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German Economy Slows More Than Estimated as Trade Weakens

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  • German Economy Slows More Than Estimated as Trade Weakens

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

Gross domestic product rose a seasonally-adjusted 0.2 percent in the three months through September, the Federal Statistics Office in Wiesbaden said on Tuesday. That’s below the 0.3 percent forecast in a Bloomberg survey of economists, and follows an expansion of 0.4 percent in the second quarter. Growth was 1.7 percent from a year ago.

As Europe’s biggest economy, Germany’s fortunes are key to the recovery of the 19-nation euro area, where GDP figures later on Tuesday will likely show growth stuck at mediocre levels. The European Central Bank will review its stimulus program in less than four weeks, when it will have to factor in a global economic outlook characterized by the rise of populists critical of international trade deals.

Germany’s expansion last quarter was driven primarily by domestic demand 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 rose.

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.

Trade Threat

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.”

The world economy “faces once again an abnormal degree of uncertainty,” ECB Vice President Vitor Constancio said in Frankfurt on Monday. He also warned against drawing “hasty, positive conclusions” from the response of financial markets to the U.S. vote. The dollar climbed and bonds slumped as investors bet that Trump will follow through on a pledge to unleash a wave of fiscal stimulus.

The Netherlands will publish its third-quarter GDP estimate at 9:30 a.m. local time, followed half an hour later by Italy, the currency bloc’s third-largest economy. Data for Portugal and Cyprus will also be released, before figures are published for the euro area at 11 a.m.

Euro-Area Growth

The economic expansion in the single currency area probably held at 0.3 percent, in line with a flash estimate and unchanged from the second quarter, according to a Bloomberg survey of economists.

The European Central Bank meets in December 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 slashed its 2017 economic-growth forecasts for the euro area last week, to 1.5 percent from 1.8 percent seen in May. The Brussels-based executive warned of instability caused by the U.K.’s decision to leave the European Union and the surge of anti-globalization and populism around the world.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Crude Oil

Brent Crude Oil Approaches $70 Per Barrel on Friday

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Nigerian Oil Approaches $70 Per Barrel Following OPEC+ Production Cuts Extension

Brent crude oil, against which Nigerian oil is priced, rose to $69 on Friday at 3:55 pm Nigerian time.

Oil price jumped after OPEC and allies, known as OPEC plus, agreed to role-over crude oil production cuts to further reduce global oil supplies and artificially sustain oil price in a move experts said could stoke inflationary pressure.

Brent crude oil rose from $63.86 per barrel on Wednesday to $69 per barrel on Friday as energy investors became more optimistic about the oil outlook.

While certain experts are worried that U.S crude oil production will eventually hurt OPEC strategy once the economy fully opens, few experts are saying production in the world’s largest economy won’t hit pre-pandemic highs.

According to Vicki Hollub, the CEO of Occidental, U.S oil production may not return to pre-pandemic levels given a shift in corporates’ value.

“I do believe that most companies have committed to value growth, rather than production growth,” she said during a CNBC Evolve conversation with Brian Sullivan. “And so I do believe that that’s going to be part of the reason that oil production in the United States does not get back to 13 million barrels a day.”

Hollub believes corporate organisations will focus on optimizing present operations and facilities, rather than seeking growth at all costs. She, however, noted that oil prices rebounded faster than expected, largely due to China, India and United States’ growing consumption.

The recovery looks more V-shaped than we had originally thought it would be,” she said. Occidental previous projection had oil production recovering to pre-pandemic levels by the middle of 2022. The CEO Now believes demand will return by the end of this year or the first few months of 2022.

I do believe we’re headed for a much healthier supply and demand environment” she said.

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Crude Oil

Oil Jumps to $67.70 as OPEC+ Extends Production Cuts

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Oil Jumps to $67.70 as OPEC+ Extends Production Cuts

Brent crude oil, against which Nigerian oil is priced, rose to $67.70 per barrel on Thursday following the decision of OPEC and allies, known as OPEC+, to extend production cuts.

OPEC and allies are presently debating whether to restore as much as 1.5 million barrels per day of crude oil in April, according to people with the knowledge of the meeting.

Experts have said OPEC+ continuous production cuts could increase global inflationary pressure with the rising price of could oil. However, Saudi Energy Minister Prince Abdulaziz bin Salman said “I don’t think it will overheat.”

Last year “we suffered alone, we as OPEC+” and now “it’s about being vigilant and being careful,” he said.

Saudi minister added that the additional 1 million barrel-a-day voluntary production cut the kingdom introduced in February was now open-ended. Meaning, OPEC+ will be withholding 7 million barrels a day or 7 percent of global demand from the market– even as fuel consumption recovers in many nations.

Experts have started predicting $75 a barrel by April.

“We expect oil prices to rise toward $70 to $75 a barrel during April,” said Ann-Louise Hittle, vice president of macro oils at consultant Wood Mackenzie Ltd. “The risk is these higher prices will dampen the tentative global recovery. But the Saudi energy minister is adamant OPEC+ must watch for concrete signs of a demand rise before he moves on production.”

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Gold

Gold Hits Eight-Month Low as Global Optimism Grows Amid Rising Demand for Bitcoin

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Gold Struggles Ahead of Economic Recovery as Bitcoin, New Gold, Surges

Global haven asset, gold, declined to the lowest in more than eight months on Tuesday as signs of global economic recovery became glaring with rising bond yields.

The price of the precious metal declined to $1,718 per ounce during London trading on Thursday, down from $2,072 it traded in August as more investors continue to cut down on their holdings of the metal.

The previous metal usually performs poorly with rising yields on other assets like bonds, especially given the fact that gold does not provide streams of interest payments. Investors have been jumping on US bonds ahead of President Joe Biden’s $1.9 trillion coronavirus stimulus package, expected to stoke stronger US price growth.

We see the rising bond yields as a sign of economic optimism, which has also prompted gold investors to sell some of their positions,” said Carsten Menke of Julius Baer.

Another analyst from Commerzbank, Carsten Fritsch, said that “gold’s reputation appears to have been tarnished considerably by the heavy losses of recent weeks, as evidenced by the ongoing outflows from gold ETFs”.

Experts at Investors King believed the growing demand for Bitcoin, now called the new gold, and other cryptocurrencies in recent months by institutional investors is hurting gold attractiveness.

In a recent report, analysts at Citigroup have started projecting mainstream acceptance for the unregulated dominant cryptocurrency, Bitcoin.

The price of Bitcoin has rallied by 60 percent to $52,000 this year alone. While Ethereum has risen by over 660 percent in 2021.

 

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