Business

Eurozone Inflation Rises Slightly as Germany Faces Retail Slump

Published

5 days ago

November 29, 2024

RTX

Annual inflation in the eurozone increased slightly to 2.3% in November, up from 2% in October, according to preliminary data from Eurostat released on Friday. The rise aligns with market expectations and reflects diminishing deflationary pressure from energy prices.

Despite the uptick in annual inflation, monthly data revealed a 0.3% decline in consumer prices compared to October — the steepest drop since January 2024. This decline signals potential easing of underlying price pressures, bolstering hopes that the eurozone’s disinflationary trend is intact and could pave the way for the European Central Bank (ECB) to lower interest rates in December.

Energy prices, a key inflation driver, were down 1.9% year-on-year in November, although the rate of decline has moderated compared to 4.6% in October and 6.1% in September. On a monthly basis, energy prices edged up by 0.6%.

Core inflation, which excludes energy and food prices, rose slightly to 2.8% year-on-year, up from 2.7% in October. However, monthly core inflation fell by 0.4%, hinting at easing underlying price pressures. Services prices, a historically “sticky” component, rose 3.9% annually but recorded a significant 0.9% monthly decline, offering a positive outlook for inflation.

Economic Outlook and ECB Policy

The November inflation figures align with expectations that disinflation remains a dominant force. This trend strengthens the case for the ECB to lower interest rates during its December meeting, particularly as economic activity across the eurozone continues to weaken.

Recent Purchasing Managers’ Index (PMI) data underscores the region’s economic struggles. The Eurozone Composite PMI dropped to 48.1 in November, down from 50.0 in October, marking the sharpest contraction since January. While the manufacturing sector remains in decline, the services sector has also slipped into contraction for the first time in 10 months, with its PMI falling to 49.2 from 51.6.

Kyle Chapman, a forex market analyst at Ballinger Group, remarked, “The market expects a 25-basis-point cut in December. While the economy isn’t collapsing, the ECB has room to cautiously adjust rates without frontloading aggressive cuts.”

German Retail Sales Plunge

Germany, the eurozone’s largest economy, reported its steepest retail sales drop in two years. Retail sales fell by 1.5% month-on-month in October, far exceeding market expectations of a 0.3% decline. This drop follows a 1.6% rise in September and highlights the ongoing challenges in consumer spending.

The weak retail performance reflects deteriorating consumer confidence, adding to concerns about the region’s economic fragility.

Market Reactions

Financial markets remained stable following the data. The euro traded at $1.0560 against the US dollar, while Germany’s 10-year Bund yield held at 2.12%, its lowest level in nearly two months.

Equity markets were flat, with the Euro STOXX 50 index unchanged. Gains from Airbus SE and Schneider Electric SE balanced declines in Telefonica and Banco Santander.

As the ECB prepares for its next policy decision, the region’s economic and inflation dynamics remain in sharp focus.

Business

El Salvador’s Church Urges President to Maintain Ban on Gold Mining Amid Environmental Concerns

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2 days ago

December 2, 2024

RTX

The Roman Catholic Church in El Salvador has joined growing calls for President Nayib Bukele to uphold the country’s ban on gold mining, a policy that has been in place since 2017. Archbishop José Luis Escobar Alas urged the president to retain the ban, warning that lifting it would cause irreversible damage to the nation’s environment.

In a statement on Sunday, Escobar Alas stated, “It will damage this country forever,” adding his voice to concerns raised by various civic and environmental groups. His remarks came after President Bukele expressed opposition to the seven-year-old ban, calling it “absurd” in a post on X (formerly Twitter) on Wednesday. Bukele suggested that unmined gold represents untapped wealth that could transform the country, triggering further debate on the issue.

El Salvador’s ban on metal mining, which applies both above and below ground, was implemented in 2017 to protect the country’s precious water resources from contamination. A broad coalition, including environmental groups and the Catholic Church, supported the measure at the time, citing the risks posed by mining operations to the country’s water supply.

While gold and silver deposits had been discovered in the country, no large-scale mining had begun by the time the ban was enacted. However, it is unclear what El Salvador’s full gold reserves may be. Bukele’s recent comments, however, mark a shift from his stance during his 2019 presidential campaign, when he supported the mining ban.

The president has since suggested that “modern and sustainable” mining could be introduced, with a focus on environmental responsibility. However, environmental advocates have rejected this notion, asserting that such mining practices are not as environmentally friendly as claimed.

Amalia López of the Alliance Against the Privatisation of Water emphasized the dangers of mining, saying, “It’s not true that there’s green mining; it’s paid for with lives, kidney problems, respiratory issues, and leukemia that aren’t immediate.” Critics are particularly concerned about the significant water consumption required for mining operations and the challenges of safely storing water contaminated with heavy metals.

Given Bukele’s political dominance, with his party controlling a majority in the legislature and the opposition weakened, the potential for a formal proposal to lift the mining ban could face little resistance. However, the strong opposition from environmental groups and the Catholic Church signals that the debate over the future of gold mining in El Salvador is far from over.

Business

Biden Visits Angola to Strengthen Ties, Counter China’s Influence

Published

2 days ago

December 2, 2024

RTX

U.S. President Joe Biden arrived in Angola on Monday for a historic three-day visit aimed at enhancing investment opportunities, deepening bilateral relations, and countering China’s growing presence in the region. This marks the first visit by a sitting U.S. president to the Sub-Saharan African nation, fulfilling a promise Biden made in 2022.

Angola, a key oil producer with approximately 9 billion barrels of proven crude oil reserves and 11 trillion cubic feet of natural gas, has been a focal point for global energy players. Companies such as TotalEnergies, Chevron, ExxonMobil, and BP dominate the sector, controlling 41%, 26%, 19%, and 13% of market shares, respectively.

Biden’s visit comes as the U.S. seeks to bolster its presence in resource-rich regions like Angola amid shifting global energy dynamics. While no specific energy projects are expected to be announced during the trip, Biden’s engagement could pave the way for increased oil infrastructure investments by American firms, particularly as the incoming Trump administration is expected to prioritize fossil fuel production.

Energy Markets in Focus
Biden’s Angola trip also unfolds against the backdrop of volatile global oil markets. Despite crude prices edging higher on Monday following better-than-expected manufacturing data from China, last week saw oil prices slump over 4%, touching near three-year lows due to easing Middle East tensions and oversupply concerns.

With the upcoming OPEC+ meeting on December 5, where production cuts may be extended, analysts will closely watch the impact of Biden’s visit on Angola’s role in global energy supply chains.

Diversifying Critical Mineral Supply Chains
A key highlight of Biden’s visit is the U.S.-backed Lobito Corridor railway project. This 800-mile railway, linking Angola with the Democratic Republic of Congo (DRC) and Zambia, is designed to transport critical minerals like copper and cobalt—essential components for batteries and electric vehicles—to Western markets.

The project aligns with Washington’s strategy to diversify supply chains for critical minerals and reduce dependence on China, which has heavily invested in Angola and Africa through its Belt and Road Initiative.

In 2022, Biden committed $55 billion in investments across Africa over three years, a move aimed at counterbalancing China’s $50 billion in African infrastructure projects.

Broader Agenda
Beyond energy and infrastructure, Biden is expected to deliver speeches focusing on public health, agriculture, and cultural heritage preservation during his visit. His trip underscores the U.S.’s commitment to fostering deeper partnerships with African nations, positioning Angola as a strategic ally in the region.

As Biden’s presidency winds down, the visit sets the stage for continued collaboration under the incoming administration, ensuring Angola remains a focal point of U.S. engagement in Africa.

Business

Oil Prices Rise Amid Middle East Tensions and OPEC+ Policy Delay

Published

6 days ago

November 28, 2024

RTX

Oil Prices Rise Amid Middle East Tensions and OPEC+ Policy Delay

Oil prices edged higher on Thursday, rising nearly 1% as geopolitical tensions in the Middle East reignited supply fears. Brent crude climbed to $72.90 a barrel in midday European trading, recovering from recent losses, after Israel reported ceasefire violations by Hezbollah.

Ceasefire Breach Raises Tensions

Israel’s military claimed that Hezbollah breached a newly established ceasefire along the Israel-Lebanon border. Spokesperson Avichay Adraee stated on social media that “suspects” were observed entering southern Lebanon in what Israel described as a violation of the truce.

The ceasefire, which began on Wednesday, was intended to halt 14 months of conflict in the region. However, renewed hostilities have sparked concerns over the fragile stability along the border, where safety warnings remain in place for residents.

The heightened tensions contributed to a slip in the euro by 0.2%, while European stocks pared earlier gains.

OPEC+ Postpones Key Meeting

Amid these developments, the OPEC+ alliance announced the postponement of its pivotal meeting on oil production policy. Originally scheduled for December 1, the meeting will now take place on December 5, as many key ministers will attend the Gulf Cooperation Council Summit in Kuwait.

Analysts expect the meeting to address the alliance’s production cuts and consider extending them further into 2024. While OPEC+ had planned to gradually increase output if prices stabilised, persistently low prices have led to delays in production hikes.

Stronger Cohesion Among OPEC+

Goldman Sachs analysts highlighted improving cohesion within OPEC+, noting a rise in member compliance with production cuts. “Any ramp-up in OPEC+ production will be gradual and data-driven,” said Daan Struyven, Goldman Sachs’ lead analyst.

The investment bank anticipates that production increases will begin in April 2025, rather than January, with Brent crude forecast to average $76 per barrel in 2025 and peak at $78 by June of that year.

Supply Concerns and Market Trends

US Energy Information Administration data shows crude oil and gasoline inventories are hovering at five-year lows, underscoring short-term supply concerns. Goldman Sachs also predicts Brent crude could rise to the mid-$80s in early 2025 if stricter sanctions reduce Iran’s oil supply by 1 million barrels per day.

Despite global decarbonisation efforts, oil demand is expected to grow for another decade, driven by rising energy needs in emerging markets and slow transitions in sectors like air travel and petrochemical production.

Outlook

As geopolitical tensions and OPEC+ policies continue to influence the market, investors are closely watching developments in the Middle East and the alliance’s production strategy. These factors, alongside structural energy trends, are expected to shape oil prices and global energy dynamics heading into 2025.