“Bitcoin…”

Bitcoin reached a new record high extending the sharp rally that was mostly fuelled by big investors who began to take digital assets seriously.  Bitcoin, the first cryptocurrency, hit $49,938 and has gained roughly 70% this year, mostly after Tesla said it bought $1.5 billion in bitcoin and would accept the currency as payment.  Besides Tesla, bitcoin has drawn flows from big and small investors in recent months.  On Thursday, Bitcoin traded just shy of the new record high of $52,640 reached overnight, with its roughly 58% surge this month.  Some analysts warned that the rally might be unsustainable.   

UK Inflation

British inflation increased a bit more than expected in January as the country is once again in lockdown, official data showed on Wednesday.  Consumer prices rose 0.7% in annual terms after an 0.6% increase in December, said the Office for National Statistics.

Eurozone Fourth Quarter GDP

New estimates showed on Tuesday that eurozone gross domestic product fell less than estimated in the last quarter of 2020 and employment edged higher against the previous three months despite the lockdowns.  According to the European Union’s statistics office Eurostat, GDP in the 19 countries sharing the euro contracted 0.6% quarter-on-quarter in the October-December period for a 5% year-on-year drop.  Eurostat further said that employment grew 0.3% on the quarter in the last three months of 2020 after a 1% quarterly rise in the previous three months, however, it was still lower by 2% than in the same period a year earlier. 

German Investor Morale

The ZEW economic research institute showed that investor morale in Germany rose beyond the optimistic forecast in February on expectations that consumption will take off in the coming months.  The ZEW also said that its survey of investors’ economic sentiment showed a rise to 71.2 points from 61.8 in the previous month.  Meanwhile, a separate gauge of current conditions eased to -67.2 from -66.4 the previous month.  The expectations boosted the euro. The Economy Ministry said on Monday that lockdown measures used to slow the spread of the new coronavirus in Germany will continue to weigh on the economy in the first quarter of 2021, however, the prospects for exporters are cautiously positive.  The lockdowns will now extend until 7 March. 

FED Minutes

Federal Reserve officials in January discussed how to lay the groundwork for the public to accept higher inflation, and also the need to stay vigilant for signs of stress in buoyant asset markets, according to minutes of the US FED policy meeting held on 26-27 January.  Discussions ranged from the public perception of inflation to the retail stock trading platforms.  FED officials said they were still prepared to keep their easy monetary policy on track to support the job market impacted by the coronavirus pandemic.  According to the minutes released on Wednesday, “many participants stressed the importance of distinguishing between such one-time changes in relative prices and changes in the underlying trend for inflation.”  The minutes further stated that “A number of participants” said they saw such price increases on the horizon for goods “whose production has been subject to supply chain constraints, or soon could be; others anticipated that possibly abrupt return to normal levels of activity could result in one-time increases in certain prices.” In view of the public being sensitive to the prices of basic goods like food and energy, FED officials emphasise the need to focus on the differences between “temporary factors affecting inflation” and more systemic changes in prices that the central bank tries to target, the minutes showed. 

US Producer Prices

US producer prices increased by the most since 2009 in January.  The cost of goods and services increased suggesting inflation at the factory gate started to move slowly.  The producer price index (PPI) for final demand jumped 1.3% last month (the increase in December was 0.3%), the biggest gain since December 2009 the Labour Department said on Wednesday.  In the 12 months through January the PPI accelerated 1.7% after rising 0.8% in December.  Accounting or two-thirds increase in the PPI was a 1.3% rise in the prices of services.  That was the biggest gain since December 2009.  Excluding the volatile food, energy and trade services components, producer prices accelerated 1.2% in January.  The core PPI increased 0.4% in December.  In the 12 months through January the core PPI climbed 2%.  The FED tracks the core personal consumption expenditures (PCE) price index for its 2% inflation target.  The US Central Bank indicated that it would tolerate higher prices after inflation persistently undershot its target.   

US Retail Sales

US Retail sales rebounded sharply in January after households received additional pandemic relief money from the government.  This suggests a pick-up in economic activity that have been badly impacted by the coronavirus pandemic.  The Commerce Department said on Wednesday that retail sales surged by a seasonally adjusted 5.3% last month.  Excluding automobiles, gasoline, building materials and food services, retail sales jumped 6% last month after dropping by a revised 2.4% in December. Further gains in sales are expected in the months ahead as the US Congress is considering the $1.9 trillion recovery plan which will include an additional $1,400 checks to households.  The massive fiscal stimulus is expected to power consumer spending this quarter and drive faster economic growth.

US Weekly jobless Claims

The number of Americans filing first-time applications for unemployment benefits unexpectedly rose last week.  The labour market is steadily recovering amid additional fiscal stimulus and falling COVID-19 that allow more service businesses to reopen.  Initial claims for state unemployment benefits totalled a seasonally adjusted 861,000 for the week ended 13^th February compared to 848,000 in the prior week, said the Labour Department on Thursday.    Part of the increase in claims could be related to the temporary closure of automobile plans beginning last week due to a global semiconductor chip shortage. 

Gold

Gold prices extended losses for a fifth straight session on Wednesday dropping to two-week lows as the increasing US Treasury yields and a firm dollar reduced the commodity’s appeal. Whilst spot gold eased 0.1% to $1,793.37 US gold futures dropped 0.6% to reach $1,788.40. Higher inflation boosts gold but also lifts treasury yields which in turn increases the opportunity cost of holding gold.  

Oil

Oil prices rose to their highest in about 13 months on Monday as the rollouts of the vaccine promised to revive demand while suppliers kept tightened supply.  Brent crude was up 1.1% at $63.13 a barrel after hitting a session peak of $63.76, its highest since 22 January last year.  US West Texas Intermediate crude futures gained 1.1% at $60.10 after touching $60.95 the highest since 8 January last year. Oil prices gained about 5% last week.  Over recent weeks prices rallied on tightening supplies, mainly due to production cuts from OPEC and allied producers. 

Market Wrap

US markets were closed on Monday for the Presidents Day holiday.  London’s FTSE 100 rose on Monday as mining and energy stocks followed the strong gains in commodity prices and investors were hopeful that the global vaccine rollouts will lead to a faster economic recovery this year. The index increased by 2.52% reaching 6756.11.   European shares reached one-year highs on Monday and mining stocks tracked a jump in copper prices as bets of more US stimulus fuelled optimism around a faster global economic recovery this year.  The CAC 40 reached 5786.25 increasing by 1.45% and DAX increased by 0.42% reaching 14,109.48.   

European shares hovered around near one-year highs on Tuesday as investors were hopeful on a US stimulus package to drive global economic growth.  The FTSE 100 climbed amid an increase in financial stocks that gained on bets of a vaccine led economic recovery while Glencore jumped after reinstating its dividend.  The commodity-heavy FTSE 100 was up 0.4% with financials HSBC Holdings and Prudential rising 2.8% and 1.5% respectively.  The FTSE 100 has recovered nearly 34% from its March 2020 lows and is now 14% below its peak last year.  Whilst gains were led by stimulus support the increase in the number of infections and lockdowns have slowed the pace of gains. Aviation and tourism stocks dominated gains in Singapore on Tuesday after the city state pledged more fiscal support for the hard-hit sectors. 

German 10-year bond yields hit their highest level since June on Tuesday amid the expectations of an economic recovery and the extraordinary fiscal stimulus in the US pushed yields higher across the board.  The prospects of reflation a boost in inflation from extraordinary fiscal stimulus pushed the US Treasury yields above 1.25% for the first time in 11 months on Tuesday.  Meanwhile most other high-grade eurozone government bond yields also rose between 2-4 basis points.  

European shares retreated from a one-year highs on Wednesday due to concerns about a possible rise in inflation that changed the optimism about a recovery.  Sectors such as healthcare, telecoms and financial services stocks lead the declines.  UK shares dropped on Wednesday as inflation picked up by a little more than it was expected in January.  The FTSE 100 index was down 0.5% with British American Tobacco being the biggest drag.  Meanwhile a gauge of global equity markets pulled back on Wednesday from the records hit in the previous session as investors sold technology related companies and the prospect of rising inflation affected the optimism around a vaccine led global economy.  The Dow Jones Industrial Average increased by 0.29% reaching 31613.02 due to gains in Verizon Communications Inc and Chevron Corp in which Warren Buffet’s Berkshire Hathaway disclosed major investments in the companies on Tuesday. The NASDAQ dropped by 0.54% to 13699.711 whilst the S&P 500 dropped 0.03% down to 3931.33 with Apple Inc, PayPal Holdings Inc and Nvidia Corp weighed most on both indexes. 

European shares rose on Thursday as mining stocks tracked a jump in commodity prices.  Technology, energy and auto stocks were among the biggest gainers in early trading rising between 0.7% and 1.3%.   

Currency Roundup

Sterling hit two-and-half year highs against the dollar on Tuesday and set a nine-month high to euro as investors continued betting that the rapid vaccinations would help Britain to recover from its biggest drop in output in 300 years.  The pound rose $1.3955 against the dollar, its highest since April 2018 in Asian trading.  Against the euro it reached 87.06 pence, its highest since May 2020.  Although the UK economy has suffered its biggest crash in output in more than 300 years in 2020 when it slumped by 9.9, sterling is the best performing G10 currency this year, up 2% against the dollar and 2.5% against the euro. 

The dollar hit a five-month high against the yen on Wednesday as US bond yields jumped on the prospects of further economic recovery and a possible acceleration in inflation.   The soaring US bond yields boosted the dollar, with the 10-year yield rising to as high as 1.333% from around 1.2% at the end of the previous week. The yen, which is sensitive to US yields, reacted the most with the dollar rising to 106.225 yen, the highest since September, before retreating to 105.91 yen.  The euro slipped slightly to $1.2085 though, its drop was less pronounced due to its gains earlier on Tuesday following strong German economic sentiment data.  Sterling held firm at $1.3895 having reached its highest level since April 2018 on Tuesday.  Against the euro, the pound traded at its highest level since early May at 87.02 pence per euro.  The Australian dollar stood at $0.775 down slightly but still not far after hitting a 2 ½ year high of 6.4010 earlier in the week. 

The Australian and New Zealand dollars held steady on Thursday amid solid domestic data that helped to offset a bounce in the US Dollar.  Data showed that Australian jobs rose 29,100 in January whilst the jobless rate dropped 6.4%, the lowest since April when the lockdowns shut most of the economy.  Unemployment is still well above the 5% level held before the pandemic.

Malta:  Pension Entitlements in Malta 2018

In a press release dated 17^th February 2021 at the end of 2018 total pension entitlements in Malta amounted to EUR36.4 billion, equivalent to 290.8% of GDP.  Most of these entitlements were accumulated by members of the Social Security Pension System, with these accounting for EUR 33.2 billion or 91.2% of the total entitlements.  The remaining EUR 3.2 billion or 8.8% represent entitlements relation to the Treasury Pension System.  In 2018, social contributions totalled EUR 2.1 billion, EUR 1.9 billion of which were allocated to cover the Social security pension system. 

Malta’s pension entitlements amounted to 290.8% of GDP in 2018, the 10^th lowest percentage among the 28 European countries (24 European Member States, Iceland, Norway, Switzerland, and the United Kingdom) for which data is currently available.  Luxembourg reported the highest number at 528%, with Austria second and France third at 446% and 430% respectively.  Denmark registered the lowest share with their obligations amounting to 94% of GDP followed by Bulgaria (178%) and Ireland (186%). 

Malta:  Outbound Tourism Q4/2020

In a press release dated 15 February 2021 issued by the National Statistics Office, during the last quarter of 2020 the total outbound tourist trips amounted to 18,614.  Total estimated expenditure by outbound tourists between October and December decreased by 85.6% over the same quarter of 2019 and stood at EUR 23 million equivalent to an average of EUR 793 per person.  Meanwhile for the period between January and December 2020 total outbound tourist trips in 2020 numbered 196,508 a decrease of 72.2% over 2019.

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