Aurelia Butler

Data released earlier this week showed that eurozone business activity contracted sharply and unexpectedly this month, with the downturn appearing to be  broad-based as Germany, Europe’s largest economy, saw its decline deepen while France – the bloc’s second biggest – returned to contraction.HCOB’s preliminary composite eurozone Purchasing Managers’ Index (PMI), compiled by S&P Global, sank to 48.9 this month from August’s 51.0, below the 50 mark that separates growth from contraction for the first time since February.“The risks of a sharper slowing in activity have clearly grown,” said analysts at HSBC, in a note dated Sept. 25. “In turn, a risk-based approach to setting monetary policy might favour earlier and (at least initially) faster easing. With the deposit rate currently at 3.50%, it can probably be cut multiple times while keeping policy restrictive.”Additionally, disinflationary news from commodities and the euro, the favorable trajectory of wages and inflation expectations, and the fact that the eurozone’s largest economies are stuttering strengthens the case for more near-term easing, the bank added.In its September forecast, the ECB projected headline inflation below target in 2026. A further weakening in the demand outlook could raise the risk of a more material inflation undershoot of target, HSBC said. “So even if the supply side of the economy remains weak and the labor market only cools gradually, more policymakers may be persuaded that some ‘insurance’ rate cuts might be necessary.”HSBC now expects the ECB to cut rates by 25 bps at every meeting from October until April 2025, when the key deposit rate reaches 2.25% “Previously we had expected cuts every other meeting until the key deposit rate hit 2.50% in September 2025.” More

The previous government had planned to cut the fiscal shortfall to 3% of GDP by 2027, but weak tax revenues and budget overruns have put that target all but out of reach, leaving a hole for the new cabinet that took office this month.”Three years is not realistic, not economically or with regards to growth. But to do it in five years is possible,” Villeroy, who is also a policymaker at the European Central Bank, told France 2 TV.Earlier this week, Finance Minister Antoine Armand said the budget deficit was one of the worst in French history. The last government had hoped to limit the 2024 budget deficit to 5.1% of GDP, but the latest estimates suggest it may spiral towards 6%.The overshot puts huge pressure on new Prime Minister Michel Barnier to come up with billions of euros in budget cuts as well as a some targeted tax increases as it races to finalise the 2025 budget.Barnier has suggested he would be open to raising taxes on the wealthy and some corporations. Spending cuts are also expected, which Villeroy said in the interview that he supported.Time is running out for the government to finalise its 2025 budget and hand it over to lawmakers, with mid-October the very latest if it is to be passed by parliament before the end of the year, the head of the Cour des Comptes public audit office Pierre Moscovici said.He added that parliament could pass special emergency laws to ensure taxes are in place by the start of the year, allowing for the overall budget bill to be dealt with later.”That would be rather unorthodox, to say the least,” Moscovici told journalists.In rare good news for the new government, consumer confidence improved for the third straight month in September, topping analysts’ expectations, official INSEE data showed.An increase in the proportion of households feeling that the present is a good time to make big purchases, as well as easing concern about unemployment, helped drive the index up two points to 95, still below the long-term average but at its highest level since February 2022.But the proportion of households considering that now is a good time to save more also increased, a possible sign that consumers want to build up a cushion of spare cash in case times get tougher ahead.While consumer confidence has improved, investors remain concerned about the new government’s ability to tackle the deficit, pushing France’s borrowing costs briefly above Spain’s on Tuesday for the first time since 2008. More

OTTAWA (Reuters) – Canadian Prime Minister Justin Trudeau looks set to survive a vote of confidence on Wednesday after his main political rival appeared to fail to muster enough support to end nine years of Liberal Party rule.Legislators in the House of Commons are due to vote at about 3.30 pm ET (1930 GMT) on a motion by the official opposition Conservative party declaring a lack of confidence in Trudeau’s minority Liberal government.Trudeau, whose popularity has slumped amid unhappiness over rising prices and a housing crisis, became more politically vulnerable this month when the smaller New Democratic Party tore up a 2022 deal to keep him in power until the 2025 election.The right-of-center Conservatives have a big lead in the opinion polls ahead of an election that must be called by the end of October 2025. “I am proud of this country – Canadians are proud of this country. We are going to bring home the country we love,” Conservative leader Pierre Poilievre told the House on Tuesday as he introduced the motion of confidence. The Conservatives say they want an election as soon as possible on the grounds that Canadians cannot afford a planned increase in the federal carbon tax. They also say federal spending and crime have ballooned under Trudeau.Trudeau, while acknowledging public unhappiness, accuses the Conservatives of playing politics rather than focusing on what people need.Poilievre needs the backing of the other two major opposition parties in the House to bring down Trudeau and both have made clear they will not cooperate.The separatist Bloc Quebecois, which seeks independence for the province of Quebec, says it will back Trudeau in exchange for legislation to increase benefits for seniors.The NDP, which like the Bloc and the Liberals is a broadly center-left movement, also says it will not vote to bring Trudeau down despite precipitating Trudeau’s current struggles by tearing up its deal with him. Polls indicate the NDP would also be in trouble if an election were called now.Trudeau played down polls showing his party’s unpopularity, saying they reflect Canadians’ frustrations with daily life.”People are taking a lot out on me for understandable reasons. I’ve been here, and I’ve been steering us through all these things, and people are sometimes looking at change,” he told U.S. late-night television host Stephen Colbert on Monday. More

NEW DELHI (Reuters) -India’s federal labour minister asked the southern state of Tamil Nadu to resolve a weeks-long strike by workers at Samsung Electronics (KS:005930), a government source said on Wednesday.The protests – the biggest such in India in recent years – at the South Korean group’s plant near Chennai has disrupted operations, with over 1,000 of the 1,800 workers demanding higher wages and union recognition.In a letter addressed to Tamil Nadu Chief Minister M.K. Stalin, labour minister Mansukh Mandaviya has urged the state government to intervene for an “early and amicable” resolution, the source, who did not want to be named as the document has not been made public, said.Reuters could not independently verify the contents of the letter.Samsung and the Tamil Nadu government did not immediately respond to Reuters requests for comment. The labour unrest which began on Sept. 9 is an overhang on Indian Prime Minister Narendra Modi’s mission to attract foreign investment for manufacturing in the country and to triple electronics production to $500 billion in six years. The Tamil Nadu plant accounts for about a third of Samsung’s $12 billion annual revenue in India.The South Korean company has defended its wages, saying its workers at the Tamil Nadu plant are paid almost twice as much as employees in nearby plants belonging to other companies. Its India HR team has also written an email to some striking workers, warning them of pay being withheld for days they don’t work. More