US Business

Italy posted better-than-expected quarterly growth on Monday, a surprise bump for new Prime Minister Giorgia Meloni that staves off — for now — an expected recession in Europe’s third-largest economy.

In its third quarter, gross domestic product (GDP) grew by 0.5 percent over the second quarter, compared to the slight decline that had been anticipated by the previous government of Mario Draghi. 

That rise — according to preliminary estimates by national statistics institute Istat — outpaced the Eurozone average of a rise of 0.2 percent and the 0.3 percent Germany published Friday.

Nicola Nobile of Oxford Economics told AFP it was due to a surge in “household consumption, especially in services such as tourism”.

“But like other countries in the eurozone, Italy should enter a recession this winter in a context of rising interest rates and inflation,” he said. 

Regardless, the quarterly surprise comes at the right time for Meloni, leader of the post-fascist Brothers of Italy party, whose first budget is due before the European Commission by the end of November.

– Balancing act –

On her first visit to Brussels on Thursday, where she will be received by European Commission President Ursula von der Leyen, Meloni is expected to pledge her willingness to curb deficits while maintaining the costly election promises of her right-wing coalition. 

Hailing as she does from a historically Eurosceptic party, her election has been closely watched elsewhere in Europe.

The balancing act for Italy — the first beneficiary of the EU’s post-Covid stimulus package — comes against a global backdrop of rising interest rates, record inflation, the energy crisis and the war in Ukraine. 

During the election campaign, she pledged not to swell the budget of a country long plagued by low growth and huge debt.

Still, while the Draghi government forecast a public deficit of 3.4 percent of GDP next year, Giorgia Meloni plans to raise the bar.

According to the Italian press, she is aiming for a deficit of 4.5 percent, or an additional 21 billion euros ($21 billion) to be financed by debt. 

A large part of the budget will be devoted to measures aimed at mitigating soaring energy prices for businesses and households, the new government’s top priority.

– In small doses – 

At the helm is Economy Minister Giancarlo Giorgetti, who served as economic development minister under Draghi and is considered a moderate within Matteo Salvini’s far-right League. 

The coalition’s flagship measure — extending a 15 percent flat tax for the self-employed to those with annual incomes of 100,000 euros, instead of the current 65,000 euros — could be limited at first and then extended to other incomes.  

Funds must also be made available to lower the retirement age, which, in the absence of new measures, would automatically rise from 64 to 67 in 2023, as provided for in a 2011 reform.

Salvini has proposed recovering one billion euros with a six-month hiatus in Italy’s controversial basic income — a minimum payment which goes to Italy’s hardest up, including the unemployed, those who cannot work because of disabilities or retirees who live under a basic income level.

Salvini’s contentious proposal to save cash is to cut the income for six months to an estimated 900,000 beneficiaries who are capable of working but currently not.

But the last word will go to Giorgia Meloni.  

The challenge for the premier will be “to ensure the support of the League, while neutralising in part its leader” Salvini, who could undermine the “serious image” Meloni wants to put forward, said Credit Agricole analyst Sofia Tozy. 

Attorneys in the saga over Elon Musk’s Twitter takeover have asked a Delaware court to dismiss the litigation following the deal’s closure, according to court documents released Monday.

“Yesterday evening, Defendants and Twitter closed the transaction contemplated by the merger agreement dated April 25, 2022,” said the October 28 letter from Musk’s attorney in the case to Judge Kathaleen McCormick.

“In light of this development, Defendants and Twitter have agreed to dismiss their claims and counterclaims as set forth in the stipulation and proposed order of dismissal submitted with this letter.”

Twitter sued Musk in the Delaware court in July after the unpredictable billionaire tried to walk away from the April deal to acquire the social media company for $44 billion.

But with an October trial date looming, Musk revived the deal in early October, ultimately sealing the takeover last week.

After taking over, Musk immediately dismissed senior Twitter leaders and said he would appoint a “content moderation council.”

Shanghai Disney Resort abruptly shut its doors Monday as Chinese authorities imposed a snap lockdown, trapping guests who are not permitted to leave until they test negative for Covid-19.

China is the last major economy wedded to a zero-Covid policy, with authorities brandishing snap lockdowns, mass testing and lengthy quarantines in an effort to stamp out emerging outbreaks.

But new variants have tested local officials’ ability to snuff out flare-ups faster than they can spread, causing much of the country to live under an ever-changing mosaic of Covid curbs.

Visitors to Shanghai Disney Resort are not allowed to leave “until on-site testing returns a negative result”, the city government said in an online notice on Monday.

It added that those who had visited the park since Thursday must obtain three negative Covid tests over three successive days and “avoid participating in group activities”.

The announcement came after Disney said it was “temporarily closing with immediate effect… in accordance with disease control requirements”.

The sprawling 390-hectare (960 acres) theme park and resort includes Shanghai Disneyland, Disneytown and Wishing Star Park. The resort had previously said that it was operating at reduced capacity due to Covid restrictions.

“We will notify guests as soon as we have a confirmed date to resume operations,” Disney said. 

China reported 2,699 local Covid infections on Monday, including 10 asymptomatic cases in Shanghai, according to the National Health Commission.

The eastern megacity — a major hub for the world’s second-largest economy — seethed under a months-long lockdown earlier this year marked by sporadic food shortages and isolated protests.

World stocks mostly rose Monday before a key Federal Reserve policy meeting later in the week, with investors hoping for a less hawkish tilt in plans for interest rate hikes. 

Frankfurt and London equities climbed, but Paris slipped on news of record high eurozone inflation and slowing economic growth.

Investors were nevertheless soothed by reports that the Fed could take its foot off the accelerator in its push to rein in decades-high inflation.

It is expected to announce a fourth successive 75 basis point hike on Wednesday, but it could hint that officials are open to dialling back the pace of increases.

The US slipped into the red on Monday morning, after Wall Street enjoyed strong gains before the weekend thanks to a rally in tech firms after strong earnings from Apple.

“The Fed decision is high priority — and the likelihood of a less hawkish Fed is increasing, which could benefit riskier assets” like equities, said XTM Market analyst Walid Koudmani.

The US gathering comes as other central banks recently indicated they are willing to ease up, with Canada raising rates less than expected last week.

The Bank of England is however expected to deliver another hefty rate hike on Thursday.

– Better earnings than expected –

Concerns that rapidly rising borrowing costs will send economies into a recession have hammered markets globally this year.

Yet a better-than-expected earnings season has provided recent support.

More multinationals are due to report this week as the financial reporting season rolls on, including pharmaceutical giants Moderna and Pfizer, technology behemoth Sony, and car brands BMW, Toyota and Ferrari.

But investors remain on edge over red-hot inflation, as analysts warned a recession in the Eurozone appeared to be on its way.

Economic growth in the bloc fell to 0.2 percent in the third quarter, as inflation hit another record high on the back of soaring energy prices, the EU’s statistics agency said Monday.

“It is a matter of how deep the recession will be and not if there will be one,” Oxford Economics said in an analyst note.

Consumer prices jumped by a fresh record of 10.7 percent in October, stoked by an eye-watering 41.9 percent rise in energy costs, Eurostat said.

The news came after the European Central Bank warned last week that a recession was looming, as it announced another jumbo interest rate hike to try to curb inflation driven up by the fallout from energy producer Russia’s war on Ukraine.

“Double-digit inflation and decade-high interest rates do not bode well for eurozone growth during the rest of this year and into 2023,” noted economist Benjamin Trevis at think-tank CEBR.

– ‘Salt to the wounds’ –

Asia mainly advanced, although Hong Kong and Shanghai sank on concerns over the economic impact of Chinese Covid restrictions.

Beijing reported a contraction in factory activity Monday as sweeping pandemic restrictions paralysed major industrial cities.

That also weighed heavily on oil because China is a major global consumer.

“Although these data points are weaker than expected, it should be no surprise given those broad-based Covid-related restrictions that remained in place during the party congress,” said Stephen Innes, managing partner at SPI Asset Management.

“Negative news from the real estate sector is adding salt to the economic wounds.”

– Key figures around 1330 GMT –

London – FTSE 100: UP 0.5 percent at 7,084.52 points

Frankfurt – DAX: UP 0.19 percent at 13,271.77

Paris – CAC 40: DOWN 0.1 percent at 6,267.68

EURO STOXX 50: UP 0.2 percent at 3,619.19

New York – Dow: DOWN 0.3 percent at 32,749.75

Tokyo – Nikkei 225: UP 1.8 percent at 27,587.46 (close)

Hong Kong – Hang Seng Index: DOWN 1.2 percent at 14,687.02 (close)

Shanghai – Composite: DOWN 0.8 percent at 2,893.48 (close)

Euro/dollar: DOWN at $0.9906 from $0.9965 on Friday

Pound/dollar: DOWN at $1.1498 from $1.1615 

Dollar/yen: UP at 148.72 yen from 147.60 yen

Euro/pound: UP at 86.15 pence from 85.80 pence

West Texas Intermediate: DOWN 1.3 percent at $87.90 per barrel

Brent North Sea crude: DOWN 0.4 percent at $96.31 per barrel

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Inflation in crisis-hit Sri Lanka dipped marginally for the first time in 12 months but prices were still an eye-watering 66 percent higher than a year ago, official data showed Monday.

The island nation of 22 million people has suffered months of extreme economic hardship with severe shortages of essentials including food, fuel and medicines.

The Department of Census and Statistics data showed October inflation was nearly four percentage points lower than the record 69.8 percent in September.

Food inflation which had also reached a record high for the 12th consecutive month in September at 94.9 percent moderated to 85.6 percent in October.

The department did not give reasons for the slowdown in inflation, but authorities had reduced fuel prices twice in October, cutting prices by 20 percent.

However, the price of petrol is still double the amount before the start of the crisis late last year, while diesel — used commonly for public transport — is still three and a half times more.

Sharp price increases for both food and fuel has led to a drop in demand and queues for petrol and diesel and cooking gas have sharply reduced in recent weeks.

The World Bank has warned that the economy could shrink by 9.2 percent this year, worse than the 8.7 percent contraction the central bank of Sri Lanka had forecasted.

An unprecedented downturn forced the government to default on its $51 billion foreign debt in April and go to the International Monetary Fund (IMF) for a bailout. 

Blackouts, chronic fuel shortages and high prices triggered months of political unrest, ultimately forcing the president Gotabaya Rajapaksa to flee the country and resign in July. 

The IMF has tentatively approved a four-year, $2.9 billion bailout to help Sri Lanka reorganise its finances, subject to an agreement with its creditors.

It had also asked the government to contain spiralling inflation and address corruption as part of efforts to salvage the troubled economy.

World stocks mostly rose Monday before a key Federal Reserve policy meeting later in the week, with investors hoping for a less hawkish tilt in plans for interest rate hikes. 

Frankfurt and London equities climbed, but Paris slipped on news of record high eurozone inflation and slowing economic growth.

Asia mainly advanced, although Hong Kong and Shanghai sank on concerns over the economic impact of Chinese Covid restrictions.

That also weighed heavily on oil because China is a major global consumer.

– ‘High priority’ –

Investors were nevertheless soothed by reports that the Fed could take its foot off the accelerator in its push to rein in decades-high inflation.

“The Fed decision is high priority — and the likelihood of a less hawkish Fed is increasing, which could benefit riskier assets” like equities, said XTM Market analyst Walid Koudmani.

“Furthermore, Friday’s non-farm payrolls report is also going to be quite important as it will precede next week’s mid-term US election and set the tone.”

The Fed is expected to announce a fourth successive 75 basis point hike on Wednesday, but it could hint that officials are open to dialling back the pace of increases.

The gathering comes as other central banks recently indicated they are willing to ease up, with Canada raising rates less than expected last week.

The Bank of England is however expected to deliver another hefty rate hike on Thursday.

Concerns that rapidly rising borrowing costs will send economies into a recession have hammered markets globally this year.

Yet a better-than-expected earnings season has provided recent support, but investors remain on edge over red-hot inflation.

Eurozone economic growth fell to 0.2 percent in the third quarter, as inflation hit another record high on the back of soaring energy prices, the EU’s statistics agency said Monday.

Consumer prices jumped by a fresh record of 10.7 percent in October, stoked by an eye-watering 41.9 percent rise in energy costs, Eurostat said.

The news came after the European Central Bank warned last week that a recession was looming, as it announced another jumbo interest rate hike to try to curb inflation driven up by the fallout from energy producer Russia’s war on Ukraine.

“Double-digit inflation and decade-high interest rates do not bode well for eurozone growth during the rest of this year and into 2023,” noted economist Benjamin Trevis at think-tank CEBR.

Wall Street meanwhile enjoyed strong gains before the weekend, thanks to a rally in tech firms after strong earnings from Apple.

– Key figures around 1130 GMT –

London – FTSE 100: UP 0.1 percent at 7,057.08 points

Frankfurt – DAX: UP 0.2 percent at 13,266.49

Paris – CAC 40: DOWN 0.2 percent at 6,263.60

EURO STOXX 50: UP 0.1 percent at 3,616.77

Tokyo – Nikkei 225: UP 1.8 percent at 27,587.46 (close)

Hong Kong – Hang Seng Index: DOWN 1.2 percent at 14,687.02 (close)

Shanghai – Composite: DOWN 0.8 percent at 2,893.48 (close)

New York – Dow: UP 2.6 percent at 32,861.80 (close)

Euro/dollar: DOWN at $0.9935 from $0.9965 on Friday

Pound/dollar: DOWN at $1.1547 from $1.1615 

Dollar/yen: UP at 148.46 yen from 147.60 yen

Euro/pound: UP at 86.04 pence from 85.80 pence

West Texas Intermediate: DOWN 1.6 percent at $86.49 per barrel

Brent North Sea crude: DOWN 1.5 percent at $94.35 per barrel

The war raging in Ukraine and other overlapping crises are taking a toll on labour markets worldwide, the UN said Monday, suggesting a “sharp” slowdown was already underway.

In a fresh report, the International Labour Organization cautioned that the outlook for global labour markets has deteriorated in recent months.

“The ILO projects that if current trends continue, global employment growth will deteriorate significantly in the last three months of this current year 2022, and unemployment might start increasing,” agency chief Gilbert Houngbo told reporters.

The UN agency warned that multiple, overlapping crises, compounded by Russia’s war in Ukraine, were piling up with the world still in the grips of the Covid-19 pandemic.

Amid deepening energy and food security crises, swelling inflation, tightening monetary policy and fears of a looming global recession, it said both employment creation and the quality of jobs were declining.

“While it normally takes time for an economic slowdown or a recession to result in job destruction and unemployment, available data suggests that a sharp labour market slowdown is already underway,” the report said.

– 40 million jobs missing –

At the beginning of this year, as the world began recovering from the height of the pandemic, employment-to-population ratios returned to or even exceeded pre-Covid-crisis levels in most advanced economies.

ILO said this uptick was especially apparent in high-skilled occupations — but cautioned that it was also driven by a surge in informal jobs, where social protections are generally lacking.

The situation has worsened in recent months, ILO said, estimating that overall hours worked was 1.5 percent below pre-pandemic levels in the third quarter.

That amounts to a deficit of 40 million full-time jobs.

As the number of jobs available is shrinking, surging inflation is causing real wages to fall in many countries, as many households are still grappling with pandemic-induced income declines, it said.

– Ukraine employment plunges –

Monday’s report highlighted in particular the dire employment situation in Ukraine itself since Russia invaded in February.

Houngbo said the war had caused “a dramatic effect on Ukraine’s own labour market.”

Inflation in the conflict-torn country is expected to top 30 percent by the end of the year, while ILO estimated employment there would be 15.5 percent below the 2021 level.

That means 2.4 million jobs lost since the start of the war — half the number predicted by ILO in April, when the number of areas in Ukraine under occupation or facing active hostilities was higher.

But the UN agency cautioned the “partial labour market recovery is modest and highly fragile.”

It highlighted the large number of internally displaced people looking for jobs.

“This risks pushing wages down in these areas,” Houngbo said.

The report also estimated that 10.4 percent of Ukraine’s pre-war workforce — some 1.6 million people, mostly women — had fled to other countries.

A recent survey found around a quarter of Ukrainian refugees had found waged work or self-employment in their host countries, ILO said.

– ‘Deeply worrying’ –

Monday’s report called for in-depth social dialogue to create the policies needed to counter labour market downturns.

It also warned that excessive policy tightening could cause “undue damage to jobs and incomes in both advanced and developing countries.”

There is a “need to ensure that the monetary tightening to combat inflation … is really dovetailed with social measures, dovetailed with minimum social protection,” Houngbo said, describing the global employment situation as “deeply worrying”.

“Preventing a significant global labour market downturn, will require comprehensive, integrated and balanced policies both nationally and globally.”