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What Germany's planned expenditure spree might mean for the economy
German chancellor-in-waiting Friedrich Merz reached an agreement with the Greens on Friday on a massive increase in state borrowing, just days before a parliamentary vote on the issue, a source close to the negotiations said. The parties aspiring to form the next government have agreed to create a special infrastructure fund of 500 billion euros ($545 billion), and to remove the debt restrictions on defence investments. What the future plans for Europe's biggest economy could mean in terms of growth and debt: Could the spending boost Germany's ailing economy? According to economists yes, according to the economists The German DIW Economic Institute said that the planned infrastructure fund could alone increase economic output by more than two percentage point per year in the next ten years. DIW stated that a growth rate of 2,1% in 2026 is now expected instead of the previous 1.1%. A second institute, IfW, also revised its growth estimate for Germany in 2026, predicting a 1.5% expansion on the backs of expected increases in public expenditure. The IMK, an economic institute that has not updated its forecasts yet, predicts the German economy to grow by only 0.1% this year after two years of contractions in 2023-2024. However, the institute said new proposals might make a significant difference. Sebastian Dullien, IMK’s director of economics, said: "If the financial package was implemented quickly, a noticeable acceleration in growth could be expected for the second half the year. Growth in the entire year may also move away from stagnation." WHICH SECTORS ARE SET TO PROFIT MOST? Construction can benefit from the fund set up to upgrade Germany's crumbling infrastructure. The shares of Heidelberg Materials increased by 4% Friday. Bilfinger shares rose 4.8%, while Hochtief's were up 5%. Also, the defence industry stands to benefit. The proposed coalition plans would amend the constitution to remove the strict limit on borrowing in Germany, known as the "debt brake", and allow for higher defence spending plans. The news of this agreement has led to gains of between 5% and 7% for Rheinmetall, Hensoldt, Thyssenkrupp, and Renk, all German defence companies. How much more debt will Germany take on? Lots. Germany's debt was 64% of its gross domestic product last year. This is lower than other industrialized countries like the United States or France. Joerg Kraemer, chief economist at Commerzbank, expects this level to rise by 10 percentage points in the next few years due to the special fund created for infrastructure. If defence spending was increased to 3.5% of GDP, the debt ratio would increase by 2.5 points per year. Kraemer stated that the government debt ratio in 10 years could reach 90%. However, this is also dependent on inflation, and therefore, not easy to predict. Friedrich Heinemann, a ZEW economist, said: "This would mean Germany would soon join the ranks the EU's most indebted countries." He predicted that Germany's debt could reach 100% in 2034. WHAT WOULD THIS DO TO GERMANY'S TRIPLE A CREDIT RATING Not necessarily. Eiko Sievert, a Scope analyst, said that the spending plans may increase Germany's level of debt to 72% of its gross domestic product in 2029. This is below the previous record of 80%, which was set after the global financial crash of 2010, when Germany maintained its AAA rating. Sievert stated that the future of this possibility depends on the implementation and success of the necessary reforms in politics to boost competitiveness and economic development. CAN GERMANY FIND SUFFICIENT LENDERS? Germany is a popular borrower because of its top credit rating. To make German government bonds more attractive to investors, however, it would be necessary to increase interest rates. Kraemer, Commerzbank's Kraemer, says that investors are likely to demand a higher risk premium for German government bonds. Investors digested the news about the agreement regarding spending plans. This indicates that Germany's interest payments will likely increase. Could Germany's Spending Spree Influence ECB Policy? It is possible that pumping hundreds and billions of Euros into the economy will lead to inflation. The ECB must take into consideration that inflationary pressures will increase again due to the planned expansionary fiscal policies in Germany, said Cyrus de la Rubia. Chief economist at Hamburg Commercial Bank. Reporting by Rene Wagner and Maria Martinez, Writing by Rachel More, Editing by Gareth Jones, Christina Fincher
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Gold vaults $3,000 rush to safety from market, political worries
Gold prices have risen steadily, and for the first-time in history, above the psychologically important $3,000 mark per ounce. This is due to geopolitical uncertainty and economic instability that has sent investors into this safe-haven investment. Gold spot reached a new record of $3,004.86 an ounce, its 13th highest level in 2025. Prices have already risen 14% in this year after soaring 27% in 2024. There are many factors that drive demand, including central bank purchases. Standard Chartered analyst Suki cooper said that despite geopolitical uncertainties and the ongoing changes in tariffs, gold demand remains high. Since Donald Trump took office, his protectionist policies have shaken global markets. His tariffs have also triggered swift retaliation by China and Canada. John Ciampaglia is the CEO of Sprott Asset Management. He said that with equity markets falling and political risks unpredictable, Western investors are returning to gold. This could push it up to higher levels. We consider gold to be an "insurance policy" and a source of liquidity during difficult market conditions. Gold is a safe haven for investors as trade tensions and tariffs cause inflation fears. Gold stocks are also increasing in COMEX approved warehouses As traders scrambled to cover their positions in the face of tariff uncertainty, gold production hit a new record high. In recent weeks, however, inflows of gold have decreased. FEDERAL RELEASE The Federal Reserve is expected to cut rates by three quarter points this year. This was up from just two days ago. Since September, the Fed has cut rates by 100 basis point, pausing only in January. The markets expect that cuts will resume in June. This is keeping the dollar in pressure. It's a dramatic change from the time when Trump’s protectionist policies boosted the currency. Standard Chartered analyst Suki cooper said, "The inflation data helps to give the market confidence in the easing cycle given concerns about inflation and growth." ETF DEMAND According to World Gold Council data from February, the demand for gold among investors is on the rise. Physically-backed gold ETFs have seen their biggest weekly inflows since March 2022. On February 25, SPDR Gold Trust, the world's biggest gold-backed ETF saw its holdings reach 907.82 tons. This is the highest level since August 2023. Dina Ting is the Head of Global Index Portfolio Management for Franklin Templeton. She said that there will be an increase in flows to safe-haven investments like gold as investors shift away from equity growth stock amid rising uncertainty and future concerns. She said that, while investing strategies can vary, a gold allocation of 5% to 10% can provide effective diversification. CENTRAL BANK DENDER The central bank demand is a major factor in gold's price rise. Analysts believe that strong demand in 2025 will push gold prices to new heights, as countries continue to stockpile the metal during economic uncertainty. Ting stated that central banks could increase their gold purchases in the face of market uncertainty, not only to hedge against the U.S. Dollar but also to anchor their currencies with gold. In February, China's gold reserves were up for four consecutive months. In 2024, after an 18-month buying spree the central bank took a six-month break before returning to purchases in November. Macquarie stated in a report that in the absence of improvement in the U.S. deficit budget, gold may challenge the high of $3,500. Goldman Sachs has raised its 2025 year-end gold target to $3100. Goldman Sachs raised its year-end 2025 gold target to $3,100.
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Executives say AI will lead to cheaper and faster oil production.
Executives at the CERAWeek Conference in Houston explained that artificial intelligence has accelerated oil and gas drilling, and prompted companies to reconsider areas they previously deemed too expensive or difficult to develop. AI was a major topic in several sessions of the largest energy conference. Oil producers are looking for ways to stay profitable amid a plummeting price of oil and concerns that U.S. president Donald Trump's tariffs may slow down global energy demand. Ann Davies, BP’s senior vice-president of wells, revealed that the UK oil giant BP uses AI to predict problems and steer drill bits before they occur. She said, "We can drill more wells each year and we have better capital allocation." BP announced that it would increase its annual spending on oil production and gas as part of a major strategic shift to improve investor trust. Trey Lowe, chief technology officer at Devon Energy in the United States, told an interview that AI had helped Devon Energy drill into areas previously unreachable. He said that the company could, for example, gather information on a fault within a formation and then drill the opposite side to avoid the fault. Chevron uses AI-powered drones to fly over its shale oil and gas operations in Texas, Colorado and Wyoming. The drones are used to monitor and detect potential problems such as emissions leaks remotely and alert workers on the ground. Russell Robinson, deputy program manager for facilities and operations, Chevron, told an interviewer on the sidelines at the conference that in three months, the company had reduced the time it took to shut down production due to repairs or maintenance. He said drones allowed workers to spend less time performing routine inspections in the shale fields. "We have continued to run more assets for longer periods of time. This is just producing more gas or oil," he added, adding that Chevron is currently evaluating if it should expand the use of drones in monitoring its refineries. Lowe, Devon Energy's CEO, said that machine learning models monitor each of the oil rigs in the U.S. The company has also seen a 25% increase in the life expectancy of its gas and oil wells. AI also speeds up offshore drilling. BP uses AI to evaluate vast amounts of data in the Gulf of Mexico, compared to the six to twelve months it took before. A spokesperson explained that this helps geoscientists to determine where to drill wells and predict problems. The oil and gas sector has been using AI for many years. However, recent advancements like large-language modeling are revolutionizing the industry. Chicheng Xu is the founder of OpenPetro AI a company that builds AI tools for energy companies and a former petrophysicist with Aramco. He said that it would take humans a long time to create three-dimensional visualisations of deep-sea features. AI can search through data to find features that you are interested in and then visualize them for you. "That's the difference," Xu said. Gaining a competitive edge means cutting time and costs. Lowe, from Devon, said that companies who don't use AI will be left behind. (Arathy S. Somasekhar contributed additional reporting from Houston, and Simon Webb & David Gregorio edited the story).
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Terna, an Italian company, will invest 23 billion Euros in its network over a period of 10 years.
Terna, the Italian state-controlled electricity grid operator, announced on Friday that it will invest over 25 billion Euros (23 billion euros) in network upgrades within the next 10 year. The group announced that it would increase the amount of funds raised for the development of the electric network in the country for 2025-2034 by 10% per year. In a press release, Chief Executive Giuseppina di Foggia stated that "Investing in planning and modernising the electricity grids is essential in order to meet the increasing demand for energy as well as the integration of renewable resources." She said that the goal of the group was to "ensure the country has an efficient, reliable and sustainable system". Terna predicted that by the end of this year, the energy exchange capacity between markets will reach approximately 39 GW. This is up from the current 16GW. Interventions would also resolve local congestion while ensuring the stability and security grid. The group stated that the sub-high-voltage direct current (HVDC), Tyrrhenian Link is expected to be finished by 2028. It will connect the island of Sicily with Sardinia, and the southern region Campania. It is expected that the Adriatic Link will be operational in 2029. This 250-kilometer link between Abruzzo, Marche and the region of Abruzzo. Terna stated that its investments will help support the Italian Government's goal to increase installed solar and wind power by 65 GW in 2030 and by 94 GW in 2035. The plan also stated that the interventions it envisages would result in a reduction of up to 2,100 kilotons/year of CO2 emissions by 2040, and 2,000 kilotons/year by 2030. $1 = 0.9198 Euros (Reporting and editing by David Evans, Alvise Armellini)
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Copper falls from its fresh peak following downbeat Chinese data
Copper prices fell from their five-month high on Friday as concerns about U.S. Tariffs and disappointing data from China, the world's largest metals consumer, dampened purchasing activity. The benchmark three-month copper price on the London Metals Exchange rose 0.1% to $9,797 per metric tonne by 1030 GMT. It had previously reached $9,850 a metric tonne, its highest level since October 9. Prices fell after the new lending by banks in China in February was lower than expected from its record high of the previous month. Nitesh Sha, a commodity strategist with WisdomTree, said that the price of copper would be negatively affected by the lack of confidence in China's ability to control its stimulus and activities. "Dr. Copper is also very sensitive to the growth concerns in other parts of the world. "I think tariffs are causing these concerns," he said. The copper market has been alternating between buying on the assumption of tariffs forcing U.S. consumer to pay higher prices for the metal and worrying that demand would suffer if the growth slows down. LME copper has gained 12% this year, and Friday marked the fourth session in a row of gains. The most active U.S. copper futures on the Comex for May were unchanged at $4.93 per lb, after reaching $4.96. This was their highest since May of last year. The premium for Comex copper over LME is $1,063 per ton. Alphamin Resources has ceased mining at Bissie Tin mine in Democratic Republic of Congo. LME futures reached their highest level since 2022 on Thursday. In a recent note, Wang Weiwei said that the Bisie Tin Mine is the third largest tin mining operation in the world, and will contribute 6% of tin ore to the world in 2024. The Shanghai Futures Exchange saw a jump of 8.6% in tin prices on Friday, after reaching the upper limit of 10% during the morning Asian trade. LME Tin gained 1.4% to $36,410 per ton on Friday after reaching $37,100. This was its highest level since June 2022. LME aluminium fell 0.2% to $2,696.50 per ton. Nickel gained 1.1%, to $16,690. Lead increased 0.5% to 2,082.50, and zinc grew 1% to 2,990.50. (Reporting and Editing by Leroy Leo; Additional Reporting from Polina Devtt in London, Violet Li in Shanghai.
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Oil prices rise on uncertain path to Ukraine ceasefire
The oil prices recovered on Friday, after losing more than 1% in the previous session. This was partly due to the decreasing prospects for a rapid end to the Ukraine conflict that could bring more Russian energy to Western markets. Brent crude futures rose 54 cents or 0.77% to $70.42 per barrel at 1055 GMT after falling 1.5% in the previous session. U.S. West Texas Intermediate Crude was $67.13 per barrel, up 58c or 0.87% after closing 1.7% lower on Thursday. Brent and WTI prices are expected to be more or less the same as last Friday's settlement, which saw Brent settle at $70.36 while WTI settled at $67.04. Brent oil has been hovering around $70 for the last two weeks. Commerzbank analysts wrote in a note that whether it will stay at this level for the next week depends on political news. Russian President Vladimir Putin stated on Thursday that Moscow supports a U.S. proposed ceasefire in Ukraine, in principle. However, he asked for clarifications and conditions which appeared to prevent a rapid end to the fighting. Tony Sycamore, IG's market analyst, said that "Russian support for a 30-day proposal of ceasefire with Ukraine has decreased confidence in a short-term ceasefire." Trump administration announced on Thursday the expiration of a license allowing financial transactions with Russian institutions to conduct energy transactions. This will increase pressure on Putin to reach a peace deal over Ukraine. Sources say that Chinese state-owned firms also limit Russian oil imports due to sanctions risk. China and Russia stood with Iran on Friday after the United States demanded that nuclear talks be held with Tehran. Senior Chinese and Russian diplomats said dialogue should only continue based upon "mutual respect", and all sanctions should be lifted. In a client note, ANZ analysts stated that geopolitical tensions could still disrupt supply. The International Energy Agency warned Thursday that the global oil supply may exceed demand this year by 600,000 barrels a day due to the growth in the United States, and a weaker global demand than expected. The IEA's estimates of demand growth for the fourth quarter of 2024, and the first three months of 2019, were reduced due to the unstable macroeconomic conditions caused primarily by the escalating tensions in trade between the U.S. Analysts at Commerzbank said that "high risks on the supply side and increased production from OPEC+" argue against a sustained rise in oil prices.
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Britain's Energy Minister visits China to discuss climate change and energy cooperation
Britain's Energy Minister is visiting Beijing this Friday to discuss climate issues and energy issues. He hopes that re-engaging China, the world's biggest carbon emitter as well as a supplier of renewable energy infrastructure, will bring economic benefits. The government announced that Ed Miliband would meet with the Chinese energy and environmental ministers on his 14-17 March visit. He will also launch a framework of climate talks, which will see his counterparts in Beijing visiting London later this summer. Miliband wants to update an old clean energy partnership that has been in place for a decade with China. He will outline areas of collaboration, such as carbon capture and storage technologies and hydrogen power production. The UK hopes that its goal of switching almost exclusively to clean energy by the end decade will be aided by closer ties with China. China is the world's largest investor and supplier of renewable energy infrastructure. Miliband also wants to see his ambitious target of decarbonisation rub off on Chinese policies, and the Chinese government has promised to share their expertise in phasing-out the use coal, on which China is still heavily reliant. Miliband stated that "we can only protect future generations from climate change by ensuring all major emitters take action." It is a simple act of neglect to the present and future generations to not engage China in how it can take action on climate change. This is the third visit by a senior British Minister in recent months, following the foreign and finance ministries. Keir starmer wants to reset the relationship with Beijing after the degeneration of relations under the former British government. The Starmer government’s approach to China revolves around a mantra that is often repeated by its ministers: “cooperating when we can, competing when we need to, challenging where we have to.” The British government announced that Miliband would "engage honestly" with Britain's concerns over forced labour in Hong Kong, freedoms and human rights in Hong Kong, and China's support of Russia's conflict in Ukraine. (Reporting and editing by Christina Fincher, Susanna Twidale and William James)
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EU envoys renew sanction against Russian individuals and entities
EU diplomats reported that the European Union renewed sanctions against Russian individuals and entities on Friday, but did not remove Russian tycoon Mikhail Fridman from the list in spite of pressures from Hungary. The EU sanctions list must be renewed by all 27 ambassadors in Brussels every six months. The list was renewed through September 15th, the deadline for renewal being Saturday. Hungary, which maintains cordial relations with Moscow despite Ukraine's war, threatened to block renewal of the list unless certain people were removed. Two diplomats confirmed that Budapest initially requested nine names be removed, including Fridman, but other envoys were able to reduce the list to just three Russians. The three are Gulbakhor, the sister of prominent businessman Alisher Usmanov; Viatcheslav, Moshe Kantor, a businessman, and Russian Sports Minister Mikhail Degtyarev. The removal of a fourth person, Vladimir Rashevsky (a businessman), was due to the weakening of his legal case, rather than any pressure from Budapest. Three other names were removed because they died. More than 2,400 people and entities are on the EU's list of sanctions against Russia. Reporting by Julia Payne, Lili Bayer and Alison Williams; editing by Gareth Jones and Alison Williams
Gold reaches record levels as tariffs threaten to raise the price of gold.
Asia shares rose Friday, and global markets tried to rebound after a brutal sale earlier in the week. Gold reached a new record as investors became nervous due to the latest escalation in global trade tensions.
After Senator Chuck Schumer announced that he would vote for a Republican funding bill to avoid a government shutdown, he signaled his party's support.
U.S. Stock Futures were a strong response. Nasdaq futures gained more than 1% in one instance and S&P futures advanced by 0.6%.
FTSE Futures also gained 0.3%. DAX futures rose 0.6%.
Alvin Tan is the head of Asia FX Strategy at RBC Capital Markets. He said that this news, for today at least, was positive for the market sentiment.
The broadest MSCI index of Asia-Pacific stocks outside Japan, which includes Japan, traded 0.95% higher. However, it is still on course to lose 1.5% this week as global trade conflicts have weakened global stock markets.
Donald Trump, the U.S. president, said that he will impose a 200% tariff on imports of European wines and spirits if the EU does not remove the retaliatory charges on American whiskeys and other products which come into effect in the next month.
Vishnu Varathan is the head of Asia ex-Japan macro research at Mizuho.
Recent developments have sparked the steep sell-offs on Wall Street, and confirmed that the S&P 500 is in a correction. This comes just one week after Nasdaq also confirmed this.
"I don't think Trump 2.0 is the same as Trump 1.0. Michael Strobaek is the global chief investment officer of Lombard Odier. He said that this time the president appears to be willing to let U.S. stocks and the economy suffer as he implements his "America first" goals.
Gold, a safe-haven asset, has benefited from the trade war. The yellow metal hit a record of $2,993.80 per ounce last Friday. The yellow metal was expected to rise 2.6% this week.
Japan's Nikkei gained 0.8%.
Chinese stocks rose on Friday after Hohhot, a northern Chinese city, announced large cash rewards for boosting birth rates.
Investors also anticipated a press conference by officials of Beijing's top planning office and other agencies next week to discuss additional measures for boosting domestic consumption.
The Hang Seng Index in Hong Kong jumped by 2.4% while China's blue-chip index, the CSI300, grew by 2.3%. Shanghai Composite Index rose by 1.7%.
Dollar Trouble The dollar gained some ground on Friday thanks to the safe-haven flows. However, it was still not far from recent lows due to fears of an imminent U.S. economic recession and growing trade tensions.
The Euro last traded at $1.08465, down 0.04%, while the Pound fell 0.03% to $1.9475.
The German fiscal reset plan, which includes a 500-billion-euro fund for infrastructure as well as sweeping changes in borrowing rules and growth boosters to boost military spending and revive Europe's biggest economy has given the euro additional support.
The German lower house, which is leaving office in March, will vote on these measures before forming a new Parliament on March 25,
Investors will be waiting for further information on the rate outlook, amid the uncertainty surrounding Trump's policies on trade and the impact they have on U.S. inflation and growth.
"Our assessment shows that the rate trend is constant, and will continue to be lower." Varathan from Mizuho said that it's a matter of timing.
"I believe that the tariffs are only going to be an inconvenience and not a hindrance to the Fed's cuts because, even if prices increase, it will still result in a negative shock of demand, which makes people worse off.
Dollar was up by 0.5% last week against the yen, at 148.50. However, it was expected to suffer a small loss for the week against the Japanese currency due to the increasing bets on more Bank of Japan rate hikes. Next week, the BOJ will also meet.
Oil prices rose after falling the previous session.
Brent futures increased by 0.67%, to $70.35 per barrel. U.S. West Texas Intermediate Crude Futures rose 0.75% per barrel to $67.05.
(source: Reuters)