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Merz, a German economist, says that the public finances can't offset all of the price increases from Iran war
German Chancellor Friedrich Merz said on Wednesday that ending the war in Iran would be the best way to control energy prices. In response to questions from parliament, he stated that there are "measures" we can take into consideration in order to reduce the pressure but "we cannot offset every price trend by tax measures or funding measures from the federal budget". He said that the best way to control prices is to end the war in Iran. Fuel prices have risen in Germany, as well as other countries since the beginning of World War II. Critics accuse oil companies of taking advantage of the crisis to increase their prices. Merz was skeptical about the calls from his centre-left coalition partners, the Social Democrats, for a tax to be imposed on the "excess profits" of oil firms. He said that the term is practically impossible to define legally. He said Germany worked with European partners to convince the U.S., Israel and other parties to the conflict to find a diplomatic solution. The war has caused the Strait of Hormuz, a vital shipping route, to be largely closed, sending energy costs soaring around the world. He said that "this requires a willingness on all sides including Iran, which is not apparent at the moment." He said that Germany was willing to participate in 'international efforts to stabilize the region' once the hostilities ended, but this would require an UN mandate. (Reporting and editing by Madeline Chambers, Jan Harvey and James Mackenzie)
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Albemarle begins environmental review of Chile lithium extraction project
Albemarle, the largest lithium producer in the world, announced on Wednesday that it had begun the environmental review process for its first Direct Lithium Extraction project (DLE) in Chile. Albemarle stated in a press release that the project was designed to recover twice as much lithium while reducing the amount extracted of brine compared?to the current operations. Albemarle said in a submission to the Chilean Environmental Assessment Agency that if the project were completed, it would require a total investment of $3.1 billion with a useful lifetime lasting until 2045. The initiative is aimed at a?more sustainable and efficient production in the Salar de Atacama,? it said. This location is?one of the richest sources for the metal necessary to make electric vehicle batteries. Albemarle stated that the project would include a DLE facility within Albemarle’s mining concession, up to six processing train at the center of Chile’s salt flats, as well as the construction of an electricity transmission line. According to the filing, net brine extraction would drop from 442 to 342 milliliters/second with just one DLE train in operation and down as low as 142 milliliters/second with all six trains. Miners have long complained about the?water, both fresh and salty, around the vast Atacama flat. Native communities are concerned that mining will deplete the limited?reserves?of freshwater and brine rich in lithium, and reduce its availability to people and wildlife. (Reporting and writing by Fabian Cambero, Inigo Alexander, Cassandra Garrison and Alexander Smith; editing by Cassandra Garrison)
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German Finance Minister sets out reform plans to boost the growth
The German Finance Minister Lars?Klingbeil proposed Wednesday measures to stimulate the slowing economy. These included income tax reforms and a cap on the excess profits of energy companies. "If Germany remains a powerful country, it's up to us alone." "We alone will decide this," Klingbeil added, adding that Europe's largest economy needs?innovation, greater productivity, and technology leadership. He said: "We need to be technological leaders in key areas. We also need competitive investment conditions, a modern industry base, reliable supply chains and functioning capital markets." Germany's export-driven economy has struggled to grow in the wake of the pandemic. Rising competition from China and higher energy prices have put strain on its economic model. The Finance Minister, who is currently working on the budget for 2027, stated that the government will be reforming fiscal consolidation with detailed analyses of revenue and expenditure. "We can't respond to every problem and crisis with more money," said?Klingbeil. INCREASING PRODUCTIVITY AND WORKING HOURS He said that the German labour market was suffering because of high levels part-time employment, tax transfer systems which in some cases "discourage" additional work and incentives for early retirement. "I want to create a new system where willingness to perform pays," said?Klingbeil. In Germany, half of women work part-time. German income splitting lowers tax for couples with unequal earning, but also increases the effective 'tax' on the lower-earners additional work. This is often the wife. Klingbeil suggested that income splitting in its present form be abolished for future marriages. Reporting by Maria Martinez Editing Made by Madel Chambers and Sharon Singleton
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UN urges Libyan authorities release political activist
The U.N. Mission to Libya (UNSMIL), on Wednesday, called on the?Libyan government to'release political activist Al-Mahdi Abdulati. He said he was arrested and detained last week. UNSMIL reported that Abdulati was arrested on March 18 in Misrata. Misrata is located about 200 km east of Tripoli. It is home to the internationally-recognised Government of National Unity. The U.N. Mission said Abdulati had been?reportedly detained by the Internal Security Agency which operates directly under the GNU. Abdulati has been known to criticize the GNU’s performance in public spending and security issues through his Facebook page, as well as interviews with local TV channels. The mission stated that "this detention is not isolated but part of a pattern recurrent among law enforcement and security entities in the country." The statement of?UNSMIL was not immediately reacted to by the GNU or the Internal Security Agency. Since the 2011 NATO-backed uprising, which ousted Muammar Gadhafi as longtime leader of Libya, there has been little peace or stability in Libya. Oil-rich Libya split in 2014 into eastern and western factions, based in Benghazi (the second largest city) and Tripoli. Rival administrations govern each region. The mission called on all Libyan authorities to stop abusive practices, free all those arbitrarily arrested and hold those responsible accountable. (Editing by Ros Russell).
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BBC reports that BlackRock CEO Fink has warned of a 'global economic recession' should oil reach $150.
BlackRock CEO Larry Fink stated that oil prices could reach $150 per barrel and cause "global depression" if Iran "remains" a threat even after the war is over. Fink said on BBC's Big Boss Interview podcast published on Wednesday that if there was a cessation in war and Iran remained a danger, it would be a threat for trade, to the Strait o f Hormuz or to the peaceful coexistence between the GCC region. "We could see a?years where oil prices are above $100, closer to $150, which will have profound implications to the?economy." When asked what would happen if oil stayed at $150 per barrel, he replied: "We'll have a global recession." Since the U.S. and Israeli war against Iran, oil prices have remained volatile. Prices fell 4% after news that the U.S. sent Iran a 15 point proposal to end the war, raising the prospect of a possible ceasefire. The war has almost completely halted the flow of oil and liquefied gas through the Strait of Hormuz. This is a route that typically transports about one-fifth of world crude oil and?gas supplies.
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Business lobby: Iran conflict has a negative impact on Italy's economic growth prospects
Confindustria, Italy's leading business lobby, forecast that the economy would grow by 0.5% in this year. This is a reduction from the 0.7% it had predicted in October. It also warned of'strong' 'downside risks' if the Iran conflict continues. The third largest economy in the Eurozone saw its gross domestic product rise by 0.5%, marking the third consecutive year of growth below 1%. Confindustria stated in its bi-annual report that the 0.5% growth scenario for 2026 was based on an "optimistic hypothesis" that?the conflict in Iran would be over by March's end. The business group warned that if the hostilities after the?US/Israeli strikes which began on February 28, should continue through the second quarter of this year, Italy's GDP would stagnate. It said that if the conflict continues into the fourth quarter the knock-on effects on energy prices will push the Italian economy back into recession. Confindustria President Emanuele orsini presented the report and said that the main problem for Italy caused by the war is the spiraling energy costs. He told reporters that the price of a megawatt-hour had risen from 106 to 170 euros, and called for an EU response. He called for a united European energy market and joint EU debt issuance. Confindustria's baseline forecast for the year 2027 is a slight acceleration of growth to 0.6%. Next month, the government of Giorgia Meloni, who forecasted growth for this year at 0.7% last autumn, will update its projections. Confindustria, a leading Italian financial services company, said that Italy's budget, which was 3.1% of its gross domestic product (GDP) last year, just over the 3% limit set by the European Union, will decline to 2.8% this and 2.7% in 2027. The projected Italian consumer price increase, driven by energy costs, will accelerate sharply this year to an average 2.5%, up from 1.5% in 2025. It is expected to ease to 2.2% in the following years. The report predicts that if the Iran conflict continues into the second quarter of this year, Italy's inflation rate will increase to 4.3%. (Reporting By Gavin Jones)
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Markets cheered Trump's talk about Iran negotiations, as European stocks rose, oil fell, and markets cheered the rise of European stocks.
The European stock indexes rose on Wednesday and the oil price fell on the day, as a result of reports that the U.S. was seeking a ceasefire lasting a full month with Iran, despite the fact that Iran had rejected the idea. U.S. president?Donald Trump said to reporters on Tuesday that he was?making progress? in negotiations for an end to war. This raised hopes that oil would be exported again from the Persian Gulf. The news of the ceasefire plan and the fact that the U.S. sent Iran a 15 point plan for discussion was welcomed by traders. According to Iranian state media, Iran has denied direct talks and a military spokesman claimed that the United States was negotiating with themselves. Markets made modest gains in Asian trading. The STOXX 600 index rose 1.4% at 1036 GMT, but this was not enough to offset the 7.3% decline in the STOXX 600 for the month of March. London's FTSE 100 rose 1.1% for the day. Amelie Derambure is a senior multi-assets manager at Amundi. She said that the mood was positive. The market is now trading on the belief that peace talks, or a possible ceasefire might be imminent. Derambure stated that traders are positioning themselves in order to not miss out on the "relief rallies" that may occur when markets increase on positive news. She added, however, that more convincing news is needed to sustain this move. Some analysts warned against expecting that the war would end quickly. In a research report, ING's head of global markets Chris Turner said that it was probably too soon to expect a big drop in the price of energy or a softer dollar in this week. OIL EASES AND BOND Yields Fall Brent crude futures fell 5.2% to $99.01 per barrel and the U.S. West Texas Intermediate crude prices fell 5.1% to $87.62 per barrel. Iran said "non-hostile ships" could cross the Strait of Hormuz as long as they coordinated with Iranian authorities. However, the waterway which carries approximately one-fifth of the world's crude oil and gas supply is effectively closed. The yields on European government bonds fell in a move sparked by Italian bonds, which were?particularly hit since the start of the war due to Italy's dependency on fossil fuel imports. The benchmark German 10-year yield was 2.9724%. The euro fell by 0.1% to $1.1598. The data showed that German business morale dropped sharply in march, due to the Iran War, which made companies more sceptical and threatening the recovery of Europe’s largest economy. The dollar index rose to 99.333, indicating a slight increase in the U.S. Dollar against a basket currency. The yield on the 10-year U.S. Treasury note was 4.3302%. As oil prices fell, gold?prices increased. The war has caused the worst energy crisis in history, sparked inflation fears around the world and killed thousands. On Wednesday, Gulf Arab countries told the U.N. that Iran is an existential danger. BlackRock CEO Larry Fink said to the BBC that oil could reach $150 per barrel, causing a global economic recession. (Reporting and editing by Tom Westbrook, Elizabeth Howcroft)
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Reports of a 15-point ceasefire proposal sparks hopes for oil to fall
The oil prices fell by about 5% after it was reported that the United States sent Iran a 15-point plan to end the war. This prompted a 'talk' of progress towards a ceasefire, despite Israel and Iran trading airstrikes. Brent crude futures were down $5.66 or 5.42% to $98.83 per barrel at 1022 GMT after having fallen as low as $97.57. U.S. West Texas Intermediate Crude Futures were down by $4.82 or 5.22% at $87.53 after falling as low as $86.72. Both benchmarks gained nearly 5% Tuesday before losing some of their gains in the volatile trading that followed settlement. While oil prices were falling on the prospect that a ceasefire would be reached, PVM Oil Associates analyst?Tamas Vaga pointed out that reports had been made of U.S. troops being deployed in the Middle East. U.S. president Donald Trump stated on Tuesday that the U.S. is making progress in negotiations to end the war. A source confirmed Washington has sent Iran the 15 point proposal. Some analysts were, however, sceptical about the progress of these talks and expected markets to remain volatile. According to the BBC, if Iran continues to pose a threat in Hormuz, the world may face years with oil prices between $100 and $150 per barrel. Larry Fink, CEO of Blackrock, one of the largest asset managers in the world, said this. Fink replied, "We'll have a global recession" when asked what would happen if oil stays at $150. OIL SHIPMENTS VIA HORMUD ARE LARGELY?HALTED Priyanka Sackdeva, senior market analyst at Phillip Nova, said that Middle East developments will remain "the dominant price driver", keeping oil prices in a range of movements in the short term. The war has almost completely stopped shipments of gas and oil through the Strait. This is a route that typically transports about a fifth of the world’s crude and gas supply. The International Energy Agency called it the largest oil supply disruption ever. After 25 days, the global supply has been reduced by 500 million barrels or five full days. "The outlook for the market remains tight, despite the prospect of a war-off-ramp", said Saul Kavonic. He is head of MST Marquee's energy research. He stated that even if the flow through the strait resumes, "it is not clear whether all production shut down will resume until more clarity is gained on 'the durability of a ceasefire. According to a Tuesday note, Iran told the United Nations Security Council (UNSC) and the International Maritime Organization (IMO) that "nonhostile vessels" could transit the Strait of Hormuz if coordinated with Iranian authorities. Shipping data revealed that to offset the disruptions caused by the Hormuz war, Saudi Arabia's Red Sea Yanbu Port saw oil exports rise last week from 1.4 million barrels a day to almost 4 million. This is a significant increase over the levels before the outbreak of the conflict. Two sources said that the Russian Baltic ports of Primorsk, and Ust-Luga - major 'export terminals' - suspended crude oil and?products?loadings on Wednesday, after Ukrainian drone strikes sparked an?inferno? which could be seen in Finland. The strike was the biggest against Russia's oil-export facilities during the four-year conflict and will increase the level of uncertainty on the oil market. Reporting by Seher DAREEN in London, Yuka OBAYASHI in Tokyo, and Trixie YAP in Singapore. Editing by Jamie Freed Bernadette BAUME and Jason Neely.
ROI-Inflation-spooked rates markets have overshot: McGeever
The markets overshoot and the recent dramatic increase in bets placed on higher interest rates due to the Middle East energy crisis is the latest example: although the move was logical, its magnitude remains questionable.
The Iran War shows no signs of stopping and the?markets are still in flux. Rates traders may need to take a break and re-evaluate.
The abrupt change in global 'rate outlook' reflects concerns about the short-term impact on inflation of the soaring prices for oil and gas. Federal Reserve now has a higher probability of raising U.S. interest rates in this year rather than cutting them. The European Central Bank and Bank of England will also likely increase their rates multiple times starting next month.
Zoom in on the shifts in Europe.
On February 27, a day before the joint U.S. - Israeli strike on Iran, UK rate futures indicated 50 basis points of ease by the end of the year, or two quarter point rate cuts. This has now changed to almost 75 basis point?of tightening or three rate hikes.
It is remarkable to see a 125-basis-point swing in just a few weeks.
Euro zone futures are now pricing in two rate increases, from implying the ECB would keep its key rate at 2% throughout the remainder of the year.
This hawkish course could be realized. The policymakers have not recovered from the mistake they made in 2021-22 when they misread "transitory inflation". The last two times that they increased?rates when oil was well above $100 per barrel, in 2008 and 2011, they were widely blamed for policy mistakes.
Limits of 2022 Comparative Analysis
Many analysts draw parallels between the current energy crisis and that caused by Russia's invasion in Ukraine in February of 2022, which helped to fuel "the worst bout of inflation on developed markets in decades."
There are some key differences.
Interest rates in February 2022 were significantly lower than those at the beginning of this crisis. The G4 central banks' policy rates were close to zero at that time, and the ECB, Bank of Japan, and Bank of Japan were in negative territory.
In addition, trillions of dollars in stimulus money for pandemic fighting and the explosion of economic activity following lockdowns also contributed to inflation in 2022. Early 2022, real interest rates were negative.
The combination of super-easy fiscal policy and monetary policies meant that inflation was far from temporary. The U.S. inflation rate has not returned to its target despite the biggest hike cycle in over 40 years.
Today, fiscal stimulus is on the agenda. Governments from Washington to Tokyo and Berlin are all set to cut taxes while spending heavily on energy and defense. These volumes are not as large as the pandemic-fighting package that was worth at least 10% GDP.
GOLDMAN AND CITI STICK WITH US RATE CUT VIEW
Goldman Sachs economists and Citi analysts are part of a shrinking group that is fighting the tide of forecast revisions. They also want the Fed to act quickly and raise interest rates in order to curb price pressures.
Jan Hatzius, Andrew Hollenhorst, and their team at Citi are sticking to their three-cut call.
They claim that any inflation will be temporary, lasting perhaps a few weeks, but the risks for growth and employment are much greater. They expect a temporary shock to the supply that will raise prices, but also deal a greater blow to demand.
It's not impossible. The Purchasing Managers' Index data released on Tuesday revealed that the U.S. Private Sector output in March was at its lowest level in 11 months. Activity in the Euro Zone also fell to a 10 month low. In Britain, activity expanded at its slowest rate in six months.
The rate markets should be nervous given the magnitude and speed of the energy shock. It will be difficult to justify a rate increase if the economy is slowing down and unemployment is on the rise, even if inflation is higher than target in both Britain and America.
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(source: Reuters)