“Bank of England slows Bond Buying…”

The Bank of England (BOE) slowed the pace of its trillion Dollar stimulus program and is expecting a faster recovery but still stressed about tightening the monetary policy. Governor Andrew Bailey said that it was good news that the economy looked set for a stronger recovery than previously forecasted with less unemployment. However, he stressed that there would still be a big shortfall against the economy’s pre-pandemic path.  The Central Bank said it would reduce the amount of bonds it buys each week to 3.4 billion Pounds down from the current pace of 4.4 billion Pounds a week. The BOE said that “the expected completion point of the purchase programme remained unchanged.  This operational decision should not be interpreted as a change in the stance of the monetary policy.  The Central Bank kept its benchmark interest rate at an all time low of 0.1%. 

Europe’s Business Growth

A survey on Wednesday showed that the Eurozone business activity accelerated last month as the services industry returned to growth.  It also showed firms were facing soaring costs for raw materials.  IHS Markit’s final composite Purchasing Managers’ Index, is seen as a good gauge of economic health, climbed to 53.8 last month from March’s 53.2 staying above the 50 mark that separates growth from contraction.  According to Chris Williamson, Chief Business Economist at IHS Markit, “April’s survey data provide encouraging evidence that the Eurozone will pull out of its double-dip recession in the second quarter.”  Whilst a PMI for the service industry rose to 50.5 from 49.6 a manufacturing PMI on Monday showed that factory activity growth surged to a record high in April.  The Eurozone vaccine programme started to pick up after initially being hit by issues.  Whilst optimism amongst services firms also improved, the Business Expectations Index climbed from 67.4 to 68.4, the highest in over a decade.

Eurozone Producer Prices

Data on Wednesday showed that Eurozone Producer Prices accelerated in line with expectations in March, driven by increases of energy and intermediate goods, reinforcing the forecasts of higher consumer inflation in the coming months.  According to the European Union Statistics office, Eurostat, prices at factory gates in the 19 countries sharing the Euro rose by 1.1% month-on-month for a year-on-year increase of 4.3%, a 29-month high. These prices compared well with market expectations of 1.1% and 4.2% respectively. Changes in prices at factory gates are usually transmitted to final consumers.  Eurozone Consumer Inflation jumped in April to a two-year high of 1.6%, taking another step higher in a sharp climb that could push it above the European Central Bank’s target of near 2% later this year.

UK Mortgage Lending

British mortgage lending showed the biggest net increase on record in March after Finance Minister Rishi Sunak extended a tax cut for property purchases, according to data from the Bank of England (BOE).  The BOE said that mortgage borrowing rose by a net 11.8 billion Pounds in March, the highest increase since the series began in April 1993.  The BOE also showed that British lenders approved 82,735 mortgages in March, down by about 5,000 from February and a recent peak of over 103,000 in November.  Britain’s housing market rebounded strongly after the first coronavirus lockdown in the Spring of 2020 and Sunak announced that  on the 3rd of March he was extending the cut in stamp duty land tax for buyers. The BoE data published on Tuesday showed unsecured lending to consumers was 8.6% lower than in March 2020, when the first lockdowns started in Britain.

US Trade Deficit

The US Trade Deficit hit a record high in March due to increased domestic demand, which is attracting imports with the gap widening even further as the nation’s economic activity rebounds faster than its global rivals.  The $1.9 million relief package by the White House and the roll out of the covid-19 vaccination program is leading to a boom in demand, which is pushing against supply constraints.  Furthermore, economic activity is being boosted by the Federal Reserve’s ultra-easy monetary policy stance.  As manufacturers lack the capacity to satisfy the surge in demand and inventories are lean, businesses are forced to import more goods.  According to the Commerce Department on Tuesday, the trade deficit increased 5.6% to an all-time high of $74.4 billion in March.  Imports soared 6.3% to a record high of $274.5 billion in March while exports surged 6.6% to $200 billion. 

US- Janet Yellon

The US Treasury Secretary Janet Yellon said on Tuesday that she sees no inflation problem brewing, downplaying earlier comments that rate hikes may be needed to stop the economy from overheating amid Joe Biden’s spending plans to boost growth.   The initial comments made by Yellon deepened a sell-off in tech stocks and pushed longer-dated Treasury yields higher.  Yellon told a Wall Street Journal CEO Council that she does not anticipate inflation to be a problem to the US economy and that any price increases would be transitory because of supply chain shortages and the rebound in oil prices to pre-pandemic levels.  When asked directly about her remarks on rates, she said she was neither predicting nor recommending a rate rise.  Yellen said during an Atlantic event that the main goal of Biden’s programs is to help reverse decades of widening economic inequality.  She further added that the programs that include stepping up infrastructure, childcare and education will make a “big difference” to inequality.

US Weekly Jobless Claims

The number of Americans filing new claims for unemployment benefits dropped below 500,000 last week for the first time since the COVID-19 pandemic started, over a  year ago.  This indicates that the labour market recovery had entered a new phase amid a booming economy.  In addition, data on Thursday showed US based employers in April announced fewest job cuts in nearly 21 years.  Initial claims for state unemployment benefits tumbled to 92,000 and seasonally adjusted to 498,000 for the week ending the 1st of May, said the Labour Department. That was the lowest since mid-March 2020 when mandatory shutdowns of nonessential businesses were enforced to slow the first wave of COVID-19 infections.   

Australia Central Bank

Australia’s Central Bank left its key interest rates at near zero overnight for a fifth straight meeting and pledged to keep its policies loose for a prolonged period to support the economy. 

Market Wrap

European stocks closed higher on Monday after the European Commission outlined plans to loosen COVID-19 restrictions on tourism, while strong factory and retail sales data together with  a robust corporate earnings season added to the enthusiasm.  European travel and leisure stocks climbed 0.2% after the European Commission recommended letting foreign travellers from more countries enter the block, hoping to boost the tourism industry this summer.  As the UK markets were closed due to a holiday, the gains in travel stocks were limited given that British stocks make up the bulk of the sector.  Trading volumes across the European markets was thin due to the UK holiday.  Bourses in Italy, Germany and Spain marked strong gains after a survey showed that the Eurozone Factory Activity growth reached a record high last month, while German retail sales posted their biggest year-on-year increase in March since the start of the COVID-19 pandemic.  Data on Monday showed €80 billion was bought under the ECB’s PEPP Emergency Stimulus Scheme in April, the first full month after the higher pace was announced in March compared to €60 billion in February. Meanwhile US Treasury yields dropped on Monday after data showed manufacturing activity growth slowed in April amid supply chain challenges and rising demand fuelled by the COVID-19 vaccine rollout and fiscal stimulus.  The Institute for Supply Management (ISM) said its index of national factory activity fell to a reading of 60.7 last month after rising to 64.7 in March which was the highest level since December 1983. 

Sectors that are sensitive to the economy such as miners, travel and energy drove European stocks up on Tuesday, with British shares outperforming after a holiday-extended weekend.  Travel and leisure sector increased by 1.3% and was the most in Europe, benefiting from Britain’s expected announcement of a green list for countries that people can travel to on holidays.   European stocks then moved lower as the increases in commodities, banks and travel stocks were offset by the losses in highly valued tech companies and automakers.  Miners, oil and gas sectors also rose more than 1% as investors bet on a strong global rebound amid massive vaccine programmes and unprecedented stimulus.  Meanwhile, tech stocks struggled after their Wall Street peers came under pressure on Monday.    World Share Index stayed near all-time highs as the Dollar and Government Bond Yields moved higher while some of the biggest global economies pushed on with easing the COVID-19 restrictions.  Bond market borrowing costs were also moving higher on signs that the World’s major Central Banks remain in no rush to reel the massive stimulus schemes that kept them below recent 13-month highs.   Taiwan’s tech-heavy bourse was the exception, with stocks closing down 1.7% amid a rare uptick in domestic COVID-19 infections and after Wall Street’s tech indices struggled on Monday.  Emerging market stocks struggled as Taiwan and India faced a rise in COVID-19 infections, with the latter seeing increases in covid cases passing the 20 million.   Stock markets fell 0.5% on Tuesday in a matter of minutes and further after, leaving investors perplexed as to what was behind the move.  This was followed by Janet Yellon’s comments that rate hikes may be needed to stock the economy from overheating.  The heavy-tech NASDAQ tumbled on Tuesday as investors pulled out of fast growing companies such as Apple and Amazon amid concerns over rising interest rate and the uncertainty over an upcoming jobs report. 

Eurozone bond yields edged up on Wednesday as equity markets recovered from a sudden slump a day earlier that sent yields on safe-haven assets falling sharply.  European stocks bounced back up after the sharp sell-off in the previous session amid gains in commodity and banking stocks. Optimism about strong earnings season and a speedy economic recovery dominated the markets.  The DAX jumped 1.3% while the FTSE 100 gained 1.1%.  Big UK miners that include Rio Tinto, BHP Group and Anglo American rose about 3% each as copper prices rose past a key psychological level of $10,000 a tonne, buoyed by optimism about the speedy recovery in the global economy.  Wednesday saw the DJIA closing at 34,230.34 rising 0.29%, the NASDAQ dropping 0.3% reaching 13,503.37 while the S&P 500 increased by 0.07% to 4,167.59.  European indices gained, with the CAC 40 rising 1.4% reaching 6,339.47, the DAX at 15,170.78 with an increase of 2.12% and the FTSE 100 gained 1.68% to close at 7,039.3. 

World shares and commodity prices held firm on Thursday with investors shifting to cyclicals amid hopes of a strong economic recovery.  Meanwhile, drugmakers’ shares came under pressure after Washington backed waiving patents for COVID-19 vaccines.  Japan’s Nikkei jumped 1.8% as it reopened after a five-day holiday.  China’s healthcare share index dropped more than 4% after US President Joe Biden threw his support behind waiving intellectual property rights for COVID-19 vaccines.  Whilst Biden’s move hit US vaccine makers including Moderna, Wall Street was supported overall by gains in energy and other cyclical shares.  European stocks inched higher hovering near record levels amid strong earnings reports from AB Inbev and several Eurozone banks that added to the upbeat mood amid solid economic data.  The Eurozone banking sector rose 1% to hit a fresh 14-month high. 

European stocks hit a record high on Friday amid strong economic data from Germany and other major economies as well as upbeat earnings that added to hopes of a swift economic recovery from the pandemic.  The DAX rose 0.8% moving closer to its highest level, while France CAC 40 hit its highest since November 2000 and the FTSE 100 breached the 7,100 mark.  

Currency Roundup

In the currency market, the US Dollar found some ground to partially unwind last month’s long decline. The Dollar’s bound on Tuesday has put pressure on the Euro,  which dropped once again below the $1.20 mark on Wednesday, and breached the $1.1995/1.2 area.   Sterling dipped marginally to $1.3870 ahead of the Bank of England meeting on Thursday and the Scottish Parliamentary Elections.  The Scottish National Party (SNP) is expected to win a majority in the Scottish Parliament, which some see it as a risk for Britain.  The SNP has pledged to call for a second Scottish independence referendum, although permission to do so will need to be granted by the UK Government in London.  British Prime Minister Boris Johnson has repeatedly said he will not grant one. 

Sterling was unchanged against the Dollar on Wednesday morning, as a poll showed Scotland’s main Pro-Independence Party was unlikely to win an outright majority in Thursday’s election.  This is a blow to its hopes for a referendum on separating from Britain.   The Dollar hit its highest in over two weeks on Wednesday, extending a rally as talks over the possibility of higher US interest rates and a sell off in tech stocks soured risk sentiment for the benefit of the currency. 

Dollar stayed under modest pressure on Friday ahead of key US Jobless Report that could raise expectations of a strong economic recovery and increase investor appetite for stocks, higher yielding currencies and commodities.  As the Dollar is softer against most currencies, the Euro outperformed many others, having gained 0.5% on Thursday and last stood at $1.2067.  Against the Yen, the Dollar dropped to ¥109.05, almost flat so far on the week as its rebound since late April has lost steam. 

Gold

Gold prices dropped on Tuesday amid a rebound in the Dollar that impacted the metal’s safe-haven appeal. Meanwhile, investors speculated that a swifter than expected US economic recovery could prompt an interest rate hike. Investors await April payrolls data due later this week for further cues on the health of the US economy.   Meanwhile, Federal Reserve Chairman Jerome Powell said on Monday, that the US economy is doing better, but it is “not out of the woods yet.”  Spot gold was down 0.4% at $1,786.10 per ounce after hitting its highest since the 25th of February at $1,797.75 on Monday.  US gold futures dropped 0.4% to $1,785.50. 

Oil

Oil rose more than 1 % on Monday as Chinese economic figures and US vaccination rates pointed to a strong rebound in demand.  Investors however remain wary over record-breaking infection rates in India along with higher OPEC+ oil supply.  India is the third-largest fuel importer worldwide.  The top oil consumers, the US and China, are expected to drive a recovery in demand from the coronavirus pandemic.  Brent has rallied almost 30% this year recovering from last year’s historic lows thanks to record supply cuts by OPEC and its allies.  The latter have decided last week to stick to a plan to boost supply slightly from 1^st May and OPEC’s production climbed in April led by a boost from Iran.  Oil prices rose nearly 2% on Tuesday after more US states eased lockdowns and the EU sought to attract travellers however, soaring COVID-19 cases in India capped gains.  Meanwhile futures strengthened in post-settlement trade after American Petroleum Institute estimates of US crude inventories fell more than expected according to traders.  Brent crude futures settled at $68.88 a barrel up $1.32 or 1.95%.  The global benchmark continued to rise after the API data was issued, and was trading at $69.36 a barrel, $1.8 higher. US West Texas Intermediate crude futures rose by $1.20 or 1.86% to settle at $65.69 after a 1.4% jump on Monday.  Oil prices slipped after earlier gains on Thursday weighed by the rising infections in India and elsewhere despite a sharper than expected drop in US crude inventories.  Brent crude oil futures fell by 0.4% to $68.68 while West Texas Intermediate US crude lost 0.5% to $65.32 a barrel.      

Malta: Registered Business Units – 2020

A press release dated 03 May 2021 shows the demographic patterns of registered business units in Malta and their involvement over time.   In 2020, registered units within the statistical business register amounted to 130,745, an increase of 3.7% (4,713) registered units over 2019. 97.4% of the business units (micro) employed between 0 to 9 persons.  The population of small (10-49) and medium (50-249) businesses amounted for 2,682 (2.1%) and 555 (0.4%) units respectively.  The large businesses employing 250 persons or more amounted to 135 (0.1%).  The number of registered units that employ between 0 and 9 persons increased by 3.8% to 4,619 units.    The number of registered units that employ between 10 and 49 persons increased by 83 units, an increase of 3.2%.  In 2020 50.5 of the registered units were sole owners or partnerships, 45.8 were limited liability or public limited companies while 3.7% were governmental, non-profit or other types of legal organisations.  Whilst new registrations in 2020 amounted to 10,530 units deregistrations amounted to 10,187 units.  

Malta: Government Expenditure on Social Security Benefits – January-March 2021

A press release dated 5 May 2021 shows that between January and March 2021, spending on Social Security Benefits totalled €252.7 million, a 4% increase over the previous year. A €11.1 million increase in contributory expenditure explains the increase in spending.  Government spending towards contributory Benefits amounted to €205.1 million which is 5.7% higher than 2020.  Pensions in respect of Retirement recorded the largest increase of €9.3 million primarily the result of a rise in the number of Two-Third pensioners.  By the end of the first quarter of 2021, €47.3 million went towards Non-Contributory Benefits, which is a 3% drop in comparison to 2020.  In the first quarter of 2021 the largest number of Contributory beneficiaries was reported under the Two-Thirds Pension (51,804).  Children’s allowance reported the highest share of Non-Contributory recipients with 41,329 families in receipt of the benefit.

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