Business

Germany Set to Approve Major Spending Bill on Defence and Infrastructure

Published

1 year ago

March 18, 2025

RTX

Germany is poised to pass a significant spending bill that will unlock hundreds of billions of euros for defence and infrastructure projects, potentially boosting both the euro and the German stock market. Investors remain optimistic about the fiscal reform, which could support continued market uptrends.

German Markets Surge Ahead of Parliamentary Vote

The German stock market and the euro continued their upward momentum ahead of Tuesday’s parliamentary vote on the spending bill. The proposal, introduced by Chancellor-in-waiting Friedrich Merz, aims to exceed the traditional 1% GDP limit on defence spending, allowing the government to allocate approximately €45 billion for military expenditures. Additionally, the bill will establish a €500 billion special fund dedicated to infrastructure development.

Last Friday, Merz secured a crucial agreement with the Green Party on the debt-financed spending package, clearing a major hurdle in the legislative process. With the CDU/CSU, SPD, and Greens controlling 520 seats in the Bundestag, the coalition comfortably surpasses the two-thirds majority required to amend constitutional laws.

The DAX index rose 0.73% on Monday to 23,154.57, just 1% below its all-time high of 23,419.48 recorded on March 6. Meanwhile, the euro strengthened by 0.43% against the US dollar to 1.0922, holding near a four-month high, despite minor fluctuations during Tuesday’s Asian trading session.

European Defence Stocks See Massive Gains

Defence stocks have surged since mid-February following US President Donald Trump’s decision to initiate peace talks with Russian President Vladimir Putin while initially excluding the European Union and Ukraine. His move to halt all military aid to Ukraine has prompted the EU to accelerate defence spending.

In early March, European Commission President Ursula von der Leyen proposed an €800 billion defence budget for the bloc, urging member states to raise military spending by an average of 1.5% of GDP. In response, Merz announced plans to exempt defence spending from Germany’s constitutional debt brake. His proposal received backing from all 27 EU member states at a summit in Brussels on March 6.

The increased focus on defence has propelled major European arms and aerospace stocks to new highs. Shares in German weapons manufacturer Rheinmetall have soared 52% month-over-month and 123% year-to-date, repeatedly breaking records. Similarly, BAE Systems and Rolls-Royce Holdings have climbed 42% and 36%, respectively, in 2025.

The Euro Stoxx Aerospace & Defence Index has jumped 33% year-to-date, significantly outperforming the pan-European Stoxx 600’s 8% gain. Meanwhile, Germany’s benchmark DAX has risen 16% this year, making it one of the best-performing global indices.

Euro Poised for Further Gains Amid Fiscal Reform

The euro has appreciated by 7% against the US dollar since its January low, driven by optimism over increased European defence spending. The massive fiscal injection into defence and infrastructure is expected to revitalize Germany’s economy and support the euro’s strength.

Conversely, the US dollar has weakened against major G10 currencies amid escalating global trade tensions. Analysts predict further declines due to rising economic uncertainty in the United States. “I still view any USD rallies as selling opportunities and would be fading any USD upside across the G10 board,” wrote Michael Brown, a senior research strategist at Pepperstone London.

The upcoming Federal Reserve rate decision on Wednesday will be a key moment for currency markets. Any dovish signals from the central bank could exert additional pressure on the dollar, potentially driving the euro even higher.

Business

FII Summit in Rome Calls for Faster Reforms to Boost Europe’s Investment Appeal

Published

5 minutes ago

June 19, 2026

Web Reporter

The discussions highlighted what participants described as a critical opportunity for Europe to reinforce its strategic autonomy and position itself as a leading destination for global investment. However, speakers warned that without faster reforms and reduced administrative barriers, the region risks falling behind the United States and rapidly advancing Asian economies.

Unlike the recent G7 discussions, which focused heavily on geopolitical tensions and security issues, the Rome summit placed economic transformation at the centre of attention. The FII Priority Europe event brought together policymakers and investors to examine how the continent can regain momentum and secure funding for industrial and technological development.

Richard Attias, chairman of the executive committee of the FII Institute, told delegates that Europe retains strong fundamentals, including skilled labour, innovation capacity and established industrial infrastructure. However, he said investors increasingly demand predictability, speed and clarity in decision-making processes.

Attias called for streamlined regulations and simplified administrative systems to improve capital flows into key sectors such as artificial intelligence, digital infrastructure, renewable energy and advanced manufacturing. He also noted that Europe is competing not only with the United States but also with emerging economies that are rapidly adjusting their regulatory frameworks to attract investment.

He stressed that the challenge lies in maintaining European standards while ensuring that regulatory systems do not slow economic progress. According to him, global capital is moving quickly, and Europe must adapt if it wants to remain a leading investment destination.

The issue of long-term investment in Europe was also addressed by Yasir O. Al Rumayyan, governor of Saudi Arabia’s Public Investment Fund and chairman of energy giant Aramco. He said Europe stands at a defining moment in shaping its role in the evolving global economy and emphasized the importance of creating conditions that support large-scale, long-term investment.

Al Rumayyan pointed to opportunities in areas such as energy transition projects, technological innovation and strategic infrastructure development. His remarks carried significant weight, given that the Public Investment Fund manages assets worth about $1.15 trillion, while Aramco remains one of the world’s most profitable energy companies.

Organisers said the choice of Rome as the summit venue reflected Europe’s potential to combine historical influence with forward-looking reform ambitions. The message repeated throughout the event was that while Europe continues to attract strong investor interest, its ability to convert that interest into sustained economic growth will depend on how quickly it modernizes its regulatory environment and accelerates structural reforms.

Business

Oil Prices Slide as US–Iran Accord Eases Supply Fears While Markets React to Fed Policy Shift

Published

19 hours ago

June 18, 2026

Web Reporter

Global crude prices extended losses on Thursday after the United States and Iran signed a memorandum of understanding aimed at ending their conflict and reopening the Strait of Hormuz, a key route for global energy shipments. Equity markets also responded unevenly as investors digested the Federal Reserve’s latest policy signals.

Oil benchmarks dropped in early trading following confirmation that US President Donald Trump and Iranian President Masoud Pezeshkian had signed an initial agreement designed to halt hostilities and restore normal maritime flows through the Strait of Hormuz. The waterway handles a significant share of global crude exports, and expectations of its reopening immediately weighed on prices.

At the time of writing, West Texas Intermediate fell 2.3% to around $75 a barrel, while Brent crude slipped about 2% to $78 a barrel. Although both benchmarks remain above pre-conflict levels near $70, they have retreated sharply from recent highs above $100 recorded during the height of the tensions.

The agreement sets a 60-day period for negotiations on a final settlement addressing Iran’s nuclear programme. In the interim, Tehran has agreed to reduce its stockpile of highly enriched uranium. The deal also includes provisions for easing sanctions, allowing Iran to resume oil exports and enabling tanker traffic to move more freely through the Persian Gulf.

US officials have indicated that the Strait of Hormuz could be fully reopened by Friday without transit fees, a development that has reinforced expectations of increased global supply. President Trump, commenting after the signing, said “oil down, stocks up,” reflecting market reactions to the accord.

Despite the easing outlook, the International Energy Agency has warned that global oil markets remain fragile. Strategic reserves in advanced economies have fallen to their lowest levels since 1990, with OECD stockpiles declining by more than 160 million barrels since the conflict began. The agency also revised down its demand forecast, citing weaker consumption and elevated fuel prices.

Flows through the Strait of Hormuz had already begun recovering before the agreement, reaching roughly 12 million barrels per day in early June after a period of disruption.

Financial markets, meanwhile, delivered a mixed performance following the Federal Reserve’s latest projections. Wall Street fell on Wednesday, with the S&P 500 down 1.2%, the Dow Jones off 1%, and the Nasdaq losing 1.3%, after policymakers signalled the possibility of interest rate increases later this year.

In his first press conference as Fed chair, Kevin Warsh avoided committing to a clear policy path, signalling a shift in how the central bank communicates future decisions. US President Donald Trump, attending the G7 summit in France, described the situation as “whatever,” while acknowledging uncertainty over potential rate hikes.

Early trading on Thursday pointed to a rebound, with US futures higher and Asian equities advancing on optimism over easing geopolitical risks. European markets opened more cautiously, reflecting lingering uncertainty despite the improving energy outlook.

Business

Kevin Warsh Begins Fed Tenure as Markets Watch for Clues on Future Rate Path

Published

2 days ago

June 17, 2026

Web Reporter

The US Federal Reserve enters a new phase on Wednesday as Kevin Warsh presides over his first policy meeting as chair, marking a closely watched leadership transition in American monetary policy. While economists broadly expect interest rates to remain unchanged, investors are focused on signals that could define the central bank’s direction under new leadership.

The Federal Open Market Committee is expected to keep the benchmark interest rate within the 3.50% to 3.75% range, extending a steady policy stance for a fourth consecutive meeting. The last adjustment came in December 2025, when rates were reduced by 25 basis points.

Although no immediate policy shift is anticipated, attention is centred on the language of the Fed’s statement and Chair Warsh’s first press conference. Analysts say even subtle changes in wording could indicate whether policymakers are leaning toward holding rates higher for longer or considering future increases if inflation remains persistent.

Warsh assumes leadership during a more complex economic environment than when he was previously associated with calls for lower interest rates. At that time, he aligned with arguments suggesting artificial intelligence-driven productivity gains could help ease inflation pressures. However, economists now point to continued inflationary risks tied to investment cycles in technology sectors, which have contributed to demand pressures across the economy.

Inflation has risen since the outbreak of the Iran conflict in February, reaching 4.2%, its highest level in three years, largely driven by higher energy costs. Although a US-backed framework for a peace deal has been announced, uncertainty remains over its durability, and analysts warn that any relief in fuel prices could take months to filter through to broader inflation measures.

The Fed’s preferred inflation gauge has remained above its 2% target for more than five years. At the same time, the labour market continues to show resilience, with 172,000 jobs added in May, marking the third consecutive month of solid employment growth. This stability has reduced pressure for further rate cuts that were previously projected earlier in the year.

Because interest rates are expected to remain unchanged, market attention has shifted to the Fed’s updated Summary of Economic Projections and the “dot plot”, which outlines policymakers’ expectations for future rate movements. Some economists, including those at Bank of America, anticipate that the projections may indicate no rate cuts through 2026, with a minority of officials even signalling potential rate increases.

Communication strategy is also expected to be a key focus under Warsh. He has previously argued that the Fed should reduce the frequency of public commentary to avoid constraining policy flexibility. One possible change could involve returning to fewer press conferences, a model last used under former Chair Ben Bernanke.

However, analysts caution that reduced communication could unsettle financial markets that have grown reliant on clear forward guidance from the central bank.

Adding to the complexity, former chair Jerome Powell remains on the Fed’s board as a governor and is expected to participate in Wednesday’s vote, maintaining influence over policy decisions during the transition period.