“Boris Johnson Presents His Proposals …”

Boris Johnson Presents His Proposals

This week Prime Minister Boris Johnson was expected to present his proposals for an amended Brexit agreement.    In his closing speech at the Conservative Party’s annual conference, Boris Johnson stuck to his hard line on Brexit.  He made a final Brexit offer to the EU and said that unless the bloc compromised, Britain will leave without a deal at the end of this month.  Johnson said, “We are tabling what I believe are constructive and reasonable proposals which provide a compromise for both sides.”  The seven-page explanatory note calls for the creation of an all-island regulatory zone on the island of Ireland covering all goods, thus eliminating checks for trade in goods between Northern Ireland and Ireland.  The document further said that the regulatory zone would be dependent on the consent of the institutions of Northern Ireland, which would remain fully part of the UK’s customs territory.  Whilst the reaction from other European capital was cool, Berlin and Paris said they were awaiting details.

Europe

On Tuesday a September survey showed eurozone manufacturing activity had contracted the most in almost seven years.  Germany’s September CPI data rose less than expected, suggesting eurozone inflation was losing momentum and the region’s economy was not improving, irrespective of the large amount of stimulus from the European Central bank last month.  Meanwhile, a key market gauge of long-term inflation expectations for the eurozone fell on Wednesday within sight of record lows, increasing the concerns that the latest stimulus measures by the ECB will not lift inflation towards the 2 percent inflation target.

Germany’s Manufacturing Recession

The recession effecting the Germany manufacturing deepened in September as factories reported their weakest performance since the world financial crisis, ten years ago, showed a survey on Tuesday.  The final PMI for manufacturing which accounts for about a fifth of the German economy, fell to 41.7 in September from 43.5 the previous month.  This represents the lowest reading since 2009 when the German economy has contracted by nearly 6 percent amid the global financial crisis.   Meanwhile, German unemployment fell unexpectedly in September, retail sales rose in August, and inflation fell for the third consecutive month in September, the data showed.  Having initially risen after the European Central Bank’s easing measures on 12th September which included a rate cut and open-ended asset purchases to lift growth and inflation, market inflation expectations have resumed their decline.  Inflation in the European area had been under its target since 2013, and there is concern that further action by the ECB is now limited.

Delisting Of Chinese Firms From US Markets

President Donald Trump’s administration is considering delisting Chinese companies from the US stock exchanges.  This move is part of a broader effort to limit US investment in Chinese companies, according to two sources.  One of the sources said this was motivated by the Trump administration’s growing security concerns about the companies’ activities.  In June, US lawmakers from both parties introduced a bill to force Chinese companies listed on American stock exchanges to submit to regulatory oversight, including providing access to audits or face delisting.  Meanwhile, Chinese authorities have long been reluctant to let overseas regulators inspect local accounting networks citing national security concerns.  Officials are examining how the United States could put limits on Chinese companies included in stock indexes managed by US firms, the agency cited three sources as saying.  As at February, 156 Chinese companies were listed on the NASDAQ and New York Stock Exchanges, according to US government data, including at least 11-state owned firms.  Trade talks between the US and China are expected to be held on 10-11 October.   On Monday China warned of instability in international markets from any “decoupling” of China and the US after sources said that Trump considered delisting Chinese companies from US stock exchanges.

US House Of Representatives’ Impeachment Probe Into President Donald Trump

The US House of Representative’s impeachment probe into President Donald Trump intensified on Monday as Trump raged about inquiry and news reports that suggested he had used additional diplomatic channels to go after his adversaries.  Three House committees said a subpoena for documents had been sent to Trump’s lawyer Rudy Giuliani.  The former New York mayor had said on television he asked the government of Ukraine to “target” former Vice President Joe Biden, who is seeking the Democratic nomination to run against Trump in the 2020 election.

China September Factory Activity

China’s factory activity shrank for the fifth straight month in September, according to an official survey on Monday.  The official Purchasing Managers’ Index (PMI) was slightly higher at 49.8 in September compared to the 49.5 in August.  The 50-point threshold separates expansion from contraction on a monthly basis.

Factory Activity In the United States

The survey from the Institute for Supply Management (ISM) on Tuesday said its index of national factory activity dropped 1.3 points to a reading of 47.8 last month, the lowest level since June 2009, when the recession was ending.  A reading below 50 indicates contraction in the manufacturing sector, which accounts for about 11 percent of the US economy.  The reading for September marked the second straight month the index broke below the 50 threshold.  The index has now declined for the sixth consecutive month.  The ISM index has to drop below the 42.9 level to signal a recession in the broader economy.  The ISM said comments from manufacturers “reflect a continuing decrease in business confidence” and also noted that “global trade remains the most significant issue.”  A separate report from the Commerce Department underscored the slowing economic growth and showed that construction spending edged up 0.1 percent in August.  Data for July was revised down to show construction outlays unchanged instead of nudging up 0.1 percent as previously reported.  Spending on private residential projects jumped 0.9 percent, the biggest gain since November 2018, after rising 0.6 percent in July.  Also, housing starts and building permits increased to a more than 12-year high in August, government data showed last month, lifted by declining mortgage rates.

Hiring In The United States

Hiring by US private employers slowed further in September, suggesting that trade tensions that have pressured manufacturing, could be affecting the labour market.  The ADP National Employment Report on Wednesday also showed private payrolls growth in August was not as strong as previously estimated and said “businesses have turned more cautious in their hiring”, with small enterprises becoming “especially hesitant.”    Private employers added 135,000 jobs in September, said the ADP National Employment report.  Meanwhile, data for August was revised downwards to show private payrolls increasing by 157,000 jobs instead of the previously reported 195,000 positions.  Slow job growth is of major concern as it could hold back consumer spending which so far has been the economy’s main growth engine.   The ADP report showed that employment in the goods-producing sector increased by 8,000 jobs in September.  Manufacturing payrolls increased by 2,000 jobs last month and construction added 9,000 positions.  Natural resources and mining shed 3,000 jobs.  The services sector added 127,000 jobs last month, with the additions in education, health services, professional and business services, trade, transportation and utilities industries.

The Reserve Bank Of Australia

The Reserve Bank of Australia lowered its cash rate by a quarter point to an all-time low of 0.75 percent and indicated the willingness to do more if needed.  The yields on the two-year bonds slipped to 0.7 percent, the lowest in a month.  While Australia’s A$ 1.95 trillion economy has not been hit by recession for the last 28 years, economic risks have heightened over the past year with moderate economic growth and inflation, rising unemployment and unstable property market.  Data released earlier in the session showed that Australian home prices posted their biggest monthly jump in 2 ½ years in September, boosted by record low rates and looser lending rules.

Japanese Manufacturers – Business Confidence

Business confidence at big Japanese manufacturers worsened in three months to September to its lowest level in six years, according to the central bank’s “tankan” survey, a sign that global risks are having an impact on the export-led economy.  The headline index for big manufacturers’ sentiment stood at plus 5 in September, while plus 7 in June, showed the closely watched survey on Tuesday.  It was the lowest reading since June 2013 when it was at plus 4.  The index is seen slipping further to plus 2 over the next three months.  Furthermore, the survey showed that big firms plan to raise their capital expenditure by 6.6 percent in the financial year to March 2020.  The tankan’s sentiment index is calculated by subtracting the number of respondents who state that conditions are poor from those who say that they are good.  A positive reading means that optimists outnumber pessimists.

Japan’s Manufacturing Activity

Japan’s September Activity contracted at the fastest pace in seven months in September which is a sign of the pressure the economy is going through amid the US-China Trade war.  The final Jibun Bank Japan Manufacturing Purchasing Managers’ Index (PMI) fell to a seasonally adjusted 48.9 from a final 49.3 in the previous month.  This was the quickest pace of decline since February.  The index stayed below the 50 threshold that separates contraction for a fifth month.  This was the longest shrinkage since a six-month stretch from March to August 2016.  On Tuesday a sales tax hike to 10 percent from 8 percent kicked in.  This was the first nationwide tax increase by the government since April 2014.  In order to ease the burden on consumers the government has put in place stimulus steps worth 2 trillion yen without increasing the tax on food and non-alcoholic beverages.   Manufacturing activity was lower amid frail output and total new orders, both of which shrank for a ninth straight month and at a faster pace than in August, showed the survey.  Businesses which were surveyed by IHS Markit indicated that underlying demand conditions had weakened, reflecting fewer sales from both domestic and foreign markets, with order book volumes falling in China, the United States and Europe.  Data from Japan’s factory output shows that production slipped more than expected in August.  This is another disappointment for the Japanese economy.    Meanwhile, separate data on Monday showed that domestic demand might be stronger than thought, as retail sales climbed 2 percent in August from a year earlier.  This was the sharpest rise since October last year, according to Refinitiv data.

The United States Wins Backing For Tariffs On Europe In Airbus Clash

The World Trade Organisation gave Washington a green light to impose tariffs on $7.5 billion worth of EU goods annually.  The targeted list that is set to take effect on 18th October includes large Airbus planes made in France, Britain, Germany and Spain.  No tariffs will be imposed on EU-made aircraft parts used in Airbus’s Alabama assembly operations or those used by Beoing Co, safeguarding US manufacturing jobs.  The tariffs target heavily the four Airbus consortium countries, including Spanish olives, British sweaters and woollens, German tools and coffee as well as British whisky and French wine.  Cheese from nearly every EU country will be hit by 25% tariffs, however, Italian wine, olive oil and European chocolate were spared.

Currency Roundup

The British pound dropped to a three-week low against a robust dollar on Tuesday, as Prime Minister Boris Johnson was expected to soon present his proposals to amend the Brexit agreement which was expected to include new ideas that would remove the insurance policy for the Irish border that Britain previously signed up to.  The Australian dollar weakened to a one-month low on Tuesday after the central bank cut rates to a record low, while its New Zealand counterpart stumbled after the country’s business confidence deteriorated in the September quarter.  The dollar held at a 29-month high on Tuesday on renewed evidence of strength in the US economy that encouraged investors to buy the greenback.  With rate cuts in Australia, final PMI readings in Europe at seven-year lows and weak confidence readings in Japan, hedge funds pushed the dollar higher after it scored its biggest quarterly gain since June 2018.  The dollar on Wednesday dropped to a one-week low against the yen and declined for a second straight session versus the euro, amid worries about global growth following the data that was released earlier showing a sharp decline in US manufacturing activity.  The pound was little changed against the dollar at $1.2305 as the greenback’s losses extended.  The outlook of the Sterling, however remained uncertain over doubts as to whether Prime Minister Boris Johnson’s final Brexit offer to the European Union will be well received by Brussels.

Markets Wrap

On the news that the Tump administration was considering delisting Chinese companies from the US stock exchanges, major US stock indexes slipped which came days before China celebrates the 70th anniversary of the birth of the People’s Republic of China on 1st October. China shuts down for a week of festivities.  Whilst the iShares China Large-Cap ETF FXI.P shed 1.15 percent, shares of Hangzhou, Zhejiang-based Alibaba ended down 5.15 percent, JD.com fell 5.95 percent and Baidu Inc declined 3.67 percent.  Shares of US-listed Chinese stocks reversed direction on Monday after a sharp fall on the delisting reports.  Alibaba Group Holding Ltd and JD.Com Inc rose 2 percent each in early trading after tumbling more than 5 percent on Friday.  Tuesday saw the pan-European STOXX 600 index and the eurozone index log their biggest one-day drop in two months.  Furthermore, European companies looked set for their worst quarterly earnings in three years as revenue drops for the first time since early 2018, according to Refinitiv data.  Tuesday also saw Wall Street’s main indexes dropping sharply after data showed US manufacturing contracted for the second straight month in September.  On Wednesday, European shares opened lower with the London stocks lagging the most amid fresh Brexit drama, the reseal of dismal factory reports across the bloc and the US.   The FTSE 100 index slipped 0.5 percent the largest drop across European regions and ahead of UK Prime Minister’s Boris Johnson’s talks with Brussels. Eurozone bond yields inched up on Wednesday, a sign that investors were bracing for further deterioration in economic growth.   Asian stocks slipped on Thursday, after a drop on Wall Street, as Washington opened a new trade war front by stating it would impose tariffs on $7.5 billion of goods from the EU.  Also, on Thursday European shares opened lower as the US were given the go ahead to impose tariffs on European goods.  The markets were spared from sharper losses after the list was reduced.

Oil

Oil slipped on Monday as China’s economic outlook remained weak although manufacturing data improved, whilst the trade war with the US weighed on demand growth for the world’s largest crude importer.  Meanwhile, top oil exporter Saudi Arabia has restored capacity to 11.3 barrels per day after the attack on its processing facilities this month, sources told Reuters last week.   The US Commodity Futures Trading Commission (CFTC) said on Friday that money managers cut their net long US crude futures and options positions in the week to 24th September.  Saudi Arabia’s Crown Prince Mohammed bin Salman warned in an interview broadcast on Sunday that oil prices could spike to “unimaginably high numbers” if the world does not come together to deter Iran but said he would prefer a political solution than a military one.  Oil rebounded from several days of falling prices after industry data showed a surprise drop in US crude inventories.  Furthermore, weak economic data from the US have depressed global stock markets.  The American Petroleum Institute (API) data showed US crude stocks fell last week by 5.9 million barrels, against expectations for an increase of 1.6 million barrels.  Meanwhile, Ecuador, one of the smallest members of the OPEC, said on Tuesday it will leave the 14-nation bloc from 1st January due to fiscal problems.  This is the second country to withdraw from OPEC in the last year after the departure of Qatar.

Gold

Gold prices dropped on Tuesday hovering around the two-month low hit in the previous session as uncertainties arising from the US-China trade war supported the dollar.  SPDR Gold Trust, the world’s largest gold-backed exchange traded fund, said its holdings fell 0.22 percent to 920.83 tonnes on Monday from 922.88 tonnes on Friday.  Wednesday saw the price of gold jumping to 1.4 percent after disappointing hiring by US private employers that demoralised investors who were already concerned about slowing growth in the US.  On Thursday gold prices were little changed following an over 1 percent jump in the previous session, as investors awaited more data to gauge the health of the US economy.

Malta:  Direct Investment In Malta And Abroad: January to December 2018

As at the end of 2018, the stock position of Foreign Direct Investment in Malta stood at EUR 180.9 billion while Direct Investment abroad amounted to EUR 61 billion.  During the year 2018, FDI flows in Malta went up by EUR 3.4 billion.  The main contributors to total FDI flows were Financial and Insurance Activities with a total FDI flows were Financial and Insurance Activities with a total contribution of 86.1 percent.  Meanwhile, during the year 2018, direct investment flows abroad totalled Eur 6.3 billion, a marginal decline over the amount registered in 2017.  These changes are attributed to lower flows in equity capital and other capital, mainly in claims on direct investors.

Malta: Labour Force Survey – 2nd Quarter 2019

During the second quarter of 2019, the Labour Force Survey estimates indicate an increase of 7 percentage points in employment when compared to the corresponding quarter of 2018.  The Labour Force Survey estimates indicate that during the second quarter, total employment stood at 251,700 accounting to more than half of the population aged 15 and over.  Unemployed persons stood at 8,815 (2.1 percent).  Meanwhile, on average out of every 100 persons that are aged between 15 to 64 years, 73 were employed.

Antonella Mercieca

Client Relationship Manager

Source:

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

Date:

October 4th, 2019


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