Europe less at risk of inflation and rate fears: analysts

Europe less at risk of inflation and rate fears: analysts
The European Commission’s recovery program is worth 750 billion euros ($920 billion), with several EU members also having their own national programs. (File/AFP)
Short Url
Updated 28 February 2021

Europe less at risk of inflation and rate fears: analysts

Europe less at risk of inflation and rate fears: analysts
  • Fears that US President Biden’s $1.9 trillion stimulus plan will stoke up the economy too much have unnerved investors in recent weeks

PARIS: Investors are watching inflation carefully, worried that a boiling over of prices will ruin the expected strong pandemic recovery although analysts believe Europe faces much less of a risk than the United States.
Fears that US President Biden’s $1.9 trillion stimulus plan — which was passed by the House of Representatives on Saturday — will stoke up the economy too much have unnerved investors in recent weeks.
A rise in yields on 10-year US Treasury bonds — a key indicator of expectations — shows the markets believe prices are set to rise much more sharply than last year’s gain of 1.4 percent, which could force the US Federal Reserve to hike interest rates earlier than it says it plans to do.
Bond yields have risen elsewhere too, with 10-year French government bonds turning positive on Thursday for the first time in months while the benchmark 10-year German Bund has also risen although it remains negative.
European inflation data for January showed a jump in prices of 0.9 percent compared to a minus 0.3 percent reading in December, as increased costs of raw materials fed through into services and industrial goods.
After having slowed considerably in 2020, inflation is expected to rise this year in Europe as the economy picks up following the relaxation of measures to slow the spread of the Covid-19 pandemic.
But it is not so much a spike in inflation that worries investors but that the Fed would raise interest rates faster than it has communicated.
Federal Reserve Chairman Jerome Powell pledged Tuesday that the US central bank will keep benchmark lending rates low until the economy is at full employment and inflation has risen consistently above its 2.0 percent target.
But bond yields continued to rise, indicating investor concern about a rise in interest rates that would make borrowing and investment more expensive and slow the economy.
However, many analysts are skeptical that Biden’s stimulus program will spark considerable inflation.
“It isn’t clear that Biden’s recovery plan will create lots of inflation,” said Xavier Ragot, head of the French Economic Observatory think tank.
For the European Union, there is no likelihood that its pandemic recovery program would, he believes.
“The amounts of the European recovery plans pose absolutely no inflationary risk,” he said.

The European Commission’s recovery program is worth 750 billion euros ($920 billion), with several EU members also having their own national programs.
“We have a European recovery program... considerably less strong, and a loss of growth that is much greater, so there aren’t the same risks of overheating as in the United States,” said Fabien Tripier, an economist at CEPII, a Paris-based research center on the world economy.
The US economy shrank 3.5 percent last year while the drop for the eurozone was nearly double that.
There is “no risk of overheating or a sustained rise in inflation” in the eurozone, the head of the Banque de France, Francois Villeroy de Galhau, insisted this past week.
The French Economic Observatory’s Ragot also does not believe that if the Fed is pushed by the markets into raising rates that the European Central Bank would be forced to follow suit.
“It doesn’t work like that in macroeconomics,” he said, noting that the monetary policy of the Fed and ECB had diverged considerably at the start of the last decade.
“With loose financial conditions still necessary to support the economy, the ECB is unlikely to react to the coming inflation overshoot,” said Capital Economics economist Jack Allen-Reynolds.
Francois Villeroy de Galhau, who as head of the Banque de France also sits on the ECB’s Governing Council, said the central bank wants to “maintain favorable financing conditions.”
For Fabien Tripier, the ECB needs to send “a strong signal” to the markets against the idea that “just because inflation hits 1.5 percent or 2.2 percent, speculation it will hike rates should begin.”
The ECB issued a reassuring message on Friday as executive board member Isabel Schnabel said it could broaden its support for the economy in case of a sharp rise in interest rates.


Emirates NBD, Etihad Credit Insurance ink deal to ease trade finance access for UAE businesses

Emirates NBD, Etihad Credit Insurance ink deal to ease trade finance access for UAE businesses
Updated 15 min 21 sec ago

Emirates NBD, Etihad Credit Insurance ink deal to ease trade finance access for UAE businesses

Emirates NBD, Etihad Credit Insurance ink deal to ease trade finance access for UAE businesses
  • The deal will help the UAE lender to reduce any risks that may be associated with credit facilities

DUBAI: UAE export credit company, Etihad Credit Insurance (ECI), has signed an agreement with Emirates NBD to improve liquidity of UAE exporters by easing their access to credit facilities.
The deal will help the UAE lender to reduce any risks that may be associated with credit facilities, so businesses can pursue export and expansion opportunities, according to a joint statement.
More than 80 per cent of world trade relies on trade finance, ECI’s chief Massimo Falcioni said, and the agreement will allow Emirates NBD to offer innovative financial solutions to their clients.
Governments in the Gulf have been investing in strengthening local businesses as a strategy to recover from the COVID-19 pandemic, and to gradually veer away from oil-dependence.


Italian fashion brand Diesel launches online shopping platform in KSA, UAE

Italian fashion brand Diesel launches online shopping platform in KSA, UAE
Updated 19 min 33 sec ago

Italian fashion brand Diesel launches online shopping platform in KSA, UAE

Italian fashion brand Diesel launches online shopping platform in KSA, UAE
  • The website will feature new collections of the fashion line, as well as exclusive deals for online shoppers

DUBAI: Italian fashion retailer Diesel has launched its own e-commerce platform for customers in Saudi Arabia and the UAE, the company said on Sunday.
The website will feature new collections of the fashion line, as well as exclusive deals for online shoppers. It will also offer free shipping for customers in both countries.
Diesel has been in the market for four decades and is known for its denim and casual fashion offerings.
The COVID-19 pandemic has created huge demand for online shopping in the Gulf, with many retailers accelerating their digital efforts to take advantage of it


Kuwaiti coffee delivery app raises $10m in new funding

Kuwaiti coffee delivery app raises $10m in new funding
Updated 17 min 36 sec ago

Kuwaiti coffee delivery app raises $10m in new funding

Kuwaiti coffee delivery app raises $10m in new funding
  • The funding was provided by Kuwaiti listed investment house Al Imtiaz Investment Group
  • COFE was conceived in 2017 by Kuwait-based founder Ali Al-Ebrahim, developed in Silicon Valley and launched in 2018

DUBAI: Kuwaiti coffee delivery app COFE has raised $10 million in new funding, which it aims to use to scale up its operations in Kuwait, Saudi Arabia, the UAE and the UK and to expand into Egypt and Turkey.
The funding was provided by Kuwaiti listed investment house Al Imtiaz Investment Group. COFE was conceived in 2017 by Kuwait-based founder Ali Al-Ebrahim, developed in Silicon Valley and launched in 2018.
“From its early days, COFE has shown tremendous potential as a unique offering that caters to discerning coffee connoisseurs and their consumption habits, while helping to grow and transform revenue streams for vendors. Our partners have recognized this and are confident in our ability to serve existing customers and vendors, while expanding into new markets,” Al-Ebrahim said in a press statement.
Zev Siegl, a co-founder of international coffee chain Starbucks, is also an adviser to COFE. “I am happy to collaborate with the COFE App team and proud of the success and development they’ve achieved,” Siegl told the Mubasher website in April 2019. “During my stay in Kuwait, I visited more than 20 coffee shops and I was impressed by the high level of service, innovation and the high demand on coffee shops which ensure that the COFE app market will keep on growing and will reach the international market very soon.”


Israel and Greece sign record defense deal

Israel and Greece sign record defense deal
Updated 18 April 2021

Israel and Greece sign record defense deal

Israel and Greece sign record defense deal
  • The agreement includes a $1.65 billion contract for the establishment and operation of a training center for the Hellenic Air Force

JERUSALEM: Israel and Greece have signed their biggest ever defense procurement deal, which Israel said on Sunday would strengthen political and economic ties between the countries.
The agreement includes a $1.65 billion contract for the establishment and operation of a training center for the Hellenic Air Force by Israeli defense contractor Elbit Systems over a 22-year period, Israel’s defense ministry said.
The training center will be modeled on Israel’s own flight academy and will be equipped with 10 M-346 training aircraft produced by Italian company Leonardo, the ministry said.
Elbit will supply kits to upgrade and operate Greece’s T-6 aircraft and also provide training, simulators and logistical support.
“I am certain that (this program) will upgrade the capabilities and strengthen the economies of Israel and Greece and thus the partnership between our two countries will deepen on the defense, economic and political levels,” said Israeli defense minister Benny Gantz.
The announcement follows a meeting in Cyprus on Friday between the UAE, Greek, Cypriot and Israeli foreign ministers, who agreed to deepen cooperation between their countries.


Dubai Islamic Bank sees no impact from NMC law suit

Dubai Islamic Bank sees no impact from NMC law suit
Updated 18 April 2021

Dubai Islamic Bank sees no impact from NMC law suit

Dubai Islamic Bank sees no impact from NMC law suit
  • Last week it emerged that NMC was suing a Dubai bank in the Abu Dhabi courts in a dispute that could complicate the company’s multi-billion-dollar debt restructuring

DUBAI: Dubai Islamic Bank (DIB) said on Sunday it does not expect any “negative impact” from a case against it brought by the administrators of hospital operator NMC Group.
It made the disclosure in a letter to the Dubai Financial Market posted on the website of the bourse.
Last week it emerged that NMC was suing a Dubai bank in the Abu Dhabi courts in a dispute that could complicate the company’s multi-billion-dollar debt restructuring and potentially delay payouts to creditors, Reuters reported.
It was the latest twist in the tale of the UAE ‘s biggest hospital group which last year disclosed more than $4 billion in hidden debt. Its UAE operations were placed into administration and creditor claims are understood to now exceed $6.4 billion.
“It is a matter of public record that an application has been filed by the administrators of the NMC Group in the Abu Dhabi Global Markets Court, in which Dubai Islamic Bank and 12 insurance companies and third party service providers are respondents,” DIB CEO Hassan Al-Serkal said in the statement to the Dubai financial Market, where it’s shares are listed. “DIB does not anticipate any material negative impact arising from this application. As this is an ongoing legal matter, we can comment further at this time.”