Another coronavirus outbreak in China. In Germany, inflation is at 50-year highs

Inflation in Germany in August rose to 7.9% in annual terms, returning to the historical maximum recorded in May, which is the highest level in almost 50 years. Judging by the regional components of inflation, the biggest contributors to the rise in consumer prices come from rising gas and electricity prices, food prices, and higher prices for vacation tours. For the ECB, an increase in overall inflation in Germany will further fuel an internal debate about a more aggressive interest rate hike at the next meeting.

Carrefour’s CEO said French consumers are abandoning fish, buying cheaper meat, and rejecting organic products to save money on purchases. All the fault of high inflation, forcing consumers to save on food. Inflation has risen to record levels in major economies over the past year because of tight supply chains after COVID-19 and, more recently, soaring energy prices after Russia invaded Ukraine in February. France has shifted the cost of high inflation off consumers more aggressively than other eurozone countries, curbing gas and electricity prices and boosting revenues by raising wages for civil servants and pensioners, as well as through subsidies for the poor.

In Switzerland, the KOF economic barometer fell by 4.0 points in August and now stands at 86.5. This is well below the long-term average. Accordingly, the outlook for the Swiss economy in the near future seems less encouraging. The decline is primarily due to personal consumption, but negative signals come from the manufacturing and construction sectors.

Germany proposes to suspend the visa facilitation agreement with Russia. The Netherlands favors a complete ban on tourist visas for Russians.

Iran and the United States have reached an agreement on a nuclear deal, and it will be officially announced in the next two to three weeks, a former IAEA official told Iran International. The details of the agreement, as well as the IAEA official’s identity, are unknown, but the news triggered a wave of sales in the oil market. Oil fell by $6 yesterday. Analysts believe that with inflation approaching double-digit territory in many of the world’s biggest economies, that could prompt the US and European central banks to resort to more aggressive interest rate hikes, which could slow economic growth and affect fuel demand. Last week, Saudi Arabia raised the possibility of OPEC+ production cuts, which sources said could coincide with a resumption of supply from Iran if it closes a nuclear deal with the West. With most producers already operating at or above full capacity and signs that the global economy may be slowing, some supply cuts are becoming more likely in the coming months.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) gained 1.14%, Hong Kong’s Hang Seng (HK50) ended the day down by 0.37%, and Australia’s S&P/ASX 200 (AU200) closed at plus by 0.47%.

The Taiwanese military fired warning shots at a Chinese drone that flew over an island controlled by Taiwan. The situation in the region remains tense.

On Tuesday, August 30, several major Chinese cities tightened restrictions due to a new outbreak of COVID-19. Authorities have redoubled efforts to contain the coronavirus ahead of a key meeting of the ruling Communist Party this year. Nearly 4 million people in Hebei province, which surrounds Beijing, have been ordered to stay home for the rest of the week.