World

Germany and Norway want to start a NATO-led alliance to protect critical underwater infrastructure, their leaders said on Wednesday, weeks after explosions hit two key gas pipelines in the fallout from the war in Ukraine.

“We are in the process of asking the NATO Secretary General to set up a coordination office for the protection of underwater infrastructure,” German Chancellor Olaf Scholz told a press conference in Berlin.

“We take the protection of our critical infrastructure very seriously and nobody should believe that attacks will remain without consequences,” he said.

Norwegian Prime Minister Jonas Gahr Store said the alliance would be “an informal initiative to exchange between civilian and also military actors” with NATO providing “a centre, a coordination point”.

Underwater cables and pipelines were “arteries of the modern economy” and it was necessary to create “a coordinated joint effort to ensure security for this infrastructure”, he said.

NATO Secretary General Jens Stoltenberg, who is in Berlin for a security conference, welcomed the joint proposal later on Wednesday.

“NATO has been working for many years to secure our undersea infrastructure,” he said.

“We have stepped up our efforts after the recent sabotage of the Nord Stream pipelines, and it is vital to do even more to ensure that our offshore infrastructure remains safe from future destructive acts.”

The Nord Stream 1 and 2 gas pipelines off the Danish island of Bornholm were targeted by two huge explosions at the end of September.

The pipelines, which connect Russia to Germany, had been at the centre of geopolitical tensions as Moscow cut gas supplies to Europe in suspected retaliation to Western sanctions over the invasion of Ukraine.

Although they were not in operation when the leaks occurred, they both still contained gas which spewed up through the water and into the atmosphere.

Russia and Western countries, particularly the United States, have traded bitter barbs over who is responsible for the blasts.

Several European countries have since taken steps to increase security around critical infrastructure.

The G7 interior ministers warned earlier this month at a meeting in Germany that the Nord Stream explosions had highlighted “the need to better protect our critical infrastructure”.

Wall Street stocks soared and the dollar fell Wednesday after Federal Reserve Chair Jerome Powell signaled a shift from the central bank’s aggressive policy to counter inflation.

Major US indices, which had been near flat prior to Powell’s appearance, suddenly vaulted higher. 

The gains came after European bourses also advanced on better inflation data in the eurozone.

“This was the unofficial pivot the markets have been waiting for,” Forex.com’s Joe Perry said of Powell’s comments. “As a result of Powell’s dovishness, the US dollar index sold off aggressively.”

Powell, appearing at the Brookings Institution in Washington, said the Fed could ease its stance on interest rate hikes “as soon as” December when policymakers are next scheduled to meet.

He added that the full effects of the bank’s rapid tightening are yet to be felt.

“Thus, it makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down,” he said.

But Powell warned that policy will likely still have to remain tight “for some time” to restore price stability.

The Fed has raised the benchmark lending rate by 0.75 percentage point four consecutive times in recent months, out of six times this year, in an aggressive effort to rein in prices.

Major US indices rallied after the remarks, with the Nasdaq leading the way with a 4.4 percent surge.

The dollar also retreated as markets bet on fewer big rate hikes.

Earlier, Paris and Frankfurt both advanced after eurozone inflation eased to 10 percent in November, the first drop in 17 months, according to official data.

Analysts had expected the inflation rate in the single currency area to fall but the drop was steeper than predicted by Bloomberg and FactSet, who foresaw 10.4 percent. 

But the November figure may not convince the European Central Bank that it can stop raising interest rates, as its president Christine Lagarde has expressed scepticism that inflation has peaked.

As late as Monday, Lagarde warned: “I think that there is too much uncertainty … to assume that inflation has actually reached its peak. It would surprise me.”

The inflation figure was still “extraordinarily high” but offered “hope that inflation may have peaked and the deceleration could be faster than anticipated”, said Craig Erlam, senior market analyst at OANDA.

– ‘Intensifying headwinds’ –

In Asia, stocks mostly rebounded as investors looked past weekend demonstrations in China after officials announced moves aimed at softening the zero-Covid strategy.

But in a sign that the leadership was determined to maintain its authority, the country’s top security body called for a “crackdown” against “hostile forces”.

New clashes broke out in China’s southern city of Guangzhou on Tuesday night and into Wednesday, according to witnesses and social media footage verified by AFP.

Data showing China’s factory activity shrank further in November underscored the impact the zero-Covid approach has had on the world’s second-biggest economy.

“The headwinds facing China are intensifying and the protests of recent days could make it even more challenging to navigate… Even the best-case scenario is one of significant turbulence,” added Erlam.

– Key figures around 2140 GMT –

New York – Dow: UP 2.2 percent at 34,589.77 (close)

New York – S&P 500: UP 3.1 percent at 4,080.11 (close)

New York – Nasdaq: UP 4.4 percent at 11,468.00 (close)

London – FTSE 100: UP 0.8 percent at 7,573.05 (close)

Frankfurt – DAX: UP 0.3 percent at 14,397.04 (close)

Paris – CAC 40: UP 1.0 percent at 6,738.55 (close)

EURO STOXX 50: UP 0.8 percent at 3,964.72 (close)

Tokyo – Nikkei 225: DOWN 0.2 percent at 27,968.99 (close)

Hong Kong – Hang Seng Index: UP 2.2 percent at 18,597.23 (close)

Shanghai – Composite: UP 0.1 percent at 3,151.34 (close)

Euro/dollar: UP at $1.0408 from $1.0330 on Tuesday

Dollar/yen: DOWN at 138.03 yen from 138.63 yen

Pound/dollar: UP at $1.2052 from $1.1952

Euro/pound: DOWN at 86.34 pence from 86.42 pence

Brent North Sea crude: UP 2.9 percent at $85.43 per barrel

West Texas Intermediate: UP 3.0 percent at $80.55 per barrel

The Federal Reserve could ease its pace of interest rate hikes “as soon as” December, chair Jerome Powell said Wednesday, as the US central bank’s campaign to cool prices trickles through the world’s largest economy.

With American households grappling with soaring consumer costs, the Fed has waged an all-out battle to tame inflation that has hit levels not seen since the 1980s — while trying to avoid tipping the United States into a recession.

“The time for moderating the pace of rate increases may come as soon as the December meeting” of Fed policymakers, Powell said in a speech at the Brookings Institution think tank.

He added that the full effects of the bank’s moves are yet to be felt, but also warned that its policy will likely have to remain tight “for some time” to restore price stability.

Monetary policy affects the economy and inflation with “uncertain lags,” he said.

“Thus, it makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down,” he added.

He however stressed that the Fed would “stay the course until the job is done,” noting that history cautions strongly against loosening policy prematurely.

Following Powell’s remarks, US stocks rallied, with the tech-rich Nasdaq Composite Index surging more than three percent.

The central bank has raised the benchmark lending rate by 0.75 percentage points four consecutive times in recent months, out of six rate hikes this year in an aggressive effort to rein in prices.

The latest increase in November took the benchmark lending rate to 3.75-4.0 percent, the highest since January 2008.

– Soft landing ‘plausible’ –

Policymakers aim to put the brakes on spending by making it more costly to borrow, bringing demand more into balance with supply, which has been battered by global logistics problems and Russia’s war in Ukraine.

For now, there are early signs that prices are cooling, but annual consumer inflation remained at 7.7 percent in October, underscoring the heightened cost of living.

Powell said Wednesday that inflation remains “far too high,” and there is still a need to raise interest rates to a “sufficiently restrictive” level.

Despite tighter policy and slower growth in the past year, there is still not “clear progress” on easing inflation, he said.

But amid fears of a downturn, Powell said he continues to “believe that there’s a path to a soft or softish landing,” referring to a scenario where unemployment rises but the country avoids a severe recession.

“I think that’s very plausible,” he said.

In recent days, there has been a growing chorus of voices, including some Fed officials, advocating for smaller steps in coming months.

In separate remarks on Wednesday, Fed Governor Lisa Cook said “it would be prudent to move in smaller steps” going forward as well, as the Fed tries to bring inflation back to its longer-term target of two percent.

“Given the tightening already in the pipeline, I am mindful that monetary policy works with long lags,” she added.

Lawmakers in the US House of Representatives voted Wednesday to prevent a potentially catastrophic freight rail strike, stepping in to break an impasse between workers and executives during a critical pre-holiday period.

The bill effectively forces hold-out unions to accept a September deal on increased wages, which a majority of unions had already agreed to. 

The House measure — which passed with decisive bipartisan support — now moves to the Senate.

Should the bill ultimately clear Congress and reach President Joe Biden’s desk for his signature, it would avert a strike that could have cost the US economy an estimated $2 billion per day.

The Biden administration had taken a hands-on approach to the long-running deadlock over a contract between organized labor and railroads, with cabinet secretaries participating in all-night negotiations in September alongside union leaders and rail executives.

After that marathon session, leaders from the two sides announced a tentative agreement.

Since that time, members of eight of the 12 rail unions approved the deal, while four voted it down.

The agreement includes a 24 percent pay increase for workers. But critics in organized labor have slammed a lack of guaranteed paid sick time, an omission that has been seen as evidence of “unchecked corporate greed,” as one leading union put it.

The failure of the agreement to win universal approval among the unions set the stage for a potential strike on December 9, putting the White House in an awkward spot.

Biden, who has been dubbed “Union Joe” for his affinity for organized labor, called for congressional action on Monday night.

“As a proud pro-labor president, I am reluctant to override the ratification procedures and the views of those who voted against the agreement,” Biden said. 

“But in this case — where the economic impact of a shutdown would hurt millions of other working people and families — I believe Congress must use its powers to adopt this deal.”

Since Monday, at least two of the four unions that voted down the agreement have publicly criticized Biden’s stance.

The Brotherhood of Maintenance of Way Employees, part of the Teamsters, said it was “deeply disappointed” by the president’s action, while the Brotherhood of Railroad Signalmen also expressed disappointment as it encouraged the Biden administration “to stick to its pro-worker roots” and insist that guaranteed paid sick leave be included in the deal.

Both unions backed a separate resolution championed by House Democrat Donald Payne Jr. to add seven days of paid sick leave to the agreement.

Payne, in proposing the measure, described it as “about fairness” in light of the sacrifices made by rail workers and other essential workers during the pandemic.

“Without paid sick time, railroad workers are forced to make a choice between their health, or the health of their families, and their paychecks,” Payne said.

But Republican congressman Sam Graves said the existing agreement was “more than fair for rail workers” as he urged lawmakers to reject adding sick leave to the pact.

Graves said he was voting on the resolution to avert an “economically ruinous” rail strike as he blamed the Biden administration for the issue, saying it had “failed” to lead on the impasse.