AFP

EU leaders debated how to protect their industries from subsidised American competition, amid fears of a state spending race between the economic superpowers.

Arriving at an EU summit, French President Emmanuel Macron said a response was needed “to maintain fair competition”, one which “allows us to match what the Americans are doing”.

The European bloc is unsettled by parts of a multi-billion-dollar US Inflation Reduction Act (IRA) that lavishes subsidies and tax cuts for US purchasers of electric vehicles — if they “Buy American”.

The European Commission sees that as discriminatory against European car manufacturers, a breach of World Trade Organization rules, and a threat to investment in Europe.

It is urging EU leaders to sign off on a plan that would loosen state aid rules and boost public investment in cleaner energy.

In the summit room, leaders stressed “the strategic and deep ties between the EU and US across the full breadth of the relationship,” an EU official said.

But they agreed on the need “to safeguard Europe’s economic, industrial and technological base”.

They directed the European Commission to develop proposals next month “on mobilising relevant national and EU tools and improving conditions for investment”.

– ‘Delicate’ phase –

The commission was also told to come up with ways to boost competitiveness and productivity.

Commission chief Ursula von der Leyen said before the summit that such measures were needed because the IRA provisions “risk un-levelling the playing field and discriminating against European companies”.

Her Vice President Margrethe Vestager has warned: “We already have war in Europe (in Ukraine). The last thing we need is a trade war on top.”

Macron and the commission have tried to persuade US President Joe Biden to change the contentious parts of the IRA, to no avail apart from receiving promises of some “tweaks”. 

Biden and his administration believe the EU is free to come up with its own subsidy arrangement for electric vehicles — a sector in which China has outsized advantages when it comes to batteries and rare-earth supplies.  

There were some concerns among EU countries that the bloc’s main car-exporting nation, Germany, might go it alone with its own subsidies, as it already did with measures on energy.

European Council President Charles Michel, chairing the summit, said as he went in that economic ties between the United States and the EU were in a “delicate” phase.

– Migrant dispute –

The EU summit was also to study an internal dispute, between Austria and Bulgaria, over migrants.

Austria is blocking Bulgaria’s bid to join the border check-free Schengen zone encompassing most EU members and a couple of neighbouring countries. 

Vienna fears Bulgaria’s inclusion would further spur irregular migration onto Austrian territory. 

“We have more than 100,000 asylum applications in Austria, more than 75,000 of those who make these applications are not registered,” Austrian Chancellor Karl Nehammer said.

That “security problem” had to be solved before Bulgaria — and the linked bid by Romania — could be allowed into the Schengen club, he said. 

“They are countries that should protect the external border,” Nehammer said.

Bulgaria’s President Rumen Radev said as he went into the summit that his country was “highly committed to secure our border” but needed EU help.

“We request Bulgaria to be treated as a solid country,” he said. “Please don’t leave us alone.”

Global stocks sank Thursday as central banks hiked interest rates again and signalled they needed to go higher to fight inflation.

Both the Bank of England and the European Central Bank mirrored the Fed’s half-point hike on Wednesday to tackle soaring inflation, after rate increases in Norway and Switzerland.

Sentiment was hammered after the Fed suggested that it saw US rates topping out next year at 5.1 percent, higher than markets had predicted. 

Meanwhile the BoE, which lifted its key rate to the highest level in 14 years, warned that labour market tightness and inflationary pressures justified “a further forceful monetary policy response”.

The ECB delivered a similar message.

“Inflation remains far too high and is projected to stay above the target for too long,” it said.

ECB president Christine Lagarde warned “we should expect to raise interest rates at a 50 basis-point pace for a period of time”.

Market analyst Patrick O’Hare at Briefing.com said “these policy moves were expected, but that still hasn’t helped matters given the understanding that higher rates will inevitably weigh on economic activity.” 

Wall Street opened with deeper losses than it posted on Wednesday following the Fed’s hikes. The Dow dropped 1.0 percent at the start of trading. 

The S&P 500 fell 1.2 and tech-heavy Nasdaq Composite 1.4 percent.

– Fresh recession fears –

In Europe, London shed 0.6 percent, while Frankfurt and Paris tumbled 2.4 percent.

The Fed also warned that the world’s biggest economy would grow less than expected next year, fuelling fresh recession fears.

Data released Thursday showing retail sales sliding by 0.6 percent in November from October, as well a drop in industrial output, fanned those fears.  

The BoE and ECB also had downbeat messages about growth.

Rising rates fan recession concerns because they push up loan repayments for consumers and companies, denting expenditure, investment and economic activity.

At the same time, however, the world’s major central banks are seeking to dampen red-hot inflation, which has been fuelled partly by fallout from Russia’s invasion of Ukraine.

Recent official data painted a picture of slowing inflation in Britain and the United States, although consumer prices remain elevated.

“The interest rate hikes keep on coming and this trend is almost certainly going to remain intact in early 2023,” noted AJ Bell investment director Russ Mould.

“Raising rates makes it more expensive for consumers and businesses to borrow money and theoretically causes a reduction in spending and investment which should help to ease the economy and bring down prices.

“This takes time to work its way through the system and so central banks will continue their rate hiking path until there is adequate evidence to support a shift in policy.”

Markets had rallied earlier this week after data showed the US consumer price index rose less than forecast in November, marking a fifth straight slowdown and the lowest level since December last year.

But the Fed appeared less inclined to accept that the recent figures were enough to indicate enough progress was being made.

“Fifty basis points is still a historically large increase, and we still have some ways to go,” Fed boss Jerome Powell told reporters after the announcement.

Oil prices slid on fears recession would dent crude demand.

– Key figures around 1430 GMT –

London – FTSE 100: DOWN 0.6 percent at 7,451.03 points

Frankfurt – DAX: DOWN 2.4 percent at 14,112.11

Paris – CAC 40: DOWN 2.4 percent at 6,566.64

EURO STOXX 50: DOWN 2.6 percent at 3,872.25

New York – Dow: DOWN 1.0 percent at 33,624.24

Tokyo – Nikkei 225: DOWN 0.4 percent at 28,051.70 (close)

Hong Kong – Hang Seng Index: DOWN 1.6 percent at 19,368.59 (close)

Shanghai – Composite: DOWN 0.3 percent at 3,168.65 (close)

Euro/dollar: UP at $1.0707 from $1.0684 on Wednesday

Dollar/yen: UP at 136.51 yen from 135.45 yen

Pound/dollar: DOWN at $1.2321 from $1.2424

Euro/pound: UP at 86.91 pence from 85.96 pence

Brent North Sea crude: DOWN 0.5 percent at $82.25 per barrel

West Texas Intermediate: DOWN 0.6 percent at $76.79 per barrel

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Israeli scientists have created a species of egg-laying hens that only produce females, a breakthrough that could help end the annual culling of around seven billion male chicks globally. 

The chicks, born from egg-laying, are destroyed en masse by suffocation or crushing because they are not suitable for meat production and do not lay eggs. 

Animal rights activists have denounced the practice as barbaric, and it has been banned in several European states. 

A German prohibition on male chick culling came into effect this year. French farmers have until year’s end to comply with new restrictions. 

A team at the Israeli Agricultural Research Organization-Volcani Center has used gene editing to develop a new species of hens that only gives birth to females. They say this is the only option to substantially curb mass male chick culling around the world. 

“This is a world first and the only solution that is easy for industry players to implement,” team leader Yuval Cinnamon, a Volcani Center embryologist, told AFP. 

He said technologies that seek to identify whether an egg is carrying a male or female embryo are not reliable.

The Volcani Center, based in the Tel Aviv suburbs, developed the species following seven years of research in partnership with the American-Israeli firm Huminn, which in part specialises in commercially viable sustainable food production. 

– ‘Most serious problem’ –     

The technology involves genetically modifying egg-laying hens so that, when carrying male embryos, those do not progress and hatch. 

“After fertilisation the male embryos do not develop, and the female embryos develop normally without being genetically modified and hatch normally,” Cinnamon explained. 

“This will provide a real answer to what is probably the most serious animal welfare problem in the world today,” he added.

Beyond the animal rights benefits, the technology could offer poultry producers huge savings in terms of the space and energy required to operate incubators while reducing the significant culling costs. 

“It costs a dollar to cull each male chick, so that’s seven billion in savings a year,” Cinnamon said.

Huminn has forecast that commercial benefits from the technology could emerge within two years. 

At a meeting in October, European Union agriculture ministers said they would consider a bloc-wide ban on culling male chicks from egg-laying hens, pending the results of an impact assessment. 

Retail sales in the US turned negative in November as the holiday shopping season got underway, dragged by auto, furniture and building supplies, according to official data released Thursday.

The contraction comes as American consumers contend with persistently high inflation that has bumped up the cost of many items ranging from groceries to clothing.

While consumer price increases have eased slightly in recent months, the pace of inflation remains around three times the pre-pandemic level.

Retail sales slumped 0.6 percent in November from October to $689.4 billion, more than expected, according to the latest Commerce Department figures.

The numbers, which follow a bounce in October, came as auto sales plunged 2.6 percent in November from the month before, while sales of goods related to furniture and building materials dropped by a similar rate.

Compared with November 2021, retail sales was 6.5 percent higher.

As costs remain elevated, the latest data suggests consumers are spending more on essential items like food and healthcare, with spending at food and beverage stores, as well as at grocery stores, jumping 0.8 percent from October to November.

Sales at restaurants and bars remained robust as well, rising 0.9 percent.

But with households squeezed by heightened costs, spending on other items slipped.

Sales at gasoline stations edged down 0.1 percent.

The data are seasonally adjusted but do not take into account changes in prices. This means that as costs rise, a shopping dollar does not stretch as far and consumers have had to use more of their earnings on staple goods while seeking bargains.

Despite the glum figures, which come as the year-end shopping season gets underway, analysts point to underlying resilience for now.

“Overall, consumption remains supported by strong job growth and rising nominal incomes and wages and a cushion from excess savings,” said Rubeela Farooqi of High Frequency Economics.

While higher borrowing costs as the Federal Reserve pushes on with hikes in the benchmark interest rate may bite, gradually easing inflation “should be supportive of households,” she said.

But Ian Shepherdson of Pantheon Macroeconomics cautioned that economists remain “alert for a sharp slowdown in the first quarter as a weakening labor market makes people less willing to draw down on savings accumulated during Covid.”

The Bank of England on Thursday hiked its interest rate by half a point to 3.5 percent, the highest level in 14 years, in a bid to cool sky-high inflation.

The increase was the BoE’s ninth in a row, while the amount matches a hike Wednesday by the US Federal Reserve. The European Central Bank announces its latest rate decision at 1315 GMT.

“The labour market remains tight and there has been evidence of inflationary pressures in domestic prices and wages that could indicate greater persistence and thus justifies a further forceful monetary policy response,” the BoE said in a statement following its latest rate call.

The hike was less than in November when it lifted borrowing costs by 0.75 percentage points.

The Fed also slowed the pace of its tightening on Wednesday, as inflation eases on both sides of the Atlantic.

The BoE on Thursday added it expects the UK economy to contract 0.1 percent in the fourth quarter, better than its previous forecast for a contraction of 0.3 percent.

The UK government has said the British economy is in a recession that it expects to carry on into next year on fallout from rocketing energy and fuel bills.

UK inflation stands at 10.7 percent, the highest level for around 40 years, with prices surging on supply constraints caused by Russia’s invasion of Ukraine, the lifting of pandemic lockdowns and Brexit fallout, according to economists.

Soaring prices are eroding the value of wages, causing public and private sector workers to go on strike in an attempt to secure higher salaries. 

While boosting savers, rising interest rates are increasing loan costs for individuals and businesses.

“To make matters worse, higher mortgage payments will come on top of all the other soaring costs — from food to fuel,” noted Sarah Coles, senior personal finance analyst at stockbroker Hargreaves Lansdown.

– Strikes over pay –

UK nurses on Thursday staged an unprecedented one-day strike as a “last resort”, despite warnings it could put patients at risk.

It follows fresh walkouts by railway staff, while planned stoppages by passport control and postal workers spell Christmas misery for millions of Britons.

The UK consumer prices index eased in November from October’s annual inflation rate of 11.1 percent, official data showed on Wednesday. 

The BoE meanwhile began to raise its rate in December last year, when it had stood at a record-low 0.1 percent.

Paul Dales, chief UK economist at Capital Economics, said on Thursday that he expected the BoE to keep on hiking up to a peak of 4.5 percent early next year, as inflation remains at historically-high levels.

Volkswagen’s new boss Oliver Blume will seek to rally the board and shareholders at back-to-back meetings from Thursday to support his strategy on a crucial automotive software that felled his predecessor.

Blume had replaced Herbert Diess at the helm of the German giant in September, after problems dogged the development of the software and led to damaging vehicle recalls.

Under Diess, Volkswagen became the first legacy carmaker to try to follow US upstart Tesla by seeking to develop a centralised electronic architecture for its vehicles. 

This one-stop platform would replace the currently many different software systems for tasks such as controlling lights, the air conditioning, and the GPS.

But the drive has proved controversial, with critics warning that Diess had moved too fast, while underestimating how complicated it was to shift in-house an operation that was not among the carmaker’s core expertises.

At a press round-table on Tuesday, Blume hinted at plans to dial down the ambitious timetable.

The carmaker would refocus its software plans on “what has already been done”, he said.

But that also appeared to be a concession suggesting a delay to the new, centralised platform originally planned for 2026. 

That would have potentially serious knock-on effects — from delays on a flagship model to budget overruns — that Blume would need to talk the board and shareholders round to accepting.

– ‘Ripe and ready’ –

VW’s planned “Trinity” model, the centrepiece of its all new electric fleet and a project pushed by Diess, was set to operate on the new platform. 

But a delay in the new software could postpone Trinity. 

The vehicle was to be built at a planned new factory at Volkswagen’s headquarters in Wolfsburg — but this may not be built at all as, due to the software delay, there could be time to upgrade existing facilities, reports said.

In addition, development costs, carried by VW’s software unit Cariad, will exceed forecasts, according to several auto sector experts, who estimate them at several billion euros. 

Observers believe the group underestimated the complexity of coming up with a single software platform to operate across its different brands, ranging from family cars to high-end brands like Porsche and Audi. 

Automotive analyst Juergen Pieper said the group made a “mistake” in thinking that it could develop such a complex system alone and so quickly, “when car manufacturers are not IT specialists”.

Despite the considerable costs at going ahead, Pieper does not believe that Volkswagen would ditch its ambitions to develop its own software system. 

The delay could however drag until the end of the decade, he said. 

Matthias Schmidt, analyst at Automotive Research, said that Blume is likely “determined to bring the finished product to market when it is more or less fully ripe and ready for picking”.

“This could cause them market share losses in the short-term, as others bring their products to market quicker and snap away at the market share. 

“But Blume is likely more concerned about the long-term plans.”