Aurelia Butler

BERLIN (Reuters) – German Chancellor Olaf Scholz on Wednesday called on the ruling coalition, democratic opposition and local authorities to pull together to overcome the “mildew of red tape, risk averseness and despondency” that has spread across Europe’s largest economy in recent years.”The citizens are fed up with this standstill, and I am too,” Scholz said in a speech to the Bundestag lower house of parliament during a session on the 2024 budget, sporting a black eye patch following a jogging accident.The chancellor announced a new “Germany pact” with a bundle of measures aimed at reducing bureaucracy, speeding up approval processes for new construction and digitising citizens’ access to key government services.The pact sets out a range of goals to be achieved in consultation with powerful regional governments including swifter online consultation processes for wind farms and transport and data networks, a government document showed.”Citizens want orientation, courageous compromises,” Scholz said. “That is my demand of us all: the government parties that have argued too loudly in recent months and also the democratic opposition.”This was also key, he said, to fend off “those who want to draw political profit from decline scenarios and panic-mongering” in reference to the far-right party Alternative for Germany (AfD), which has surged in polls over the past year to second place, well ahead of Scholz’s Social Democrats (SPD).This “so-called alternative” was in reality a “demolition commando” for our country, he said in unusually harsh terms. The chancellor rejected the idea of fresh stimulus to boost an economy battling high inflation, financing costs and a drop in exports.”I set no store by a debt-financed flash-in-the-pan so-called stimulus program that would counteract the European Central Bank’s attempts to fight inflation,” he said.The government was already investing record sums, he said. The 2024 budget foresaw it investing 58 billion euros from its climate fund in hydrogen, the chip industry, climate-friendly mobility, digital infrastructure and building renovation.It was also investing 54 billion euros from the regular budget in railways, new bridges, faster internet, charging stations, social housing and a climate neutral economy. Rail operator Deutsche Bahn alone was getting 24 billion euros extra in investment over the coming four years.Such sums showed Germany was holding its own vis-à-vis the U.S. and the $430 billion U.S. Inflation Reduction Act, he said.For a special Reuters World News podcast on what is ailing the German economy please click here . More

The ECB has raised rates at each of its past nine meetings and policymakers are now debating whether to raise the deposit rate again, to 4%, or pause, given the deteriorating growth outlook that is boosting recession fears. Kazimir, an outspoken conservative, said that one more rate hike was necessary since inflation remained stubbornly high and inflation expectations were too far above the ECB’s 2% target.”One option is to take a break in September and, if necessary, deliver another (hopefully final) increase by 25 basis points in October or December,” Kazimir said in an opinion piece. “The second option seems preferable, reasonable, to me,” he said. “It is to deliver another 25 basis points next week and take a breather thereafter.”He argued that a hike now would be a “more straightforward and efficient solution” which would provide clearer signals to markets and give more time to policymakers to see that inflation was on a sustainable path towards 2%. Few policymakers have expressed such a clear preference ahead of next week’s meeting and most said they were open to the discussion. Market pricing also reflects this uncertainty as investors now see only a 1 in 3 chance of a hike next week but consider a move later, perhaps in October or December, as more likely. While most growth indicators have underperformed expectations, overall inflation is still above 5% and underlying price growth, a key gauge on the durability of price growth, is just past its peak.Many policymakers are also holding out for fresh economic projections due at the meeting but the accuracy of these forecasts has been poor in recent years and focus has shifted to actual data from forward looking indicators. “Forecasts for inflation and economic growth are yet to be updated. They remain, however, highly uncertain, given in particular the unclear outlook for wage developments,” Kazimir said.”It is, therefore, necessary to take one more step. As they say, better to be safe than sorry,” Kazimir said. More

JAKARTA (Reuters) – Canada expects to finalise a free trade agreement with ASEAN following the launch of the Canada-ASEAN strategic partnership, its prime minister, Justin Trudeau said on Wednesday.During a ASEAN-Canada summit in Jakarta, Trudeau also emphasised the importance of transparency and understanding international rules to achieve growth. More

Housing construction in the eurozone has declined at the fastest pace since the pandemic started after rising interest rates and high inflation hit building activity, according to a closely tracked survey.Soaring borrowing costs, following an unprecedented rise in the European Central Bank’s policy rates in the past year, have suppressed demand for new mortgages, reduced house prices and combined with higher inflation to raise the cost sharply of building new homes.The HCOB eurozone construction purchasing managers’ index, which tracks total activity in the sector, edged down from 43.5 in July to 43.4 August, its lowest level so far this year, taking it further below the 50 level that separates growth from contraction. Housebuilding declined at the fastest pace since April 2020, according to the survey, while commercial construction and infrastructure activity also declined but at a slower pace. The decline in overall construction was steepest in Germany, but it also fell in France and Italy. “This is not a good time to be in construction in the eurozone,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank. “Especially those companies focused on the housing sector find themselves in a tough spot.”The decline in building activity, which makes up about 9 per cent of eurozone output, will further weaken the outlook for the bloc’s economy as economists warn it risks shrinking in the second half of the year. House prices in the eurozone fell 0.9 per cent in the first quarter from a year ago, the first fall for more than a decade, reflecting a jump in borrowing costs. The average rate for a new fixed-term mortgage of at least 10 years has more than doubled from 1.32 per cent at the start of last year to 3.45 per cent in July, according to the ECB.The PMI survey found new orders in the construction sector fell for the 17th consecutive month, although the decline was the softest since February. Input prices increased at a slightly faster rate, albeit below the long-term average. Delivery times fell for the fourth month running.Construction companies cut jobs for a sixth consecutive month in August, at a faster rate than in July, reflecting a continued fall in confidence about the outlook for the year ahead.The survey results came as business lobby groups called on the German government to intervene to help the crisis-hit construction industry, after a wave of insolvencies claimed a number of high-profile property developers in the country.Several German developers have filed for insolvency in the past few weeks, among them three Düsseldorf-based commercial real estate firms Gerch, Centrum Group and Development Partner, as well as Euroboden of Munich and Project Immobilien Gruppe of Nuremberg, which build both residential and commercial property. Big landlords such as Vonovia and Aroundtown have announced big writedowns of their property portfolios.The cost of building new residential properties in the eurozone rose 11.5 per cent last year, the fastest pace on record, according to a separate index of producer prices in the sector published in July by Eurostat, the EU’s statistics arm.Production in the eurozone construction sector was down 1.1 per cent in the second quarter compared with the previous quarter, after rising 2.6 per cent in the first quarter, according to the latest data.There was more gloomy news for the eurozone economy on Wednesday as retail sales in the bloc fell 0.2 per cent in July from the previous month, which Eurostat said took the year-on-year fall to 1 per cent. More

The White House is seeking detailed information on Huawei’s latest flagship smartphone, which analysts have described as an important milestone for the Chinese tech group four years after US restrictions crippled its handset business.US national security adviser Jake Sullivan said on Tuesday that the US needed to get “more information” on the precise “character and composition” of a chip powering Huawei’s newly released Mate 60 Pro, in answer to a briefing question on whether US controls on exports of advanced semiconductor technology were being thwarted.While Huawei has declined to reveal details of its suppliers for the Mate Pro, a dismantling of the phone by the consultancy TechInsights last week suggested it contained a 7-nanometre processor made by Semiconductor Manufacturing International Corp. SMIC did not immediately respond to a request for comment. The partially state-owned Chinese chipmaker became subject to export restrictions three years ago, when the US commerce department said there was an “unacceptable risk” of chip technology being diverted to it for “military end use”. SMIC was reported to have begun providing chips at the advanced 7-nanometre level of miniaturisation last year, for bitcoin mining, in a development that surprised the industry given US attempts to limit its access to the latest foreign chipmaking equipment. SMIC’s 7-nanometre chips are the minimum required for rapid processing of data in smartphones and data centres and still lag those at 4-nanometre used in Apple’s current iPhone 14 range. Apple is widely expected to announce the use of a 3-nanometre chip, made by contract manufacturer Taiwan Semiconductor Manufacturing Company, in iPhone 15 models due to be launched next week. Even though SMIC is a long way from challenging TSMC’s lead, Dan Hutcheson, vice-chair of TechInsights, said the Huawei smartphone “demonstrates the technical progress” the country’s chip sector had made despite not having access to the latest extreme ultraviolet lithography tools. Washington has sought to block exports to China of EUV machines developed by the Dutch equipment maker ASML, which are required for high yields of chips made at nodes of 7-nanometre and below. Hutcheson said the development might prompt countries to impose “even greater restrictions than what exist today” to further curtail China’s access to critical manufacturing technologies. Sullivan said on Tuesday that the US would maintain “its course of a ‘small yard, high fence’ set of technology restrictions focused narrowly on national security concerns” rather than on “commercial decoupling”.Washington’s sanctions against Huawei in 2019 barred the group from sourcing advanced chips, equipment and software from the US for making 5G smartphones, forcing it to pivot to selling 4G gadgets and focus on its home market.Ming-Chi Kuo, analyst at TF International Securities, wrote in a research report that the phone’s release could revive Huawei’s smartphone business, which had suffered a collapse in sales following US sanctions.

Kuo forecast that Huawei would ship up to 6mn units within four months of the Pro’s launch, helping it to increase overall phone shipments by 65 per cent this year to 38mn units. Amid a smartphone sales slump, it would become “the world’s mobile phone brand with the most robust shipment growth momentum”, he predicted.The smartphone’s release has created patriotic fervour over its Made in China credentials, with a social media storm of appreciation and stocks immediately selling out at packed Huawei stores. It has also boosted the shares of Huawei’s component suppliers. The FactSet China Semiconductor Index, which tracks the country’s largest chipmakers, has outperformed Chinese equities, gaining more than 9 per cent since the smartphone was made available last week.Additional reporting by William Langley and Gloria Li in Hong Kong More

The retail price of gold in Japan has jumped to an all-time high as the yen extends its historic slide against the US dollar and cash-laden households rush to find a hedge against inflation.Buying of yen-denominated gold at the nation’s largest dealer has driven the price of the yellow metal above the ¥10,000 per gramme level for the first time in recent days. It was trading at ¥10,100 on Tuesday, according to retail prices published by Tanaka Kikinzoku, one of Japan’s largest gold retailers. The retail gold price in Japan — the main reference price for the metal in the country — tracks global spot prices, which have been pushed up by the coronavirus pandemic, the war in Ukraine and tensions between China and the US. It also reflects a sharp fall this year in the yen, which recently passed ¥146.5 against the dollar — a level that last year triggered verbal market intervention by the Japanese authorities. Currency analysts said the yen was likely to remain weak as long as there was no signal from the Bank of Japan that it was ready to tighten its ultra-loose policy and the gap in interest rate with the US and Europe remained wide.Economists said the move in retail gold prices, which extends an 18-month rally at gold stores around Japan, was part of a rapid shift in household attitudes to risk as years of deflation have given way to rising consumer prices.Jesper Koll, an economist and adviser to the Japan Catalyst Fund, an investment fund, said the primary driver for the buying by Japanese households was an urgent search for inflation protection after years without strong incentive to move assets out of cash. “The fact that gold is a non-yen asset helps, but the trigger is inflation,” said Koll.Japanese households emerged from the pandemic with a record of more than ¥2 quadrillion in accumulated assets or around four times the country’s annual gross domestic product. About half of that was held in cash and deposits — a balance closely eyed by Japan’s securities houses, which are trying to convince customers that inflation is here to stay and they now need to switch their savings into other financial products. Core consumer price inflation in Japan reached 3.1 per cent last month.“Inflation in Japan is at a crossroads,” said Tomohiro Ota, senior Japan economist at Goldman Sachs, noting that although consumer prices keep going up, some of the increase is down to temporary government subsidies while consumption growth has stalled since March. Goldman Sachs predicts that Japan’s currency will hit ¥155 against the dollar in the next six months.Eiichiro Kato, a general manager for Tanaka Kikinzoku’s Precious Metals Retail Department, said that gold had become particularly attractive to customers concerned about the yen’s fall to multi-decade lows and their assets being denominated in yen.Purchases of gold by central banks, news flow on the US economy and central bank policies were all driving the decision to buy gold in yen in the hope that the dollar-denominated gold price would remain high and stable, he said.“We do not see many factors that would cause the dollar-denominated price to fall significantly, and we think that the yen-denominated price could rise further if the yen continues to weaken,” said Kato.However, Hideo Kumano, chief economist at Dai-Ichi Research Institute, warned against reading too much into the rise in Japan’s gold price due to the small size of the market.“It could prove to be an outlier and the country’s elderly population might not change their behaviour and start to consume, even if inflation does remain high,” he said. More