AFP

Chancellor Olaf Scholz will visit Saudi Arabia and meet Saudi Crown Prince Mohammed bin Salman as part of a Gulf trip, his spokesman said Monday, as Germany rushes to secure energy supplies.

Scholz, whose two-day trip next weekend will also take him to Qatar and the United Arab Emirates, becomes the latest Western leader to meet with the crown prince.

Bin Salman was until recently regarded as a pariah in the West due to his suspected role in the murder of Washington Post journalist Jamal Khashoggi in 2018. 

But he is being courted again as Europe and its allies urgently seek fresh sources of fossil fuels after Russia cut gas supplies amid soaring tensions over its invasion of Ukraine.

Scholz, accompanied by a business delegation, will visit Saudi Arabia on Saturday, where he will meet with the crown prince and — if his health permits it — King Salman, government spokesman Steffen Hebestreit said. 

He did not go into detail about the reasons for Scholz’s Gulf visit but said he would be “very surprised” if the topic of energy was not discussed. 

The spokesman also offered assurances that “the murder of Mr Khashoggi will certainly figure in discussions”.

It is the latest sign of bin Salman’s international rehabilitation — in July, French President Emmanuel Macron held talks with him in Paris, and US President Joe Biden visited the kingdom.

On Sunday, Scholz will head first to the UAE and meet with President Sheikh Mohamed bin Zayed Al-Nahyan. Economy Minister Robert Habeck said Scholz would sign contracts there related to liquified natural gas — seen as a key alternative to Russian energy supplies. 

In the afternoon, the chancellor will hold talks with Qatari Emir Sheikh Tamim bin Hamad Al-Thani. 

Habeck already visited Qatar and the UAE in March in an effort to find alternatives to Russian gas, which Germany has traditionally depended on heavily.

Russia’s decision to cut off supplies has triggered an energy crisis in Europe, with consumers and businesses facing soaring bills as winter approaches. 

Stock markets dropped again Monday, extending last week’s rout as investors brace for another big rate hike by the US Federal Reserve that they fear could drag down the global economy.

The Paris CAC 40 and Frankfurt DAX were down in early afternoon trading while Asian indices mostly closed lower. London was closed for the funeral of Queen Elizabeth II. 

“Traders are worried that they are going to hear more hawkish stance from central banks this week” which would “cut economic activity further,” AvaTrade analyst Naeem Aslam told AFP.

The Fed will announce its latest monetary policy decision on Wednesday as it seeks to tame decades-high inflation.

With recent data showing US inflation rooted at four-decade highs, investors are increasingly pessimistic about the outlook for the global economy.

Central banks raise interest rates to cool inflation, but higher borrowing costs also slow down economic activity.

Disappointing US inflation figures last week unnerved traders and ramped up bets for a third successive 0.75-percentage-point rise, while some have predicted a whole percentage point move.

Policymakers, including Fed chairman Jerome Powell, have repeatedly said their ultimate aim is to bring inflation under control, even if that means sending the economy into recession.

“We’re expecting a sharp interest rate increase and therefore a clear signal against galloping inflation,” said Tim Emden, an independent market analyst.

The Bank of England and its peer in Japan are also holding key meetings this week, with the pound and the yen feeling the pressure from a strong dollar.

– Yen under pressure –

Asian equity investors continued the selling on Monday.

Hong Kong closed down one percent, even after reports that the city’s government was considering ending mandatory hotel quarantine for incoming travellers.

Shanghai was also down despite news that megacity Chengdu was ending a two-week Covid-19 lockdown that saw 21 million people affected.

Tokyo was closed for a holiday.

The prospect of more big Fed rate hikes is also keeping the dollar at multi-decade highs against its major peers, with the yen feeling most of the pressure as the Bank of Japan refuses to tighten policy.

“Speculative selling of the yen is readily justified by the ongoing widening in US-Japan yield differentials,” said Ray Attrill, of National Australia Bank.

“Until or unless something happens to arrest or reverse this spread widening, the yen is susceptible to additional selling pressure.”

The Japanese unit last week hit a fresh 24-year low of 144.99 to the dollar, though it has bounced slightly after comments from BoJ officials that signalled they were ready to intervene to provide support.

Oil prices dipped despite the news out of Chengdu as demand fears are fuelled by the growing fear of recession around the world.

– Key figures at around 1100 GMT –

EURO STOXX 50: DOWN 1.1 percent at 3,462.97

Frankfurt – DAX: DOWN 0.7 percent at 12,654.03

Paris – CAC 40: DOWN 1.4 percent at 5,994.24

London – FTSE 100: Closed for queen’s funeral

Hong Kong – Hang Seng Index: DOWN 1.0 percent at 18,565.97 (close)

Shanghai – Composite: DOWN 0.4 percent at 3,115.60 (close)

Tokyo – Nikkei 225: Closed for holiday

New York – Dow: DOWN 0.5 percent at 30,822.42 (close)

Pound/dollar: DOWN at $1.1378 from $1.1423 on Friday

Euro/pound: UP at 87.81 pence from 87.00 pence 

Euro/dollar: DOWN at $0.9991 from $1.0018

Dollar/yen: UP at 143.45 yen from 142.91 yen

West Texas Intermediate: DOWN 1.8 percent at $83.61 per barrel

Brent North Sea crude: DOWN 0.6 percent at $89.91 per barrel

The German central bank said Monday it was increasingly likely that Europe’s largest economy would shrink for a “prolonged” period as Russia throttled energy supplies to the continent.

“The signs of a recession for the German economy are multiplying,” the Bundesbank said in its monthly report, warning of a “broad-based and prolonged decline in economic output”.

The likely slump was above all down to “supply-side constraints”, namely reduced deliveries of energy in the wake of the Russian invasion of Ukraine. 

Moscow has dwindled supplies of gas to Europe and kept the Nord Stream pipeline shut since the end of August, heaping pressure on Germany’s economy.

Germany had been highly reliant on Russian energy imports to power its industry and heat its homes, with 55 percent of its gas coming from Russia before the outbreak of the war.

German GDP grew fractionally by 0.1 percent between April and June, but an increasing number of economic indicators, such as business and consumer confidence, have begun to flash red.

The economy would likely shrink “slightly” in the third quarter of the year, the Bundesbank said, before a “marked” drop over the last three months of 2022 and the beginning of 2023.

The Russian gas supply stop meant that the situation on gas markets was “very tense”, it said. 

Germany could “avoid formal rationing” of the fuel, but necessary reductions in consumption would lead companies to limit or pause production, the central bank predicted.

The impact was unlikely to be as bad as an “adverse scenario” sketched out by the Bundesbank in June, which foresaw the economy shrinking by 3.2 percent in 2023, it said.

“The outlook is however extremely uncertain,” the Bundesbank said.

The reduction in gas supplies has sent prices for the fuel and for electricity rocketing, spurring decades-high inflation rates. 

Consumer prices rose at a 7.9-percent rate in Germany in August, well above the two-percent target of the European Central Bank.

Markets fell Monday as traders extended last week’s rout across risk assets, with expectations high that the Federal Reserve will this week announce another outsized interest rate hike.

With recent data showing US inflation rooted at four-decade highs, investors are increasingly pessimistic about the outlook for the global economy.

Some observers have warned of a sharp recession in many countries caused by the huge rate increases, which are hitting families in the pocket.

And with uncertainty rife owing to a range of issues, including Russia’s war in Ukraine and China’s lockdown-induced slowdown, equities are in danger of revisiting the lows they hit in June.

Several central banks are due to make rate announcements this week, with Japan and Britain among the biggest, although the main event is Wednesday’s Fed decision.

There had been a hope that after two 75-basis-point increases in a row, and economic data showing weakness, officials would take their foot off the pedal this month.

But last Tuesday’s disappointing consumer price figures shocked traders and ramped up bets for a third successive 75-point rise, while some have predicted a whole percentage point move.

Policymakers, including Fed boss Jerome Powell, have repeatedly said their ultimate aim is to bring inflation under control, even if that means sending the economy into recession.

“It is clear that the Fed will project hawkish messaging, once again reiterating that it will bring down inflation unconditionally,” said Vasileios Gkionakis at Citigroup.

Wall Street’s worst week since June ended with more losses after FedEx reported Thursday that it shipped fewer packages than expected over the summer owing to weakness in the global economy.

That came as CEO Raj Subramaniam said he expects a global recession.

Asian equity investors continued the selling on Monday.

Hong Kong closed down one percent, even after reports that the city’s government was considering ending mandatory hotel quarantine for incoming travellers.

Shanghai was also down despite news that megacity Chengdu was ending a two-week Covid-19 lockdown that saw 21 million people affected.

Sydney, Seoul, Singapore, Taipei, Manila and Wellington were also in the red, though Mumbai and Bangkok inched up and Jakarta was flat. Tokyo was closed for a holiday.

Frankfurt and Paris both opened lower. London was closed for the funeral of Queen Elizabeth II.

The prospect of more big Fed rate hikes is also keeping the dollar at multi-decade highs against its major peers, with the yen feeling most of the pressure as the Bank of Japan refuses to tighten policy.

“Speculative selling of the yen is readily justified by the ongoing widening in US-Japan yield differentials,” said Ray Attrill, of National Australia Bank.

“Until or unless something happens to arrest or reverse this spread widening, the yen is susceptible to additional selling pressure.”

The Japanese unit last week hit a fresh 24-year low of 144.99 to the dollar, though it has bounced slightly after comments from BoJ officials that signalled they were ready to intervene to provide support.

Oil prices dipped despite the news out of Chengdu as demand fears are fuelled by the growing fear of recession around the world.

– Key figures at around 0830 GMT –

Hong Kong – Hang Seng Index: DOWN 1.0 percent at 18,565.97 (close)

Shanghai – Composite: DOWN 0.4 percent at 3,115.60 (close)

Tokyo – Nikkei 225: Closed for holiday

Pound/dollar: DOWN at $1.1390 from $1.1423 on Friday

Euro/pound: UP at 87.60 pence from 87.00 pence 

Euro/dollar: DOWN at $0.9979 from $1.0018

Dollar/yen: UP at 143.37 yen from 142.91 yen

West Texas Intermediate: DOWN 1.3 percent at $83.99 per barrel

Brent North Sea crude: DOWN 0.9 percent at $90.60 per barrel

New York – Dow: DOWN 0.5 percent at 30,822.42 (close)

London – FTSE 100: Closed for queen’s funeral