans to sell its polariser business to Shanjin Optoelectronics (Suzhou) for 270 billion won and its polariser material business to Hefei Xinmei Materials Technology for 830 billion won, it said in a regulatory filing. LG Chem said the sale of the polariser businesses, which make optical filters used in electronic devices and autos, would help the firm better use its resources.The company has previously said it is counting on its battery materials, sustainability business and innovative drugs to power its growth. Those businesses are expected to make up 57% of the company’s total sales in 2030.The business and assets Shanjin Optoelectronics and its wholly owned unit will buy from LG Chem are based in mainland China, South Korea and Vietnam, Ningbo Shanshan, the parent company of Shanjin Optoelectronics said on Wednesday.In a filing to the Shanghai stock exchange, Ningbo Shanshan said it has initial plans to relocate the South Korea-based production lines in the acquisition package to China. The package entails polariser products for organic light-emitting diode (OLED) display, and polariser products for liquid-crystal display (LCD) targeting automobiles and Apple (NASDAQ:AAPL) products, Ningbo Shanshan said.LG Chem holds a 15% stake in Shanjin Optoelectronics, which Ningbo Shanshan intends to acquire by October, said the Chinese company. Reuters could not immediately reach Hefei Xinmei Materials Technology for further details on the assets and businesses it is purchasing. LG Chem said on Sunday it had entered a partnership with China’s Huayou Group’s subsidiary Youshan to build a joint electric vehicle battery material plant in Morocco in an effort to diversify its portfolio.LG Chem also announced an investment plan with Huayou Cobalt to build a lithium conversion plant in Morocco, adding that it also planned to build two other facilities in Indonesia with Huayou Cobalt. ($1 = 1,348.6800 won) More

Bloomberg News reported that the alleged compliance failures related to UBS and Credit Suisse, which was taken over by UBS early this year.The Bloomberg report said a full-scale investigation by the Department of Justice focusing mainly on Credit Suisse and potential sanctions violations was now underway.Trading in UBS shares was halted temporarily after they fell nearly 8% following the report. They later recovered to trade 3.4% lower at 12.33 GMT.UBS declined to comment to Reuters.In its latest financial report at the end of August, UBS said its sanctions programmes are designed to comply with sanctions across multiple jurisdictions, “including those imposed by the United Nations, Switzerland, the European Union, the UK and the United States.”Switzerland’s largest bank also said in the report that Credit Suisse offices in Britain, Netherlands, France and Belgium, have been contacted by law enforcement officials as part of an investigation into cross border banking for rich clients, without giving details.”Credit Suisse has conducted a review of these issues, the UK and French aspects of which have been closed, and is continuing to cooperate with the authorities,” the bank said in its report. Bloomberg’s report, citing people familiar with the matter, said the DOJ had spoken to US-based lawyers for UBS about Credit Suisse’s alleged exposure to sanctions violations since UBS acquired its smaller rival in June.The DOJ is also looking into possible compliance failures at UBS, one of the people cited by Bloomberg said.The people also said the investigation was still in the early stages, and might not result in a charges or a settlement. Bloomberg’s report said the DOJ probe covers both restrictions imposed after Russia’s invasion of Ukraine in 2022 and previous rounds put in place following its 2014 annexation of Crimea. More

Holzmann’s proposal is based on the substantial profits that banks have reaped from unconventional monetary policy during past crises. He emphasized the importance of maintaining robust reserves for managing future crises effectively.Despite expecting strong opposition from banks, Holzmann remains resolute in his stance. The ECB Governing Council member believes that his proposal is crucial for potential similar measures in the future.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

Miles Parker, a senior economist at the ECB, highlighted that the long-term effects of unmitigated climate change could be more detrimental than the initial output reduction caused by transitioning to a net-zero carbon economy.In addition to these concerns, an ECB survey has shown that companies within the euro area are worried about transition risks due to stricter environmental standards.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More