Eurozone Stocks Rise At Open Ahead Of OPEC+ Meeting

 

Eurozone stock markets opened higher on Thursday as investors await an output decision by major oil-producing nations.

The Frankfurt DAX index was up 0.4 percent at 14,396.71 points while the Paris CAC 40 rose 0.6 percent at 6,455.27 points.

London’s FTSE 100 was shut on Thursday for a long bank holiday weekend to mark Queen Elizabeth II’s Platinum Jubilee.

The OPEC+ group of major oil producers, led by Saudi Arabia and Russia, is expected to continue its policy of modestly increasing production when it meets later on Thursday, days after the EU agreed to ban most Russian crude.

Energy prices have soared since Russia invaded Ukraine on February 24, fuelling a sharp rise in inflation that is prompting central banks to tighten their monetary policies.

Oil prices fell by almost two percent on Thursday Financial Times report that Saudi Arabia was considering a plan to boost output as Russia struggles to meet targets owing to Ukraine war-linked sanctions.

The Wall Street Journal reported on Wednesday that Russia could be removed from the OPEC+ output deal.

The move could allow the Saudis and other nations to raise their output to meet the shortfall created by a European Union ban on most Russian oil.

OPEC+ has so far resisted US pressure to increase production in order to calm the markets.

“Everything rests on the OPEC+ meeting today,” said Jeffrey Halley, analyst at online trading platform OANDA.

“If Russia is sidelined, I mean exempted from its production quotas, with other members stepping up, European markets could find themselves with a decent tailwind today. A business-as-usual outcome is likely to see a disappointing reaction,” he said.

Eurozone Inflation Soars To New Record Over Ukraine War

 

Eurozone inflation accelerated to another record high in May, data showed Tuesday, as the war in Ukraine stoked energy and food prices and threatened to flatline the economy.

The EU’s Eurostat data agency said that the increase in consumer prices in the 19 countries that use the euro reached 8.1 percent compared to the year before, up from 7.4 percent in April.

The uninterrupted rise in prices heaped pressure on the European Central Bank to speed up interest rate rises for the first time in over a decade.

The ECB has said it plans to hike interest rates in July in order to cool the pressure on prices and is expected to officially end its bond-buying stimulus policies as early as next week.

By raising rates, the ECB would be playing catch-up with other major central banks that have already made moves to tame inflation that has spread globally.

The US Federal Reserve raised rates by an unusually large 50 basis points at the beginning of May, while the Bank of England sealed its fourth consecutive hike.

The chief economist of the European Central Bank, Philip Lane, indicated on Monday that interest rates in the eurozone will rise more cautiously, going up by 0.25 percent in July and again in September.

This would lift the ECB’s bank deposit rate out of negative territory, meaning lenders would no longer pay to park their excess cash at the central bank.

The ECB had previously argued that sharp leaps in consumer prices, driven also by the waning effect of Covid-19 pandemic, were likely to let up, downplaying the inflationary threat.

Russia’s war in Ukraine disrupted that view, worsening already disrupted supply chains and throwing up new shortages in essential material from wheat to metals.

This remained that case in May with energy prices spiking by a hair-raising 39.2 percent from a year earlier. Food prices went up by 7.5 percent.

– Energy crunch –

Western economies including Germany — the eurozone’s biggest — are scrambling to wean themselves off Russian energy, which will also have its effects on inflation.

The EU on Monday agreed to ban two-thirds of its oil dependency by the end of the year — and German and Polish pledges to voluntarily forgo pipeline deliveries could push the cut to 90 percent — which could put still more upward pressure on prices.

The ban on Russian oil swiftly hit the market price for oil which means “that risks (to inflation) are skewed once again to the upside”, said Oxford Economics in a note.

“We think headline inflation will peak in the second quarter but will slow only gradually throughout 2022,” it added.

Policymakers will also be keeping an especially close eye on wages for fear pay increases to help workers meet high prices could stoke inflation further.

Despite the challenges, Lane on Monday stood by the ECB’s assessment that inflation in the eurozone would find its way back to its two percent target in the medium term.

Meanwhile, fears of negative or zero growth in Europe will be fuelled by data showing the French economy contracted 0.2 percent in the first quarter from the previous three months, in a downward revision.

The European Commission this month sharply cut its eurozone growth forecast for 2022 to 2.7 percent, but warned the outlook was highly uncertain because of the war in Ukraine.

EU Cuts Eurozone Growth Forecast As Ukraine War Bites

A logo for the European Union

 

The European Commission on Monday sharply cut its eurozone growth forecast for 2022 to 2.7 percent, blaming skyrocketing energy prices caused by Russia’s invasion of Ukraine.

The war also spurred the EU’s executive to revisit its eurozone inflation prediction for 2022, with consumer prices forecast to jump by 6.1 percent year-on-year, much higher than the earlier forecast of 3.5 percent.

“There is no doubt that the EU economy is going through a challenging period due to Russia’s war against Ukraine, and we have downgraded our forecast accordingly,” EU executive vice president Valdis Dombrovskis said.

“The overwhelming negative factor is the surge in energy prices, driving inflation to record highs and putting a strain on European businesses and households,” he added.

The EU warned that the course of the war was highly uncertain and that the risk of stagflation -– punishing inflation with little or no growth — remained a real risk going forward.

If Russia, the EU’s main energy supplier, should cut off its oil and gas supply to Europe completely, the commission warned that the forecast would worsen considerably.

“Our forecast is subjected to very high uncertainty and risks,” EU commissioner Paolo Gentiloni told reporters.

“Other scenarios are possible under which growth may be lower and inflation higher than we are projecting today. In any case, our economy is still far from a normal situation,” he said.

For the EU as a whole, including the eight countries that do not use the euro as their currency, the commission had also forecast growth of four percent in February, but has now cut this to 2.7 percent, the same level as for the eurozone.

The sharp reduction in expectations is in line with the forecast made in mid-April by the International Monetary Fund, which predicted 2.8 percent growth for the eurozone this year.

The EU’s warning for the months ahead lands as the European Central Bank is increasingly expected to increase interest rates in July to tackle soaring inflation.

Critics warn that this could put a brake on economic activity just when the economy faced the headwinds from the war in Ukraine.

Eurozone Growth Jumps As COVID-19 Restrictions Ease

 

Economic growth in the eurozone jumped sharply in February as coronavirus restrictions were eased, a key survey showed on Monday.

Growth accelerated to a five-month high, IHS Markit said in its closely watched monthly survey — but it also noted that persistent supply constraints and soaring energy prices also pushed inflation to a record level.

Its purchase managers’ index (PMI) surged 3.5 points to 55.8, higher than the 52.3 recorded in January. A figure above 50 indicates growth.

The rise was attributed to the eurozone — the 19 EU countries using the euro — exiting two months of tough restrictions designed to slow the spread of the Omicron variant.

Omicron is now the dominant strain in Europe, but governments regard it as less grave than previous variants because widespread vaccinations and booster jabs have muted its impact.

After two months of curbs that hit the eurozone economy, “February saw these restrictions ease to the lowest since November,” IHS Markit said.

The service sector led the newfound optimism, as increased travel and tourism pushed it to its highest level since last November.

Manufacturing increased “also accelerated slightly, attaining the fastest expansion since last September, thanks in part to improved supply availability” and a rise in demand.

However, supply constraints remained, causing backlogs, and average prices for goods and services spiked to the highest level recorded in the PMI surveys.

“Soaring energy costs and rising wages have added to inflationary pressures, resulting in the largest rise in selling prices yet recorded in a quarter of a century of survey data history,” said IHS Markit’s chief economist, Chris Williamson.

“The intensification of inflationary pressures will add to speculation of an increasing hawkish stance” at the European Central Bank, he said.

The survey showed that growth in the eurozone’s powerhouse Germany was at a six-month high, with an index reading of 56.2.

The second-biggest economy, France, was doing even better, with growth at an eight-month high and an index reading of 57.4.

Eurozone Economy Returns To Growth As Germany Revs Up

 


The eurozone economy returned to growth for the first time in six months in March, a closely watched survey said Wednesday, as coronavirus lockdowns had little effect on manufacturing, especially in Germany.

“The eurozone economy beat expectations in March, showing a much better than anticipated expansion thanks mainly to a record surge in manufacturing output,” IHS Markit Chief economist Chris Williamson said.

The firm’s PMI index rose to 52.5 points in March from 48.8 points in February, breaking through the 50-point level which indicates growth.

IHS Markit’s survey showed that a major pickup in activity in Germany, the eurozone’s biggest economy, had lifted manufacturing output in the single currency bloc to 63 points, its highest reading since 1997.

The services sector however still lingered in recessionary territory under the effects of the pandemic, but the rate of decline was weakening, IHS Markit said.

The acceleration in manufacturing also affected hiring as manufacturers saw headcounts rise at a rate not seen since August 2018.

READ ALSO: Second French Minister Hospitalised With COVID-19

Services, which includes the hard hit tourism and hospitality sectors, only saw a far more modest rate of job creation, the survey said.

The doldrums felt in the services sector were expected to continue, with the pandemic still bringing extreme difficulties to consumer-facing businesses.

“This two-speed nature of the economy will therefore likely persist for some time to come,” Williamson said.

IHS Markit also warned that the surge in demand for goods was “stretching supply chains to an unprecedented extent” which could trigger some consumer price inflation in the coming months.

AFP

Eurozone Economy Shrank Less Than Expected In 2020

 

The eurozone economy shrank less than expected in 2020 given the devastating consequences of the covid-19 pandemic, official data showed on Tuesday.

The Eurostat statistics agency said the eurozone economy shrank by 6.8 percent in 2020, and by 0.7 percent in the fourth quarter.

Though catastrophic, this was much better than the EU commission’s forecast of a 7.8 percent crash, made in November.

But early indicators show that the 19-countries that use the euro currency now face the prospect of a fresh recession after a recovery last summer was cut short by a second wave of the pandemic.

This is due to a halting start to the vaccination campaign in Europe and continued covid-related restrictions.

The better than expected figure for 2020, though still one of the worst in history, came largely from a better performance in Germany, Europe’s biggest economy.

German economic activity contracted by 5.0 percent in 2020 and even France in the end did better than expected with a slump of 8.3 percent, when a double digit crash was initially feared.

READ ALSO: Japan Says EU Export Curbs Delaying Its COVID-19 Vaccination Plan

“Restrictive measures have been adapted and have become milder compared to the first wave,” said ING analyst Bert Colijn.

“Think of countries like France and Spain, for example, where industry and construction have remained largely open over the course of the quarter,” he added.

Colijn also cited sustained demand for EU goods from China, where restrictions have been scarce.

Help also came from Britain, where businesses stockpiled in the final months of 2020 with the impending end of the post-Brexit transition period.

Eurostat said that the 27-member state EU economy as a whole – which adds Poland and Sweden for example – shrank by 6.4 percent in 2020 and by 0.5 percent in the fourth quarter.

Going forward, the major risk “is that the arrival of new more transmissible variants, as well as the slow speed of vaccination programmes, delays the lifting of restrictions,” remarked Jack Allen-Reynolds, Senior Europe Economist at Capital Economics.

“This would have a much bigger effect on the Mediterranean economies that are more dependent on summer tourism” and not the likes of Germany, he said.

The EU has yet to see the benefits of a 750-billion-euro ($900-billon) recovery fund whose first payouts will hit government coffers hopefully by the middle of the year.

For now, the European economy has been largely kept afloat by an unprecedented stimulus programme by the European Central Bank that has allowed eurozone nations to borrow cheaply on the markets to provide massive support.

Eurozone Business Growth Stagnates As COVID-19 Resurges

People shop at the outdoor market and walk about in central Rome on May 9, 2020, during the country’s partial lockdown aimed at curbing the spread of the COVID-19 infection, caused by the novel coronavirus. Tiziana FABI / AFP.

 

Eurozone economic activity stagnated in September as a summer recovery faltered because of a resurgence in the spread of the coronavirus, IHS Markit said Friday.

The firm’s closely watched PMI index fell to 50.1 points from 51.9 points in August, just barely above the key 50-point level which indicates growth.

“A two-speed economy is evident, with factories reporting that production growth was buoyed by rising demand” while the service sectors were hard hit, said Chris Williamson, chief economist at IHS Markit.

The data provider said that Germany, the eurozone’s biggest economy, continued to lead the recovery, though at a slower rate than previously.

France, where services are key, saw business activity “deteriorate” for the first time in fourth months.

The rest of the eurozone — which includes Spain and Italy — suffered a more rapid slowdown, IHS Markit said, noting that staff were being cut across the continent, though at a slower pace.

Williamson saw encouragement “from a further improvement in companies’ expectations for the year ahead, but this optimism often rests on (Covid-19) infection rates falling, which remains far from guaranteed for the coming months.”

Jessica Hinds of Capital Economics warned that the data “suggest that the recovery is grinding to a halt, at least outside the German manufacturing sector.”

AFP

Eurozone Economy To Crash 8.7% In 2020 – EU Forecast

 

The eurozone economy will plunge 8.7 percent in 2020 due to the coronavirus crisis, the European Commission said Tuesday in more pessimistic forecasts that do not see a complete rebound next year.

The new forecasts see the eurozone economy bouncing back by 6.1 percent in 2021, still leaving the region worse off than before the countries were forced to implement lockdowns in an attempt to contain the spread of COVID-19.

“The economic impact of the lockdown is more severe than we initially expected,” said Commission Vice President Valdis Dombrovskis in a statement accompanying the release of the updated forecasts.

“Looking forward to this year and next, we can expect a rebound but we will need to be vigilant about the differing pace of the recovery,” he added.

Germany, the EU’s biggest economy, is expected to see a 6.3 percent contraction this year and 5.3 percent growth in 2021.

The economies of France, Italy and Spain will each contract by more than 10 percent, and then partially recover.

France, the eurozone’s second-largest economy, is expected to contract by 10.6 percent this year and grow by 7.6 percent in 2021.

Italy, which should suffer a 11.2-percent drop this year, is only forecast to rebound by 6.1 percent in 2021.

Spain’s economy is seen as contracting by 10.9 percent before bouncing back by 7.1 percent.

“The policy response across Europe has helped to cushion the blow for our citizens, yet this remains a story of increasing divergence, inequality and insecurity,” said the EU’s economy commissioner, Paolo Gentiloni.

“This is why it is so important to reach a swift agreement on the recovery plan proposed by the Commission –- to inject both new confidence and new financing into our economies at this critical time,” he added.

AFP

Eurozone Business Decline Slows As Lockdown Eases – PMI Survey

Eurozone

 

Private sector economic activity in the eurozone shrank further in June but the rate of decline has slowed compared to the height of the coronavirus lockdown, IHS Markit said Tuesday.

The firm’s closely-watched PMI index rose to 47.5 points from 31.9 in May and a historic low of 13.6 in April but was still below the key 50 points level, which represents a contraction.

“Output and demand are still falling but no longer collapsing,” said Chris Williamson, chief business economist at IHS Markit.

“While second quarter GDP is still likely to have dropped at an unprecedented rate, the rise in the PMI adds to expectations that the lifting of lockdown restrictions will help bring the downturn to an end as we head into the summer.”

Jessica Hinds, European economist at independent analysts Capital Economics, said the survey “suggests that while the GDP outturn will undoubtedly be dreadful, it will not be as catastrophically bad as we had feared.”

Of the 19-nation single currency zone’s largest players, France actually moved into positive territory but giant Germany’s weaker score held the average down.

READ ALSO: Global Trade Set To Shrink 18.5% In Q2, Defying Worst Fears – WTO

“Overall, today’s data provide some reassurance that the economy is getting back on its feet,” Hinds said.

“But with some restrictions still in place and fears of a second wave lingering, it will be some time before activity returns to pre-virus levels.”

As the coronavirus outbreak swept the world in the first half of 2020, eurozone countries and their main partners in the rest of the EU and Britain, imposed lockdowns.

Many businesses and social and cultural life ground to a halt, hammering the economy, but the measures have been credited with getting the epidemic under control.

Governments are now moving — with caution and at varying rates — to return life to normal, hoping to revive businesses and travel in time for the summer tourism season.

AFP

Eurozone Leaders, Greece Agree On Third Bailout

Eurozone leaders on GreeceEurozone leaders have sealed an agreement with Greece over a third bailout after long-winded talks at an emergency meeting.

The development was revealed on twitter by the Chairman of the European Union, Donal Tusk, on Monday.

“Euro summit has unanimously reached agreement. All ready to go for ESM program for Greece with serious reforms and financial support,” Tusk said, referring to the European Stability Mechanism (ESM) bailout fund.

The BBC quoted him as saying that the EU leaders agreed “in principle” on negotiations for the bailout, “which in other words means continued support for Greece”.

In the meantime, the Eurozone had earlier said Greece did not present any concrete proposals to request for a new bailout.

However, Greece’s Prime Minister, Alexis Tsipras, said that after a “tough battle”, Greece had secured a “growth package” of €35bn (£25bn), and won debt restructuring.

Subsequent to the agreement, the country will on Wednesday, need to pass reforms demanded by the Eurozone.

Greece Has Not Presented Any Concrete Proposals – Eurozone

GreeceThe Eurozone says Greece has not presented any concrete proposals to request for a new bailout.

The union’s statement is coming after the ballots were counted as Greece voters rejected the terms of an international bailout in a poll with 61% “no”, against 38% “yes”.

In the meantime, Greek Prime Minister, Alexis Tsipras, said Greeks made a “brave choice” in voting to reject the terms, despite the European officials’ caution that the debt crisis could see the country ejected from the Eurozone.

In another development, Greece’s Finance Minister, Yanis Varoufakis, who often clashed with creditors also resigned.

However, Greece made a presentation earlier on Tuesday to request for a new bailout, but nothing was put on paper.

The country’s new Finance Minister, had been expected to draft a new letter requesting for European stability mechanism support.

The Minister is also expected to present proposals from the Greek side on what the substance would look like, so leaders could reach an agreement.

German Economy Grows Faster Than Expected In Second Quarter

German flags flying outside the ReichstagThe German economy grew strongly in the second quarter raising hopes that the eurozone has come out of recession. Figures just released have shown German gross domestic product (GDP) rose 0.7% in the quarter, slightly ahead of forecasts.

New figures from France showed its economy grew 0.5%, also stronger than expected, in the second quarter. More figures will be released later on Wednesday and are expected to show it back in growth for the first time in six quarters.

German GDP enjoyed its largest expansion in more than a year, driven largely by domestic private and public consumption.

Carsten Brzeski, an economist at ING, said the figures marked an impressive comeback for Germany, which saw its economy stagnate at the start of the year.

“The biggest domestic challenge remains weak investment,” he said.

“Despite very favourable financing conditions and [the] strong international positions of many German companies, domestic investment has been sluggish for a longer while.”Andreas Scheurle from Dekabank said the eurozone been hauled out of recession and Germany had done the lion’s share of that.

“It was made possible by our generous consumers who have again spent more money but the state has also dug deeper into its pockets,” he said.

“But this rhythm can’t be maintained – growth will become more modest and in second half of the year we should see plus 0.3-0.4%.”

The French national statistics agency, Insee, said France’s GDP growth in the second quarter had been driven by a rebound in exports, domestic household demand and public spending.

The April-to-June growth was the strongest quarterly growth since early 2011 when the eurozone was plunged into its sovereign debt crisis.

The French economy has been flat for the past two years, shrinking 0.2% in each of the previous two quarters.

French Finance Minister Pierre Moscovici said Wednesday’s figure “amplifies the encouraging signs of recovery”.