Aurelia Butler

The draft proposal, seen by Reuters on Tuesday, suggests creating a new type of vehicle category in the European Union for cars that can only run on carbon neutral fuels.Such vehicles would have to use technology that would prevent them from driving if other fuels are used, the draft said. This would include a “fuelling inducement system” to stop the car from starting if it was fuelled by non-carbon neutral fuels, it said.The proposal could offer a route for car manufacturers to keep selling combustion engine vehicles after 2035, the date when a planned EU law is set to ban the sale of new CO2-emitting cars.After months of negotiations, EU countries and the European Parliament agreed the law last year. But Germany’s Transport Ministry surprised other countries this month by lodging last-minute objections to the law, days before a final vote that would have seen it enter into force.The Ministry’s core demand is that the EU allow sales of new cars running on e-fuels after 2035. The Ministry was not immediately available for comment. A Commission spokesperson declined to comment on the draft document, but referred to comments by EU climate policy chief Frans Timmermans, who said last week any solution must comply with the 2035 phaseout law agreed last year.”The talks are ongoing between the Commission and the German authorities,” the spokesperson said.An EU official told Reuters on Monday that any proposal on registering e-fuel cars would only be made after the combustion engine phaseout law was finally adopted.E-fuels are made by synthesizing captured CO2 emissions and hydrogen produced using CO2-free electricity.They are not yet produced at scale. A study published on Tuesday by the Potsdam Institute for Climate Research found that all planned e-fuel projects worldwide would only produce enough fuel to cover 10% of Germany’s demand for e-fuel use in aviation, shipping and chemicals in the next few years. On Monday, Germany’s Transport Ministry said talks with the Commission about the planned end of new combustion engines from 2035 were moving forward, but added it could not say when an agreement might be reached. More

LONDON (Reuters) -Britain’s government borrowed more than expected in February, official data showed on Tuesday, but finance minister Jeremy Hunt may still hope that falling energy costs and inflation will offer leeway later this year for a pre-election tax cut.The Office for National Statistics said public sector net borrowing, excluding state-owned banks, was 16.7 billion pounds ($20.4 billion) last month, the largest February deficit since monthly records began in 1993. The reading was above all predictions in a Reuters poll of economists, which had a median forecast for 11.4 billion pounds in borrowing.The figures are not adjusted for the time of year – so comparisons are usually only made against the same month in previous years – and nor do they account for the impact of inflation over time. The ONS said February’s borrowing data reflected “substantial” spending on energy bill support programmes.The higher-than-expected borrowing underlines the dilemma facing Hunt, who must fund expensive support for households and businesses in the near term while working out a way to cut taxes before the next election, likely to be in 2024.Hunt said last week the energy subsidies would be extended until June, but would cease thereafter as wholesale energy prices are forecast to fall below the level at which the government deems consumer subsidies to be necessary.”The news on the public finances may have raised the Chancellor’s hopes that he will be able to announce a pre-election giveaway later this year,” said Ruth Gregory, deputy chief UK economist at Capital Economics.”But the big risk is that a further escalation in the banking crisis causes a deterioration in the fiscal outlook as the hit to the public finances from weaker economic growth is only partially cushioned by lower gilt yields.”Spending on energy support schemes totalled 9.3 billion pounds in February alone, the ONS said.Published with his annual budget last week, forecasts from the Office for Budget Responsibility (OBR) showed an improved outlook for the public finances compared with its previous report in November, with borrowing averaging 10 billion pounds lower in each future financial year than previously predicted.While the OBR said this reflected a less pessimistic economic outlook than four months ago, borrowing is still likely to run about 50 billion pounds higher each year compared against its March 2022 forecasts, before the full scale of the energy shock was apparent.Tuesday’s data showed cumulative borrowing from April 2022 through February 2023 stood at 132.2 billion pounds. Last week the OBR forecast borrowing for 2022/23 as a whole would reach 152.4 billion pounds, or 6.1% of economic output – a target that looks likely to be met.January’s surplus in the public finances was revised up by almost 3 billion pounds. Britain’s debt interest bill was 6.9 billion pounds in February, 1.3 billion pounds less than a year earlier, reflecting changed payments on inflation-linked government bonds, the ONS said.($1 = 0.8163 pounds) More

Investing.com — The Federal Reserve starts a two-day meeting at which it will have to decide whether financial stability risks trump inflation risks. Bank stocks recover in Europe and the U.S. as the shock of Credit Suisse’s abrupt demise recedes. Stocks more broadly are set to open higher on relief about the banking sector. Nike reports earnings after the close, and in Moscow, the Russian government is likely to press Xi Jinping with its war effort, while also paying lip service to his peace plan.Here’s what you need to know in financial markets on Tuesday, March 21st.1. Fed faces price stability vs. financial stability dilemmaThe Federal Reserve starts its two-day policy meeting with markets still very much on edge after three weeks of increasingly severe financial instability on both sides of the Atlantic.Some analysts, such as Goldman Sachs, believe that the collapse of three U.S. banks and increasing signs of stress in the mortgage-backed securities market will force the Fed to at least pause its policy tightening, while others warn that inflation and the labor market are still running too hot to allow that luxury.The pressure on mid-size regional banks appeared to ease a little on Monday, with most stocks rising. The main outlier and cause for concern remain First Republic Bank (NYSE:FRC), which fell another 47% after its credit rating was downgraded by Moody’s and Standard & Poor’s, on the risk of continued deposit outflows.First Republic staged a modest bounce in premarket after The Wall Street Journal and Bloomberg reported work afoot for a more durable solution to its woes, both in government and private circles.2. Bank stocks rebound as Credit Suisse aftershocks easeGlobal markets recovered their poise after the shock of Credit Suisse’s hasty forced marriage to UBS at the weekend. European bank stocks, in particular, extended the recovery they had started on Monday after regulators clearly stated that they would not copy the Swiss approach of imposing losses on additional Tier-1 capital before shareholders. ECB banking supervision head Andrea Enria has two speaking opportunities later to calm nerves further.The Swiss move – while legal – was seen as violating the spirit of the Basel III banking reforms and ensured that bondholders were more inclined to support legal challenges to the deal on other grounds.The Swiss government had hastily written new legislation to avoid having either bank’s shareholders veto a deal that it saw as vital to national interests.3. Stocks set for higher opening; existing home sales, Nike earnings dueU.S. stock markets are set to open higher, as fears of an immediate banking crisis subside.Regional bank stocks, such as PacWest (NASDAQ:PACW), Western Alliance (NYSE:WAL), KeyCorp. (NYSE:KEY), Comerica (NYSE:CMA), and Zions (NASDAQ:ZION) are all up by as much as 3% in premarket trading, helped by a Bloomberg report that the Treasury is looking at ways to extend insurance to all deposits, at least temporarily, removing the main driver of the recent instability.By 06:45 ET (10:45 GMT), Dow Jones futures were up 244 points or 0.8%, while S&P 500 futures were up 0.6% and Nasdaq 100 futures were up 0.3%.Existing home sales top the day’s data calendar, and housing-related data may generate some added interest, given the concerns about concentrations of mortgage-backed securities on some bank balance sheets.Nike (NYSE:NKE) reports earnings after the close.4. Putin “ready to discuss” China’s Ukraine peace proposal as Xi continues visitRussian President Vladimir Putin told his Chinese counterpart Xi Jinping he was ready to discuss Beijing’s 12-point peace plan for Ukraine, but without indicating where he may be prepared to compromise.Xi’s plan includes calls for respecting the sovereignty and territorial integrity, something hard to square with Russia’s unilateral annexation of four Ukrainian regions last year (in addition to the annexation of Crimea eight years earlier). The Ukrainian government, on Monday, reiterated its call for Russia to withdraw its forces.Xi began the second day of his visit with talks with Prime Minister Mikhail Mishustin, which agencies said would concentrate on the important economic ties between the two. A key issue is likely to be the supply of Chinese military or dual-purpose goods to shore up its war effort, which Moscow is understood to be pressing for, but which China has so far been reluctant to give.5. Crude bounces as economic concerns ease; API dueCrude oil prices came off their lows as the near-term outlook for the banking sector improved, easing concerns about an economic slowdown later in the year.By 06:55 ET, U.S. crude futures were up 1.1% at $68.53 a barrel, while Brent futures were up 0.9% at $74.42 a barrel.The market was also supported by comments from the CEO of Trafigura, one of the world’s largest traders, saying that there is “not much downside from here” given the unresolved issues on the supply side of the market.The American Petroleum Institute publishes its weekly estimates of U.S. inventories at 16:30 ET, as usual. More

Introducing the ECB’s annual report on banking supervision, Enria said euro zone banks were solid but warned that a sharp rise in borrowing costs over the past year meant lenders could no longer rely on cheap funding and rising financial markets. “Increasing interest rates and quantitative tightening require banks to sharpen their focus on liquidity and funding risks,” said Enria, in remarks the ECB said were drafted in February, before recent turmoil in the global banking system.”There is a risk that banks might be caught off guard,” he warned.The global financial system is on tenterhooks after two large banks – Silicon Valley Bank of the United States and Switzerland’s Credit Suisse – ran out of cash, albeit for different reasons.Enria’s report warns banks about a likely hit to their net worth as borrowing costs rise.This was a major problem at SVB, which had invested customer deposits without hedging itself against the risk of rising rates, ultimately suffering a bank run.”(Banks) should adopt sound and prudent asset and liability management modelling practices in order to capture shifts in consumer preferences and behaviour when interest rate regimes change,” Enria said. “They should also carefully monitor risks arising from hedging derivatives.”Credit Suisse also suffered massive deposit outflows, especially from its international business, after a string of scandals.Large euro zone banks had a leverage ratio – a broad gauge of their solidity in which capital is measured as a percentage of total assets – of 5.2% on average as of September 2022, the report showed.This one of the lowest levels since the ECB started supervising them in 2014 but still well above requirements, the ECB said in the report.Enria is due to appear before the European Parliament at 1330 GMT on Tuesday and may give updated figures about the health of the euro zone’s banking system. More