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German Cooling, Italy Rebound Keep Euro-Area Growth at 0.3%

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Euro-Area Economy
  • German Cooling, Italy Rebound Keep Euro-Area Growth at 0.3%

German economic growth slowed to the weakest pace in a year last quarter, a reminder of the fragility of the euro area’s recovery in a time of rising uncertainty.

The slowdown in Germany to 0.2 percent, along with a resumption of growth in Italy and France, left expansion in the 19-nation currency region at 0.3 percent, in line with an initial estimate and matching the pace of the three months through June.

As Europe’s biggest economy, Germany’s fortunes are key to the recovery of the euro region, where the economy’s expansion is stuck at mediocre levels. That backdrop will color the European Central Bank’s review of its stimulus program in less than four weeks, when it will also have to factor in a global outlook characterized by the rise of populists critical of international trade deals.

“The economy is growing in the euro area but still not quite helping the ECB meet its price-growth target of 2 percent,” said Ralph Solveen, head of economic research at Commerzbank AG in Frankfurt. “It’s probably not enough to satisfy them, and we think they will have to extend stimulus in December.”

Economists forecast that the euro area will maintain its current pace of growth through the first half of 2017, then see a slight pickup to 0.4 percent.

Germany’s growth in the third quarter marked a slowdown from 0.4 percent and fell short of the median forecast of economists. Italy’s economy, the euro region’s third largest, grew 0.3 percent, resuming expansion after stagnation in the three months through June. In the Netherlands, growth was unchanged from the previous quarter at 0.7 percent. Previously published figures put French growth at 0.2 percent.

Domestic Demand

In Germany, domestic demand drove growth last quarter as both government and private consumption spending rose, the statistics office said. The global economy dragged on growth, with exports contracting slightly. Investment in equipment also slipped while construction climbed.

The Bundesbank has already noted that the economy cooled in the summer months — a phase it said was probably temporary — and recent data has showed a pickup in momentum. Business confidence rose to the highest level in more than two years and unemployment dropped to a record low. A separate report on Tuesday showed the ZEW German investor confidence rising more than estimated in November.

Even so, risks may be mounting. Donald Trump won the U.S. presidential election on a platform that included a pledge to renegotiate or cancel trade deals, and the U.K. looks on track for a hard exit from the European Union and its single market.

Bundesbank President Jens Weidmann said in a speech after Trump’s election that “pronounced political uncertainty” was weighing on growth prospects, raising the “question of how much protectionism and isolationism will determine the future political agenda.” On Monday, ECB Vice President Vitor Constancio said the world economy “faces once again an abnormal degree of uncertainty.”

ZEW noted in its survey of investors that responses after the U.S. vote were less optimistic than earlier ones.

“The election of Donald Trump as U.S. president and the resulting political and economic uncertainties, however, have made an impact,” ZEW President Achim Wambach said in a statement. “After the election, the economic sentiment has been less positive than before.”

The ECB’s Governing Council will meet on Dec. 8 to decide whether to extend its program to buy 80 billion euros ($86 billion) a month of debt through March. The Frankfurt-based central bank will also publish fresh economic forecasts that extend to 2019.

The European Commission cut its 2017 projections for the euro area last week, to 1.5 percent from 1.8 percent seen in May. It also warned of instability caused by Brexit and the surge of anti-globalization and populism around the world.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

Oil Prices Continue to Slide: Drops Over 1% Amid Surging U.S. Stockpiles

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Crude Oil

Amidst growing concerns over surging U.S. stockpiles and indications of static output policies from major oil-producing nations, oil prices declined for a second consecutive day by 1% on Wednesday.

Brent crude oil, against which the Nigerian oil price is measured, shed 97 cents or 1.12% to $85.28 per barrel.

Similarly, U.S. West Texas Intermediate (WTI) crude slumped by 93 cents or a 1.14% fall to close at $80.69.

The recent downtrend in oil prices comes after they reached their highest level since October last week.

However, ongoing concerns regarding burgeoning U.S. crude inventories and uncertainties surrounding potential inaction by the OPEC+ group in their forthcoming technical meeting have exacerbated the downward momentum.

Market analysts attribute the decline to expectations of minimal adjustments to oil output policies by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known collectively as OPEC+, until a full ministerial meeting scheduled for June.

In addition to concerns about excess supply, the market’s attention is also focused on the impending release of official government data on U.S. crude inventories, scheduled for Wednesday at 10:30 a.m. EDT (1430 GMT).

Analysts are keenly observing OPEC members for any signals of deviation from their production quotas, suggesting further volatility may lie ahead in the oil market.

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Energy

Nigeria Targets $5bn Investments in Oil and Gas Sector, Says Government

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Crude Oil - Investors King

Nigeria is setting its sights on attracting $5 billion worth of investments in its oil and gas sector, according to statements made by government officials during an oil and gas sector retreat in Abuja.

During the retreat organized by the Federal Ministry of Petroleum Resources, Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, explained the importance of ramping up crude oil production and creating an environment conducive to attracting investments.

He highlighted the need to work closely with agencies like the Nigerian National Petroleum Company Limited (NNPCL) to achieve these goals.

Lokpobiri acknowledged the challenges posed by issues such as insecurity and pipeline vandalism but expressed confidence in the government’s ability to tackle them effectively.

He stressed the necessity of a globally competitive regulatory framework to encourage investment in the sector.

The minister’s remarks were echoed by Mele Kyari, the Group Chief Executive Officer of NNPCL, who spoke at the 2024 Strategic Women in Energy, Oil, and Gas Leadership Summit.

Kyari stressed the critical role of energy in driving economic growth and development and explained that Nigeria still faces challenges in providing stable electricity to its citizens.

Kyari outlined NNPCL’s vision for the future, which includes increasing crude oil production, expanding refining capacity, and growing the company’s retail network.

He highlighted the importance of leveraging Nigeria’s vast gas resources and optimizing dividend payouts to shareholders.

Overall, the government’s commitment to attracting $5 billion in investments reflects its determination to revitalize the oil and gas sector and drive economic growth in Nigeria.

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Commodities

Palm Oil Rebounds on Upbeat Malaysian Exports Amid Indonesian Supply Concerns

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Palm Oil - Investors King

Palm oil prices rebounded from a two-day decline on reports that Malaysian exports will be robust this month despite concerns over potential supply disruptions from Indonesia, the world’s largest palm oil exporter.

The market saw a significant surge as Malaysian export figures for the current month painted a promising picture.

Senior trader David Ng from IcebergX Sdn. in Kuala Lumpur attributed the morning’s gains to Malaysia’s strong export performance, with shipments climbing by a notable 14% during March 1-25 compared to the previous month.

Increased demand from key regions like Africa, India, and the Middle East contributed to this impressive growth, as reported by Intertek Testing Services.

However, amidst this positivity, investors are closely monitoring developments in Indonesia. The Indonesian government’s contemplation of revising its domestic market obligation policy, potentially linking it to production rather than exports, has stirred market concerns.

Edy Priyono, a deputy at the presidential staff office in Jakarta, indicated that this proposed shift aims to mitigate vulnerability to fluctuations in export demand.

Yet, it could potentially constrain supply availability from Indonesia in the future to stabilize domestic prices.

This uncertainty surrounding Indonesian policies has added a layer of complexity to palm oil market dynamics, prompting investors to react cautiously despite Malaysia’s promising export performance.

The prospect of Indonesian supply disruptions underscores the delicacy of global palm oil supply chains and their susceptibility to geopolitical and regulatory factors.

As the market navigates these developments, stakeholders remain attentive to both export data from Malaysia and policy shifts in Indonesia, recognizing their significant impact on palm oil prices and market stability.

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