Aurelia Butler

The advisers, whose forecasts guide the German government in setting fiscal policy, cut their 2021 growth outlook to 2.7%, down from the 3.1% they expected in March, but raised their outlook for next year by six percentage points to 4.6%.The darkening mood blamed by the advisers on supply-chain bottle necks and inflationary pressure afflicting the global economy is likely to create additional problems for the would-be coalition parties in carrying out promises of transformational investments into greening the economy and a return to strict debt limits from 2023 without raising taxes.The federal audit office had warned earlier on Wednesday that federal government finances were in a critical state after two years of pandemic-related spending, and said the next government must consolidate them.Olaf Scholz’s Social Democrats, who will lead the government if talks are successful, and the Greens are more relaxed about government spending, but for the business-friendly Free Democrats, fiscal discipline is central to their pitch.The advisers also said in their report that they expected the current inflationary spurt to continue well into 2022.Inflation, driven by high input prices, would come in at 3.1% this year, and at 2.6% in 2022. Economic output would grow 4.6% next year, an improvement on the 4% forecast in March.The government is due to respond to the advisers’ report in early 2022. The coalition parties aim to have reached agreement by Christmas, three months after Germany’s federal election. More

LONDON (Reuters) -The standard setter for global trade finance flows has proposed a new set of rules to define sustainability in the trade finance arena, worth some $5 trillion a year, an executive told Reuters. While governments and business sectors move quickly to set guidelines for some types of sustainable finance, there are no standards for trade finance. Those rules would apply to a third of global trade.Agreeing on a common rulebook could help direct more trade flows toward efforts that reduce climate-warming emissions and that also meet the United Nations’ development goals, said Andrew Wilson, policy director at the International Chamber of Commerce (ICC).While others have begun to set definitions for parts of the sustainable finance industry, such as green bonds, “none of those frameworks can be easily or reliably applied to the financing of trade,” Wilson said on the sidelines of the COP26 climate talks https://www.reuters.com/business/cop in Glasgow.A framework for trade finance is considered more complicated as more parties are involved and entire supply chains need to be monitored, he said.Banks and companies are assessing the sustainability of their trade deals in different ways that can be hard to reconcile. On Wednesday, the ICC released a position paper that it expects to be formalised as guidelines in 2022. The paper was produced with the Boston Consulting Group based on input from more than 200 companies and banks including HSBC, Santander (MC:SAN) and Commerzbank (DE:CBKG). More input would be sought, including with civil society and governments, before the framework is finalised to ensure support and consistency between the banks in how they classify transactions.If the framework is considered workable, the ICC would look to develop sectoral standards for specific types of transactions, Wilson said. While the ICC rules are not compulsory, the group is a recognised standard-setter, Wilson said, noting that its decisions are often referred to in court decisions.He said he expected the framework to be under consultation until the second quarter of 2022, when a more detailed framework would be delivered. Final rules would then come in the third quarter. More

Investing.com — Inflation is back on the center of everyone’s radar as the U.S. prepares to release the highest CPI number in three decades. China’s producers are also letting rip, with a 13% rise in factory gate prices through October. Rivian’s IPO is poised to be the biggest since Facebook’s (NASDAQ:FB) in 2012, while weekly jobless claims are due a day early. Oil prices are close to their highs for the year after a surprise drop in U.S. crude stocks, and Walt Disney (NYSE:DIS) reports earnings after the close. Here’s what you need to know in financial markets on Wednesday, 10th November.1. Inflation back on the radar; jobless claims set for new lowThe official U.S. inflation rate is set to hit a 30-year high at 8:30 AM ET (1330 GMT), when the Bureau of Economic Analysis releases October’s consumer price index. Analysts expect the CPI to be up 5.8% from a year earlier, while the core CPI index which strips out volatile food and energy prices is expected to have risen 4.3%.In both cases, that will represent an acceleration from September. However, given that annual rates are heavily influenced by basis effects, the monthly price increases may be of more importance in measuring the current strength of an inflation dynamic that is starting to spook markets again – Tuesday’s chunky rise in producer prices being a good illustration.Additionally, due to the Veterans Day holiday on Thursday, the Labor Department is also releasing weekly jobless claims data at the same time. Initial jobless claims are expected to have inched down to a new post-pandemic low of 265,000 amid a nationwide shortage of workers.2. Rivian prices IPO above the top of its rangeRivian, the electric van maker backed by Amazon (NASDAQ:AMZN) and Ford, is set to make the biggest market debut by a U.S. company since Faceb-, er, Meta Platforms, in 2012.The company’s initial public offering was priced late on Tuesday at $78 a share, giving it a valuation of $77 billion on a fully-diluted basis. Not bad for a company that is yet to book any meaningful revenue. Its bankers had already revised up the marketing range from an initial $57-$62 a share to $72-$74.The listing provides a timely opportunity for investors in electric vehicles, given that Elon Musk is preparing to sell around $21 billion of Tesla (NASDAQ:TSLA) stock to pay his tax bills. Tesla stock steadied in premarket trading on Wednesday after falling 12% on Tuesday in response to an SEC filing that showed Musk’s brother Kimbal cashed out a $110 million chunk of Tesla shares a day before Musk held his social media poll flagging the stake sale.3. Stocks set to open lower; Disney earnings eyed U.S. stock markets more broadly are set to open lower, however, as Tuesday’s producer price data from the U.S. and even more alarming PPI data from China overnight put inflation and the need for tighter monetary policy back on the radar.By 6:20 AM ET, Dow Jones futures were down 81 points, or 0.2%, while S&P 500 futures were down 0.3% and Nasdaq 100 futures were down 0.4%. All three indices had fallen on Tuesday.Stocks likely to be in focus later include Upstart (NASDAQ:UPST), which was hit by profit-taking after its results late on Tuesday, and Alphabet (NASDAQ:GOOGL), which was also lower after the EU’s top court dismissed its appeal against a $2.8 billion antitrust fine. Disney is the standout earnings report due Wednesday, but comes after the closing bell.4. China’s factory gate prices soarInflation was the main story of the day in China overnight, after data showing that producer prices rose by 13.5% on the year through October. That was up from 10.7% in September and well above a consensus forecast of 12.4%. Manufacturers were hit by, among other things, high energy prices as they cranked up output to meet booming global demand.Chinese consumer prices also rose a hefty 0.7% on the month, taking the annual rate to 1.5%, a 12-month high. That sparked concern that the People’s Bank of China may be constrained in its ability to support the economy with looser monetary policy if the crisis in the country’s real estate sector requires it.China Evergrande (OTC:EGRNY) is widely expected to meet some dollar interest payment obligations Wednesday after announcing a modest asset sale earlier in the week. However, shares in rival Fantasia (HK:1777) slumped to a record low after it said its lenders were demanding early repayment of their loans.5. Oil gives up some gains ahead of EIA inventory dataCrude oil prices gave up some of their gains after Tuesday’s surge in response to a surprising draw on U.S. crude stocks last week.By 6:25 AM ET, U.S. crude futures were down 0.5% at $83.80 a barrel, after having tested the $85 mark on Tuesday when the American Petroleum Institute said crude inventories had fallen 2.5 million barrels last week, rather than rising by 1.9 million as expected. Data from the Energy Information Administration are due at 10:30 AM ET as usual.The U.S. government decision to shelve the idea of releasing oil from the Strategic Petroleum Reserve also supported prices overnight – a move that analysts had dismissed as unlikely to have any lasting effect in any case, given current global supply-demand dynamics. More

Greetings from Washington, to where your intrepid trade reporter is delighted to have returned from a brief visit to the UK. The queues at Dulles were soul destroyingly long, as ever, but seemed to move more swiftly than usual. Perhaps the US Customs and Border Patrol officers sensed the sheer joy of us Brits and other assorted Europeans at being allowed to travel freely again and were letting us through with a lighter grilling than usual.Speaking of borders, our note today is on some more trade friction with Canada and Mexico, which we sense is about to escalate. Charted waters looks at the stats on how Brexit is affecting trade between the UK and EU. Subsidies sour relations with the US’s neighboursWe’ve written before about continuing spats between the US and Canada over trade. Despite a new era of attempted co-operation by Joe Biden, there have been tensions over goods such as cheese, lumber and solar panels. With Mexico, too, there have been a few difficulties over energy reforms and some friction over the Latin American country’s implementation of the USMCA trade deal’s labour provisions. Now there’s a new trade fight brewing, in which Canada and Mexico are united in their opposition to America, and it’s about Biden’s plans to provide an incentive for electric vehicle manufacturing.In new proposals that are part industrial policy, part efforts to make the US greener and the climate cleaner, Biden has set out new tax credits meant to help people afford electric vehicles. For the first five years after the bill is enacted, buyers of electric cars will be given $7,500 of credit regardless of where the vehicle is made. But for five years after that, the credit will only apply to cars made in the US. Moreover, there’s $500 of tax credit available for any car with a US-made battery, and another $4,500 if the car is made in a plant with a union. Unsurprisingly, Canada is not very impressed with this, and neither is Mexico. Both see the proposed measure as in effect more of Biden’s Buy American sentiment, but this time applied to the North American car supply chain. Canadian trade minister Mary Ng has argued it would encourage auto companies to build new EV battery plants in the US, as opposed to Canada. Ng has gone as far as to write to senior US senators and officials to complain that the tax credits could “undermine decades” of Canada-US auto collaboration, prompt the loss of tens of thousands of Canadian jobs and cause additional harm to US workers. Canada’s innovation and industry minister François-Philippe Champagne, meanwhile, last Thursday said Canada would respond “appropriately” to the credits, which sounds ominous to us. “They understand that legislation like that would generate a response on the Canadian side,” Champagne said in an interview with Reuters. “We have always responded appropriately to these types of legislation.” Mexico’s top trade official for North America, meanwhile, Roberto Velasco Alvarez, has also said he is “very concerned” about the impact of the proposals on the Mexican auto sector.This puts Biden in a tricky spot. The North American supply chain for autos is famously integrated. This doesn’t stop when it becomes green. Canada boasts a wealth of minerals needed to make EV batteries, such as lithium, graphite and cobalt, providing a useful source of minerals to be imported into the US from Countries That Are Not China (or the Congo, where child labour has been known to be used). It’s unlikely the US will be able to become self-reliant when it comes to the minerals needed for EVs, and Canada is going to become an increasingly important supplier. It would be unwise to get into too much of an adversarial relationship with Ottawa over EV manufacturing (or over auto trade more broadly). On the other hand, these tax credits are a central tenet of Biden’s new green industrial policy efforts, and he’s not going to be able to give them up. Moreover, it fits into the rhetoric of providing American jobs for American workers. As Ted Alden of the Council on Foreign Relations points out, “if you can go into the swing states in the Midwest and say, ‘look, the transition to electric vehicles is providing you with great factory jobs again’, that’s a big deal politically”.So what now? Well, Canada and Mexico may well bring a dispute forward under the USMCA mechanisms. But it’s difficult to see what the happy resolution is — unless the part about the cars needing to be made in the US is dropped and swapped for “in North America”. We suspect this might be another fun trade problem for trade representative Katherine Tai to try and fix without unbalancing the political equation. We’ll be watching.Charted watersMartin Wolf, our chief economics commentator, has written his latest column on how Brexit — specifically London’s threat to repudiate its deal with the EU — risks damaging the UK’s trading relationship with countries beyond Europe’s shores. In today’s Charted waters, however, we’re focusing on evidence of how it has affected the relationship with its largest trading partner, the EU. The chart below clearly shows an impact, with exports from the UK to the EU almost 10 per cent lower over the past three months than they were in the fourth quarter of 2020. There is less evidence that the break with the EU is affecting relations with the rest of the world, with goods exports more or less at the same level now as at the end of last year. Claire Jones Trade linksForeign Affairs ($) has an interesting piece on the China Shock’s Lessons for the Green Economy. Biden’s commerce chief Gina Raimondo has said (Bloomberg, $) talks with the UK and Japan over steel will start soon. Europe’s largest chipmaker Infineon almost doubled its profits in the three months to the end of September, benefiting from the clamour for semiconductors amid a global shortage. In a coup for economic security planners in Tokyo, meanwhile, Sony has signed a deal (Nikkei, $) with TSMC to jointly build and operate a $7bn chip plant in Japan. Other Asian chipmakers — Samsung, Renesas, SK Hynix and Kioxia — have complied with the US request for data — excluding client information — to help identify supply chain vulnerabilities. Aime Williams, Francesca Regalado and Claire Jones More