“Biden’s $1.9 Trillion Rescue Package…”

Source: Reuters

Incoming President Joe Biden proposed $1.9 trillion into the economy to support jobs and spending which is needed to avoid long-term damage from the COVID-19 pandemic.  The Democratic administration’s proposed package provides aid that according to economists delivers the most effective economic boost.  Amongst the measures it includes an increase to the current extra weekly benefit to the unemployed to $400 from $300, directs $170 billion towards the reopening of schools that resulted in millions of workers in particular women to leave their jobs. Furthermore, it puts $1,400 in the hands of most Americans.  The new package still has to be voted by Congress and would bring to $5.2 trillion the total fiscal stimulus delivered to the US economy since the crisis began.  Meanwhile, Fed Chair Jerome Powell said on Thursday that with the US economy still far from its inflation and employment goals it is too early for the Federal Reserve to discuss changing its monthly bond purchases. 

UK Economy

The British economy shrank in November for the first time since the initial COVID-19 lockdown, and now is 8.9% smaller than a year earlier. In October the economy was 6.8% smaller than a year before.  With a third lockdown in place and with an economy that is less open to a trading relationship with the EU the country is facing major challenges in early 2021.     

German Economy

The German economy contracted by a smaller than expected 5% in 2020 amid a strong state response that helped limit the damage caused by the COVID-19 pandemic in the economy, according to preliminary data from the federal statistics office on Thursday. The contraction in gross domestic product was less severe than that suffered in 2009 at -5.7% during the global financial crisis.   Private consumption dropped 6% in the year while investment in new equipment also fell sharply.  Exports dropped nearly 8.6% said the office.  On a positive note, data showed that government spending pushed up state consumption by 3.4% and construction by 1.5%.  Compared to a surplus of Euros 52.5 billion or 1.5% in 2019 this shows a series deterioration of public finances.  

US Weekly Jobless Claims

The number of Americans that filed their first-time applications for unemployment benefits climbed last week.  This reflects weakening labour market conditions as COVID-19 has disrupted business operations.  According to the Labour Department on Thursday, initial claims for state unemployment benefits totalled a seasonally adjusted 965,000 for the week ended 9 January compared to 784,000 in the prior week. 

US House Impeaches Trump for a second time

On Wednesday Donald Trump became the first president in the US history to be impeached twice as 10 of his fellow Republicans joined Democrats in the House of Representatives to charge him with inciting an insurrection in last week’s violent rampage in the Capitol.  

Chinese Exports

Chinese exports grew more than expected in December showed customs data on Thursday as coronavirus disruptions increased the demand for Chinese goods irrespective of the appreciation in the yuan that made Chinese exports more expensive for overseas buyers.  A robust domestic recovery also impacted the appetite by the Chinese for foreign products in December.  Exports rose 18.1% in December from a year earlier, slowing from a 21.1% increase in November however beating a 15% increase in expectations. Imports increased 6.5% year on year last month, rising from November’s 4.5% growth.  According to analysts going forward sustained demand for medical supplies and work-from-home products should support Chinese exports.

The European Bank for Reconstruction and Development (EBRD)

The European Bank for Reconstruction and Development (EBRD) said on Thursday that it had increased its investments to a record 11 billion euros in 2020 to help companies across its region lesson the economic impact from the coronavirus pandemic.  In its annual operational statement, the development bank said that Turkey overtook Egypt as the biggest recipient country receiving 1.7 billion euros in investments, half of which went to local banks.  Last year EBRD focused on providing emergency short-term liquidity, working capital, trade finance and restructuring for its existing clients affected by the crisis. 

Currency roundup

Sterling gained against the dollar on Tuesday as the greenback took a breather from its recent rally, allowing the British currency some gains after four consecutive sessions of losses. The dollar gained on the back of rising US Treasury yields that pushed the pound to $1.3451 as investors bet on massive fiscal stimulus in the US.  Finance minister Rishi Sunak warned on Monday that the British economy would get worse before it got better, with the country now in its third national lockdown and struggling to contain the spread of COVID-19.  With a third lockdown investors are considering the possibility of the Bank of England cutting interest rates below zero.  The FTSE index moved lower by 0.3% as sterling gained and as Britain battled with an increase in new infections, hospitalisations, and deaths. 

Sterling hit a seven-week high against the euro on Wednesday, building on the gains during the previous session.  As the economy is facing its third national lockdown, Governor Andrew Bailey said there were “lots of issues” with cutting interest rates below zero, which could hurt banks and potentially reduce their lending to companies.   Against the dollar the pound flattened to $1.3667 after briefly touching a nine-day high of $1.37.  The stabilising US Treasury yields helped the dollar trade back in positive territory although investors remained bearish on the currency’s near-term prospects.  Sterling rose 0.4% to 88.97 pence on Wednesday, its highest level against the Eur since 25 November. 

As US Treasury yields stabilised helping the dollar to trade back in positive territory, investors remained bearish on the currency near-term prospects.  On the day, euro after having earlier made its sharpest daily gain against the greenback, lost ground and traded lower at $1.2168.      

The dollar extended its rebound from near three-year lows on Thursday supported by higher US yields as President-elect Joe Biden prepared to outline his plans for the massive fiscal stimulus.  The US dollar has risen in four of the five trading sessions as the prospect of more stimulus has weighed on US government bonds, sending the benchmark treasury yield above 1% for the first time since March.  Euro was largely steady at $1.164 after sliding 0.4% on Wednesday. 

Market Wrap

On Monday European shares dropped from over 10-months highs as investors booked profits after a strong week while the increased number of coronavirus cases and in mainland China attributed to the decline in energy and mining stocks.    

European stocks moved higher on Tuesday amid positive brokerage recommendations and gains in economically sensitive stocks on expectations of a larger US stimulus.  They closed flat on the day amid economically sensitive sectors including banks, automakers and oil supporting markets. In Europe automakers climbed 1.7% to lead gains after Renault, BMW and VW reported 2020 sales. Meanwhile General Motors announced its entry into growing electric vehicle business.  The UK’s exporter-heavy FTSE 100 underperformed other European markets as they were hit by a stronger pound and a surge in new COVID-19 cases. The pan regional STOXX 600 index climbed 0.2% with oil, gas, travel, leisure and banking sectors leading the gains. Eurozone government bond yields rose on Tuesday, tracking the US Treasuries expectations of more fiscal stimulus in the US.   Meanwhile investors await the start of the US earnings season this week and clarity about the fiscal spending plans under Joe Biden. 

European shares were mixed on Wednesday and the dollar rebounded while the 10-year US Treasury stabilised below its 10-month high as markets focused on inflation in the US.  London’s FTSE 100 moved higher on Wednesday as energy stocks tracked strong gains in crude prices. 

British shares gained on Thursday amid a set of positive earnings that support investor sentiment.  European shares rose for a third straight session on Thursday on hopes of large stimulus under the incoming US President Joe Biden and upbeat Chinese export that boosted sentiment. 

Oil

Oil hit an 11-mnth high towards $57 a barrel on Tuesday amid tighter supply and expectations of a drop in US inventories offset the concerns over the increase of coronavirus cases worldwide.  The hopes of a drawdown in US crude oil stockpile led to gains in oil majors such as BP, Royal Dutch Shell and Total.  Saudi Arabia plans to cut output by an extra 1 million barrels per day in February and March to stop inventories from building up.   Brent crude reached $56.41 a barrel and earlier hit $56.75 the highest since last February. US West Texas Intermediate gained 86 cents or 1.71% to $53.11. According to an official with International Energy Agency, oil producers are facing an unprecedented challenge to balance supply and demand as factors including the pace and response to COVID-19 vaccines cloud the outlook.  Oil prices edged higher on Thursday after a drawdown in US crude stocks for a fifth straight week and robust data from China that shows a surge in imports.  Brent crude oil futures gained 0.2% to $56.19 a barrel while US White West Texas Intermediate increased 0.4% to $53.11 a barrel. Customs data showed that China’s total crude oil imports rose 7.3% in 2020 despite the coronavirus shock, with record arrivals in the second and third quarters as refineries expanded operations and low prices encouraged stockpiling.  Meanwhile the Energy Information Administration said on Wednesday that US crude oil stockpiles last week fell more than expected. 

Bitcoin

Bitcoin held on the 10% gains made on Wednesday as it rebounded after sliding almost $12,000 from an all-time high of $42,000 hit last week.  On Thursday bitcoin was higher by 0.6% trading at $37,655 up from as low as $30,261.13 on 11 January. 

Malta: International Trade in Goods – November 2020

In a news release dated 11 January 2021 from the National Statistics Office shows that provisional figures for registered trade in Malta recorded a trade deficit of EUR 38.4 million during November 2020, compared to a deficit of EUR 93.9 million in the corresponding month of 2019.  Both imports and exports registered decreases of EUR 130.4 million and EUR 75 million respectively when compared to the same month of 2019.  Meanwhile during the first eleven months of 2020, the trade deficit narrowed by Eur 1,578.40 million when compared to the corresponding period of 2019.  During the first eleven months of 2020, the trade deficit narrowed by EUR 1,578.4 million when compared to the corresponding period of 2019, reaching EUR 2003.6 million. 

Malta: Quarterly Accounts for General Government Q3/2020

In a news release dated 13 January 2020, the General Government recorded a deficit of EUR 316.3 million.  During the period July to September 2020 total revenue stood at EUR 1,116.8 million, a decrease of EUR 92.5 million when compared to the corresponding quarter in 2019.  Total expenditure in the third quarter of 2020 amounted to Eur 1,433.1 million, an increase of EUR 261.6 million over the corresponding quarter in 2019.  Meanwhile at the end of September, general government debt stood at EUR6,838.8 million an increase of EUR 1,192.9 million over the corresponding quarter in 2019.  The debt to GDP ratio stood at 53.7 per cent of GDP.

Antonella Mercieca

Client Relationship Manager

Source:

Reuters, https://nso.gov.mt/

Date:

January 15th, 2021


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