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Marketmind: Inflation fears but Turkey likely still in rate-cut mode

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Marketmind: Inflation fears but Turkey likely still in rate-cut mode
© Reuters. FILE PHOTO: A money changer holds Turkish lira banknotes at a currency exchange office in Ankara, Turkey October 12, 2021. REUTERS/Cagla Gurdogan/File Photo

(Reuters) – A look at the day ahead from Sujata Rao.

Those inflation fears just won’t go away.

European gas prices have resumed their climb and are up 60% so far in November, while Wednesday’s data showed a U.S. homebuilding sector beset with shortages of labour and material. And companies continue warning of higher costs that could hit margins.

All that on top of forecast-busting inflation data in the past week from the United States, Britain and Canada, among others.

Uncertainty about how this may impact economic growth and expectations for earlier-than-flagged interest rate rises are capping equity gains, keeping world stocks and the flatlining for the week. It’s also keeping demand alive for government bonds, following a slide on Treasury yields on Wednesday.

Worried governments are mulling relief — China said it would release oil from reserves, following a a U.S. proposal for a coordinated release of stocks by big oil consuming nations.

The news has sent oil prices skidding $1.

Emerging markets have had a torrid time this year, with most forced to raise interest rates to quell inflation and preserve their yield premia over developed markets. Average government borrowing costs have spiralled 160 basis points this year, according to a JPMorgan (NYSE:) index

On Thursday, South Africa might join the rate-hike brigade; despite subdued inflation, it may find merit in striking early.

But there are exceptions. Economists expect Turkey to cut rates by 100 basis points to 15% — some five percentage points below inflation. The lira has lost some 30% against the dollar this year — now at 11 per dollar, it was at 6.9 back in March

Will central bank governor Sahap Kavcioglu toe President Tayyip Erdogan’s line and cut rates? Standing pat to protect the lira against further losses might well see him become the fourth https://www.reuters.com/world/middle-east/revolving-door-turkeys-last-four-central-bank-chiefs-2021-10-08 governor to lose his job the last two and a bit years. Lira timeline, https://fingfx.thomsonreuters.com/gfx/mkt/zdvxonkjmpx/lira%20timeline.PNG

Key developments that should provide more direction to markets on Thursday:

-Japan’s new stimulus package will include record spending of about $488 billion

-Carlyle says takeover talks with Metro Bank ended

-Thyssenkrupp profit to double in 2022, flags hydrogen IPO

-German car registrations

-Fed speakers: Chicago President Charles Evans

-Emerging markets: Central banks meet in South Africa, Turkey, Indonesia, Phillipines

-Europe earnings: Royal Mail (LON:), National Grid (LON:), ThyssenKrup

-U.S. earnings:  Macy’s Alibaba (NYSE:), Kohl’s

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Economy

Oil Russia ban news: Russia will ban the sale of its oil to countries that have imposed a price ceiling

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oil Russia ban

Will Russia sell oil to Europe? The administration of President Vladimir Putin is preparing an order prohibiting Russian companies and any trader from buying Russian oil to sell raw materials to countries and companies that have imposed a price ceiling on Moscow. Bloomberg news agency wrote this, citing a report from sources.

“The Kremlin is preparing a presidential decree banning Russian companies and any traders buying national oil from selling it to anyone who participates in the price ceiling,” the publication wrote.

According to the newspaper’s interlocutors, this would prohibit any mention of the price ceiling in contracts for Russian crude, as well as transferring it to countries that have joined the price ceiling for the natural resource.

In the first half of September, the press service of the US Treasury Department said that the USA, together with its allies from G7 (Great Britain, Germany, Italy, Canada, France and Japan) and the European Union (EU) would impose a ban on marine transportation of Russian oil on December 5 and oil products – on February 5.

Earlier we reported that EU negotiations on limiting the prices of Russian oil reached a deadlock today.

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Economy

EU talks on restrictions on Russian crude oil prices today stalled

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russian crude oil price today

Negotiations between the European Union countries about the “ceiling” of Russian crude oil prices today reached an impasse; Bloomberg reported, according to its sources.

Representatives of the bloc cannot reach an agreement on the ceiling price of Russian oil. According to the agency, the proposed European Commission limit of $65-70 per barrel, Poland and the Baltic countries believe “too generous,” while Greece and Malta, which is actively engaged in transporting fuel, do not want the limit to fall below $ 70. Recall that the Russian response to the oil price cap was negative. The Russian government has officially said that it will only sell oil at market prices.

“We are looking for ways to make this solution work and we are trying to find a common ground to implement it in a perfectly pragmatic and efficient way, while avoiding that it may cause excessive inconvenience to the European Union,” said German Chancellor Olaf Scholz.

Earlier, we reported that the SEC fined Goldman Sachs $4 million for non-compliance with ESG fund principles.

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Economy

More than 50% of Germans said they had given up shopping for new clothes and electronics. Is Germany’s economy failing?

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is germany's economy failing

Die Welt newspaper cited a survey by the consulting company EY and said that about 56% of Germans who took part in the survey said that they had practically refused to buy new clothes.

Also, 56% of German consumers reported that they now refrain from buying televisions, smartphones, laptops and game consoles. Also, nearly one in two now uses less gasoline, and one in four said they are saving on medications.

What caused the economic crisis in Germany? The main reason is the war in Ukraine and the resulting sanctions by the EU. Also, every second respondent reported that at the moment he could buy only the essentials. According to EY analysts, German households plan to further reduce spending in the coming months. In particular, they plan to save money on food delivery and entertainment.

Earlier, we reported that prices for liquefied natural gas in Asia reached their highest since October.

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