FRANKFURT (Reuters) – Europe and the U.S. will both take a growth hit if there is a new trade war and inflation could also rise, increasing pressure on EU leaders to kick start long-delayed economic integration to insulate the bloc, Bundesbank President Joachim Nagel said on Friday.

Nagel joins a long list of policymakers arguing that tariffs proposed by U.S. President-elect Donald Trump are likely to hurt all parties involved, a message that has yet to resonate with the incoming U.S. administration.

“Implementing such tariffs would re-ignite international trade conflicts and further impair our multilateral order,” Nagel said in a speech in Frankfurt.

“Combined with other plans, they might inflict significant GDP losses in the United States and abroad,” Nagel said. “And they would probably lead to rising inflation rates – on both sides of the Atlantic.”

Europe must now come together and subordinate national interests to the common cause, creating an economic framework that protects the European model of prosperity, Nagel argued.

Necessary steps include a true banking union with a joint deposit guarantee scheme and a solution to the “doom loop”, created by the links between sovereigns and banks, Nagel said.

Another necessary step is setting up a true capital markets union, which would channel European savings to firms and regions in the biggest need of capital, Nagel added.

In a recent speech at the European Banking Congress in Frankfurt am Main, Joachim Nagel, President of the Deutsche Bundesbank, emphasized the importance of collaboration between Germany and France for a robust Europe. Alongside his French colleague, François Villeroy de Galhau, Nagel highlighted the necessity of a united Europe to confront current challenges. The central bankers also expressed relief that the era of high inflation has ended, shifting their focus to long-term economic and inflationary impacts.

Nagel recalled the optimism following the end of the Cold War, contrasting it with the current strength of autocratic regimes and the resurgence of military aggression, citing Russia’s attack on Ukraine. He pointed out the vulnerability of liberal values within democracies, noting the European Union’s scapegoating by populists, which hinders further integration.

Addressing Europe’s economic challenges, Nagel mentioned the risks of unilateral trade dependencies revealed by events like the pandemic and geopolitical tensions, advocating for more diversified supply chains. He also brought up the labor scarcity due to demographic changes and the financial demands of the digital and green transitions, which largely depend on private investment. The recent US elections were mentioned as a potential challenge to Europe politically and economically.

Nagel stressed the incomplete fulfillment of the Single Market and financial integration, citing the need to implement proposals from the Letta and Draghi reports. He called for progress on the banking union, including a joint deposit guarantee scheme and addressing the “doom loop” between sovereigns and banks. The capital markets union was also mentioned as an area needing advancement, especially in light of the new EU legislative session and the urgency added by the US election outcomes.

Regarding trade policy, Nagel expressed concern over potential tariffs from the incoming US administration, which could reignite trade conflicts and affect global GDP and inflation rates. He advocated for a prudent European response that upholds a rules-based, multilateral trading system.

In conclusion, Nagel urged for collective action to build a resilient and prosperous Europe, capable of overcoming its multiple challenges through unity and cooperation.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

(This Nov. 19 story has been corrected to fix the description of ILX to ‘development finance specialist,’ not ‘blended finance specialist,’ in paragraph 22)

BAKU (Reuters) – As officials from around the world strive this week to reach a deal on funding for poorer countries to tackle climate change, investment manager Rob Drijkoningen is the sort of person they’re hoping will help get them there.

Drijkoningen is head of emerging market debt at U.S. asset manager Neuberger Berman, which holds $27 billion in sovereign and corporate debt from developing countries. He should be a natural partner for multilateral development banks (MDBs) looking to find private sector investors for projects to slow climate change or cope with its effects.

Boosting private sector investment is, for rich nations, a crucial part of clinching a deal at the COP29 climate talks in Azerbaijan this week on a global commitment for annual funding to fight climate change – dubbed the New Collective Quantified Goal. 

Development banks committed to increase their lending to poorer countries to $120 billion a year by 2030. They also pledged to bring in an additional $65 billion annually in private sector cash to those nations. 

But Drijkoningen, after speaking with the European Investment Bank (EIB) and European Bank for Reconstruction and Development (EBRD) about potential deals this year, decided there were too many hurdles to investment. 

Development banks, he said, are not willing to open their books and share enough information about investments’ risks. Nor do they allow private investors to pick and choose the projects that interest them. For asset managers already facing limited appetite from clients for long-term infrastructure assets in developing nations, those obstacles make investment unappealing. 

“We would need to get a true sense of a level playing field: of getting equal access to information so that we can appropriately assess the merits,” Drijkoningen said. “That’s a cultural issue that I doubt we have come close to changing.”

Cash-strapped Western governments are pinning their hopes on a massive increase in private sector investment to reach the $2 trillion-plus needed annually to help poorer countries move to greener energy and protect against the impacts of extreme weather. 

After a resounding win by climate denier Donald Trump in this month’s U.S. presidential election, worries are rising that the financing gap will steadily widen if Washington – and its dollars – pulls out of the global climate fight.

An ongoing, two-year reform of multilateral institutions like the World Bank – aimed at overhauling the way they lend to make more use of their money – helped drive a 41% increase in the mobilisation of private sector funds to low income countries in 2022 across 27 development banks, a report this year showed. 

The head of the EBRD, Odile Renaud-Basso, told Reuters the bank was working hard to provide more information to the private sector, but there were some limits to what could be made public.

But a Reuters analysis of lending data and interviews with two dozen development banks, climate negotiators, private sector investors and non-profits showed that change at multilateral lenders needs to accelerate significantly if the private sector is to fulfil its hoped-for role.

The analysis of total aggregate lending last year provided by 14 of the world’s top development banks showed that for each dollar invested across all markets just 88 cents of private money was sucked in. 

And that fell to just 0.44 cents of private money to poorer countries. Here, the banks made climate finance commitments of $75 billion and mobilised $33 billion of private investment.

A report by a group of independent experts for the G20 group of industrialised nations last year on how to strengthen multilateral development banks said the target that needed to be hit was $1.5 to $2 for every $1 of lending.  

SLOW PROGRESS

Governments – which bankroll development banks – are pushing them to go reform faster. That should result in a more ambitious funding target in Baku – and help countries to skirt a politically contentious discussion on increasing the banks’ capital.

The EBRD now delivers $3.58 of private money for every $1 it invests across its portfolio, up from $2 dollars three years ago. IDB Invest – the private sector arm of the Inter-American Development Bank (IDB) – has also embarked on an overhaul of its business, helping to increase IDB Group’s mobilised private capital fivefold from 2019 to 2023 to $4.4 billion. 

There are various ways for multilateral lenders to pull in private sector cash. The most established one is parceling up parts of their own loans and selling them to private investors, freeing up money to lend again. These so-called B-loans have been around for more than six decades. 

But Nazmeera Moola, chief sustainability officer at asset management firm Ninety One, said that a raft of issues – including long lead times and returns that were sometimes unattractive – had diminished the appeal of these assets. 

Meanwhile, many large institutional investors, such as pension funds or insurance companies, think of direct investing through corporate or project finance lending in emerging markets as “scary stuff”, she added. 

Harmen van Wijnen, chair of the board of Dutch pension fund ABP, which has invested 1 billion euros in B-loan funds managed by development finance specialist ILX, said that taking the leap into unfamiliar risks – like project finance in emerging markets – would need to be mitigated by guarantees from multilateral lenders. 

Some MDBs are already providing guarantees or structures that help reduce the risks, for example by hedging the risk of a collapse in the local currency. 

At COP29, some banks have flagged new initiatives including a move by the United States to guarantee $1 billion of existing loans to governments by the Asian Development Bank so it can lend a further $4.5 billion to climate-friendly projects.

The EBRD’s Renaud-Basso told Reuters it was also looking to guarantee sovereign lending to free up more money, without providing further details. 

Guarantees aside, the reluctance of some development banks to play the junior partner in project lending, amid pressure to land big deals and maximise their own returns, was leaving them in competition with private sector investors, according to half a dozen sources in the industry.

Gianpiero Nacci, EBRD Director for Sustainable Business and Infrastructure, said that while MDBs were starting to change their culture and structures to make them more focused on attracting private sector investment, it was a “work in progress”.

“We’re increasingly incentivising our banking teams to focus on mobilization,” he said, noting the EBRD is introducing internal targets beyond its own direct investment.   

Given the scale of the climate challenge, some development experts are choosing to go it alone, among them Hubert Danso, chief executive of Africa Investor, a platform that connects private investors with green infrastructure projects on the continent.

“We have an MDB market failure which is incapable of crowding in the private capital required,” he said.

CULTURAL HURDLES

In an August document, the Organisation for Economic Cooperation and Development (OECD), which tracks the climate finance efforts of multilateral institutions, found lack of data was a “major obstacle” to raising private investment to the required levels.  

The previously unpublished report, reviewed by Reuters, said a shortfall in transparent data was leading to private investors mispricing investment risk. 

“For efficiency of markets, data is critical,” said Haje Schutte, a deputy director at the OECD. “There is an ethical and fairness dimension to that: these public sector institutions have a role to beyond their institutional self-interests.”    

Some development banks are worried about sharing their proprietary information and require the OECD to sign non-disclosure agreements, Schutte said. 

Alert to the criticism and following an investor consultation, MDBs have increased the credit risk data shared in a database called GEMs, originally designed to be used for information exchange between the banks themselves.

Since March, some data on recovery rates for public as well as private lending has been made available and, in October, more historic data was offered. But some investors are demanding more granular risk information. 

Erich Cripton, a director at Canadian pension fund CDPQ Global, which has over $300 billion in assets under management, said investors have been pushing for MDBS to publish more data in the GEMS database.

He said the released data reflected the MDBs preferred creditor status meaning that for a private investor, the risk was higher. 

For Nadia Nikolova, lead portfolio manager at Allianz (ETR:ALVG) Global Investor, who has raised over $3.5 billion in development finance and impact credit strategies, the lack of information hampers her ability to raise and invest capital in developing economies.  

“Institutional investors have a fiduciary duty to invest money responsibly,” she said. “If I don’t have that information, I can’t price the risk.” 

Abdullahi Khalif, Somalia’s chief climate negotiator, acknowledged on the sidelines of the COP29 talks that investing there was riskier than in industrialized economies, but added those who did so had opportunities for good returns in areas including renewable energy and irrigation.

“The only private sector that can come is a private sector that is really looking forward to taking the risk.”

ZURICH (Reuters) – The Swiss National Bank will continue to target low inflation as the touchstone of its monetary policy, Chairman Martin Schlegel said on Friday, underlining continuity with predecessor Thomas Jordan who stepped down in September.

Schlegel stressed keeping inflation within a range of 0-2% – which the central bank calls price stability – as a key factor for the Swiss economy’s strong performance in recent years.

After a post-pandemic spike, inflation has returned to the target range over the last 17 months, and fell to its lowest level in more than three years in October.

The downward trend has stoked market expectations of more interest rate cuts by the SNB this year and into 2025 to head off deflationary risks.

“The Swiss economy has performed well by international comparison,” Schlegel told an event in Zurich.

“The SNB has contributed to this performance by maintaining price stability despite significant deflationary and inflationary risks,” he said. “Going forward, the SNB will continue to contribute to favourable economic conditions in Switzerland by ensuring price stability.”

The comments echo Jordan’s consistent messaging on inflation during his 12-year stint in charge.

Schlegel, who began his career at the SNB in 2003 and worked as a researcher for Jordan, was widely seen as the bank’s continuity candidate.

He said the SNB needed a flexible inflation target due to Switzerland being strongly affected by global economic trends. He also noted it has a safe-haven currency, which tended to appreciate during downturns.

Schlegel said the SNB’s main tools were its policy interest rate, as well as currency market interventions.

The SNB’s target range allowed the central bank to respond flexibly to shocks and decide how to act, Schlegel said.

The Eurozone has experienced a downturn in business activity in November, with both the services and manufacturing sectors contracting. The HCOB Flash Eurozone Composite PMI Output Index, which is a measure of the overall health of the economy, fell to 48.1, marking a 10-month low and indicating contraction. This figure was down from October’s reading of 50.0, which signals no change in activity levels. The services sector, which had been expanding, joined manufacturing in contraction, with its PMI Business Activity Index dropping to 49.2 from 51.6 in October, also reaching a 10-month low.

Manufacturing continued to struggle, with the Manufacturing PMI Output Index decreasing to 45.1, a slight decline from 45.8 in October, and the overall Manufacturing PMI falling to 45.2 from 46.0, both reaching a two-month low. The data, collected between November 12 and November 20, reflects the second contraction in three months for the Eurozone.

The decline in output is attributed to diminishing demand, as new orders have decreased for the sixth consecutive month, and at the fastest rate in 2024. This reduction was more pronounced in manufacturing, but the services sector also saw a significant drop in new business. The decline in new business from abroad, including intra-Eurozone trade, was the largest since the end of last year, with new export orders decreasing sharply.

Confidence in the future of the Eurozone economy has also waned, with business sentiment falling to its lowest level since September 2023. The drop in optimism was most notable in the service sector, where it reached a two-year low. In France, pessimism was recorded for the first time in over four years, while German companies showed a slight improvement in confidence compared to October. Nonetheless, the rest of the Eurozone maintained a strong positive outlook for the coming year, despite a slight decrease in optimism.

Employment across the Eurozone was marginally reduced for the fourth month in a row, with a marked decrease in manufacturing jobs, the most significant since August 2020. In contrast, the services sector saw an increase in employment, the fastest in four months. Germany reported a fall in staffing levels, while France and the rest of the Eurozone saw an increase.

Prices in the Eurozone have continued to rise, with input cost inflation accelerating to a three-month high in November, although it remains below the average for the year. Services input prices have surged, counterbalanced by a reduction in manufacturing input costs. Output prices also increased at a faster rate than in October but were still below the average for the year. Germany, France, and the rest of the Eurozone all reported increases in output prices.

Inventories and supply chains were also affected, with manufacturing firms reducing their purchasing activity at the fastest rate in 2024. Stocks of purchases and finished goods were lowered more than in the previous month, and suppliers’ delivery times remained broadly stable.

Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, commented on the situation, noting the challenges faced by the Eurozone’s economy amidst political uncertainties in France and Germany, as well as the impact of the U.S. presidential election. He highlighted the unexpected drop in the services sector and the stagflationary environment, with declining activity and rising prices. De la Rubia also mentioned the possibility of a rate pause by the European Central Bank (ECB) in December, although a 25-basis point rate cut is more likely to be supported by the majority.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

(Reuters) – Inflows into global equity funds slowed in the week ending Nov. 20 due to geopolitical tensions between Russia and the West, with investors also anxious about the U.S. interest rate policy outlook for next year.

According to LSEG data, investors snapped up only net $7.97 billion worth of global equity funds during the week after a robust $49.84 billion worth of net purchases in the prior week.

Hopes for accelerated rate cuts waned, slowing inflows into equity funds as Fed Chair Jerome Powell indicated ongoing U.S. economic growth, robust job market and inflation above the 2% target mean there is no urgent need for the Federal Reserve to lower interest rates.

Investors racked up European and U.S. equity funds of net $4.17 billion and $2.98 billion, respectively, during the week, although it is a substantial reduction from $11.8 billion and $37.42 billion worth of net inflows a week ago.

Asian funds, meanwhile, had $744 million worth of net sales, the second weekly outflow in a row.

The financials and industrials sectors received a notable $1.53 billion and $571 million worth of inflows, respectively. Conversely, investors pulled out a net $550 million from the utilities sector.

Global bond funds attracted inflows for the 48th week in a row, totaling a net $9.61 billion.

Investors pumped a sharp $2.03 billion into loan participation funds, the biggest amount in 2-1/2 years. High yield bond funds also attracted a massive $2.12 billion, while investors ditched government bond funds worth $2.13 billion.

Meanwhile, investors exited $9.31 billion worth of money market funds after aggressive purchases in the previous two weeks.

The gold and precious metals funds attracted investments worth a net $966 million, marking a thirteenth weekly inflow in fifteen weeks.

Data covering 29,675 emerging market funds showed investors offloaded $5.49 billion worth of equity funds after about $5.78 billion worth of net disposals in the prior week. Bond funds also saw a $1.61 billion worth of sales.

(Reuters) – U.S. investors snapped up equity funds for a third successive week through Nov. 20, buoyed by optimism over rising corporate earnings expectations, although the inflows were restrained due to a cautious Federal Reserve rate outlook and geopolitical tensions between Russia and the West.

According to data compiled by LSEG, investors acquired U.S. equity funds of a net $2.98 billion during the week, booking a significantly smaller weekly net purchase compared with about $37.42 billion worth of net additions in the previous week.

Following Donald Trump’s decisive early-November victory and strong U.S. corporate performances, data compiled by LSEG showed analysts have increased their 2025 earnings forecasts for U.S. companies by 1.3% on average in the past two weeks, boosting demand for equity funds.

U.S. sectoral funds secured a net $1.2 billion worth of inflows during the week, the second in a row. The financials, industrials and consumer staples segments received a notable $841 million, $437 million and $364 million, respectively.

Investors added $1.51 billion to U.S. equity value funds after a $1.97 billion net purchase the previous week, while growth funds experienced outflows of $3.65 billion during the same period.

Meanwhile, they channelised a hefty $8.29 billion worth of capital into U.S. bond funds, registering the highest weekly net purchase in five weeks.

The U.S. short-to-intermediate investment-grade funds received an outstanding $4.8 billion, the largest weekly net inflow since February 7th.

General domestic taxable fixed income, loan participation, and municipal debt funds, meanwhile, received weekly inflows at $3.35 billion, $2 billion and $1.29 billion, respectively.

U.S. money market funds, meanwhile, faced $24.6 billion worth of net selling after a net $76.56 billion worth of purchases in the previous week.

By Echo Wang

NEW YORK (Reuters) -Private equity-owned Medline Industries is aiming to raise more than $5 billion in its U.S. initial public offering expected to occur in 2025, people familiar with the matter told Reuters on Thursday.

The stock market flotation could value the medical supplies provider at about $50 billion and come as early as the second quarter, the sources said, cautioning that the company’s plans are subject to market conditions and could change.

Northfield, Illinois-based Medline, which is owned by buyout firms Blackstone (NYSE:BX), Carlyle, and Hellman & Friedman, has invited several investment banks to pitch for lead roles on what is likely to be one of the marquee IPOs next year, the sources said, requesting anonymity as the discussions are confidential.

Medline did not immediately respond to requests for comment. Blackstone, Carlyle, and Hellman & Friedman declined to comment.

The preparations for a stock market flotation come as dozens of other high-profile names are gearing up for potential listings next year, after several bouts of market volatility shut down the IPO market for much of the last two years.

AI cloud platform operator CoreWeave and cybersecurity firm SailPoint are among those pushing ahead with their plans for stock market debuts next year, the sources said.

Medline, which was acquired by its current private equity owners in a deal worth $34 billion in 2021, is one of the largest manufacturers and distributors of medical supplies such as surgical equipment, gloves and laboratory devices used by hospitals around the world.

The company was founded in 1966 by brothers James and Jon Mills and it went public in 1972, before being taken private again by the brothers. Its longtime CEO Charlie Mills, the son of James Mills, retired from Medline last year, with company veteran Jim Boyle replacing him at the helm.

Medline, which employs about 43,000 people worldwide and operates in more than 100 countries, generates annual sales of more than $23 billion, according to its website.

Bloomberg reported on Medline’s IPO preparations in July.

By Stine Jacobsen

COPENHAGEN (Reuters) -Northvolt’s CEO and co-founder Peter Carlsson is stepping down, the Swedish maker of battery cells for electric vehicles said on Friday, one day after the group filed for U.S. Chapter 11 bankruptcy protection.

Northvolt in a matter of months this year went from being Europe’s best shot at a home-grown electric-vehicle battery champion to racing to stay afloat, hobbled by production problems and as funding ran out.

It now needs to raise between $1 billion and $1.2 billion in order to restore its business, Carlsson told reporters.

“The Chapter 11 filing allows a period during which the company can be reorganised, ramp up operations while honouring customer and supplier commitments, and ultimately position itself for the long-term,” the outgoing CEO said.

Carlsson co-founded the company and is a former Tesla (NASDAQ:TSLA) executive.

The lithium-ion battery maker on Thursday said it only had cash to support operations for about a week and that it had secured $100 million in new financing for the bankruptcy process, allowing operations to continue.

Northvolt, which employs around 6,600 staff across seven countries, in its Chapter 11 filing said it expects to complete the restructuring by the first quarter of 2025.

Carlsson will take on a role as senior adviser and remain a member of the board, the company said, adding that the search for a new CEO has started.

In the meantime, the company will be led by Chief Financial Officer Pia Aaltonen-Forsell and its president of battery cells, Matthias Arleth, who takes up a new role as chief operations officer.

On Monday, Reuters reported that Northvolt had missed some in-house targets and curtailed production at its battery-cell plant in northern Sweden, underscoring the challenge of ramping up output.

Northvolt on Thursday said it is conducting a search for one or more partners to finance its restructuring and return the company to long-term sustainability, including the completion of major battery plants in Germany and Canada.

“Any and all interested parties, regardless of their desired transaction type, are encouraged to contact Rothschild as soon as possible and submit proposals by early December,” Northvolt said in its Chapter 11 filing at a Texas court.

Failing this, Northvolt said it has also engaged financial services company Hilco Global to assist with “an orderly liquidation process if necessary”.

While the path forward remains uncertain, the company stands ready to engage with all interested parties, it said in the Chapter 11 filing document.

“Northvolt trusts that it can build on its billions of dollars of investment and groundbreaking facilities and technology to achieve a value-maximising recapitalisation or sale in Chapter 11,” it said.

By William Schomberg

LONDON (Reuters) – British business output shrank for the first time in more than a year and tax increases in the new government’s first budget hit hiring and investment plans, a survey showed, a fresh setback for Prime Minister Keir Starmer’s push for economic growth.

The preliminary S&P Global Flash Composite Purchasing Managers’ Index, published on Friday, fell to 49.9 in November – below the 50.0 no-change level for the first time in 13 months – from 51.8 in October.

“The first survey on the health of the economy after the budget makes for gloomy reading,” said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.

Employers cut staffing levels for a second month in a row – with manufacturers reducing headcount at the fastest pace since February – as they turned more pessimistic about the outlook.

The survey’s measure of overall new business was the weakest since last November.

A weaker outlook for the global economy weighed on companies with the automotive sector in a slump. But the first moves of Britain’s Labour government were also a cause for concern.

“Companies are giving a clear ‘thumbs down’ to the policies announced in the budget, especially the planned increase in employers’ National Insurance Contributions,” Williamson said.

Finance minister Rachel Reeves raised the rate of social security contributions paid by employers and lowered the threshold at which companies must pay them as she sought to raise more money to fund public services.

Many employers have said the budget changes fly in the face of the pledge by Reeves and Starmer to turn Britain into the fastest-growing Group of Seven economy.

Momentum was already weak with gross domestic product edging up by only 0.1% in the July-to-September period, according to official data published last week.

Figures on Thursday showed government borrowing shot past forecasts in October, underscoring how reliant Reeves is likely to be on an improvement in economic growth to generate the tax revenues needed to fund more spending on public services.

Friday’s survey found firms were not replacing departing staff as they braced for April’s rise in payroll costs.

Williamson said the survey suggested the economy was contracting at a quarterly 0.1% pace but the hit to confidence hinted at worse to come, including further job losses.

Selling prices rose at the slowest rate since the coronavirus pandemic but high rates of growth in input prices and costs related to wages were hurting the service sector.

That could worry some interest rate-setters at the Bank of England which is watching prices in the service sector closely.

Inflation also jumped by more than expected last month, showing why the central bank is moving cautiously on interest rate cuts.

The business activity index for the dominant services sector fell to a 13-month low of 50.0 from 52.0 in October. The manufacturing index slid to 48.6, its lowest in nine months, from 49.9 in October.