“Brexit Final Call…”

Brexit Final Call

British lawmakers voted on Monday to seize control of Brexit for a day in a usual bid to find a way through the Brexit impasse after Prime Minister Theresa May Divorce was rejected again. The range of possible outcomes include everything leaving with no deal to holding another referendum, to cancelling Brexit altogether. On Wednesday lawmakers voted on a range of Brexit options, giving parliament a chance to indicate whether it can agree on a deal with closer ties to Brussels. Some lawmakers suggested a tweaked version of May’s deal could finally win their approval. Jacob Rees-Mogg, the leader of a faction in May’s Conservative Party demanding a clean break from the EU, said the choice now seemed to be between May’s deal or no Brexit. Today, MPs will vote on the withdrawal agreement, which sets out the terms of the UK’s departure from the EU. Ministers say their backing is vital if Britain is to avoid a disorderly exit. But Labour will vote against it, saying that denying MPs a say on the political declaration section of the deal, which outlines the shape of future UK-EU relations, is a “blindfold Brexit”.

ECB And Rate Hikes

As threats to growth rise, the European Central Bank could further delay a planned increase in interest rates if it needs to look at measures to mitigate the effects of negative interest rates, said ECB President Mario Draghi on Wednesday. Draghi told a conference in Frankurt, “Just as we did at our March meeting, we would ensure that monetary policy continues to accompany the economy by adjusting our rate forward guidance to reflect the new inflation outlook.” Earlier in the month the ECB put off plans to “normalise“ policy, instead providing banks with even more liquidity and delaying a rate increase until next year. Draghi said that with external demand in a slump, business investments have suffered, and risks are growing that domestic demand and employment will be affected. TLTROs (Targeted longer-term refinancing operations) are one of the tools to counter the slowdown.

US Yields

On Friday (week ending 22nd March) concerns emerged about a potential US recession after cautious remarks by the US Federal Reserve caused the 10-year treasury yields to slip below the three-month rate for the first time since 2007. Yields on US 10-year treasury yields modestly rose after data showed German business morale improved unexpectedly in March, but spreads between the US three-month and the 10-year Treasury yields moved closer again to inversion. Concerns about the global economic climate remain. An inverted yield curve is widely seen as a leading indicator of recession. Chicago Federal Reserve Bank President Charles Evans said on Monday it was understandable for markets to be nervous when the yield curve flattened, though he was still confident about the US economic growth outlook. Meanwhile, former chair Janet Yellen said that yield curve may signal the need to cut interest rates at some point, but it does not signal a recession.

US Housing

US homebuilding fell more than expected in February as construction of single-family homes dropped to near a two-year low, offering more evidence of a sharp slowdown in economic activity early in the year. Housing starts, decreased 8.7 percent to a seasonally adjusted annual rate of 1.162 million units last month, said the Commerce Department. The decline was the sharpest drop in homebuilding last month.

Trade Talks

President Donald Trump’s top trade negotiator Robert Lighthizer and Treasury Secretary Steven Mnuchin are due to resume trade talks in Beijing on Friday 28th March, with China’s Vice Premier Liu He expected in the US the following week.

China’s industrial Profits Shrink

China’s industrial firms posted their worst slump in profits since late 2011 in the first two months of 2019, data showed on Wednesday, amid slowing demand at home and abroad that took a toll on business. The National Bureau of Statistics (NBS) said that profits notched up by China’s industrial firms in January-February, slumped 14 percent year-on-year to 708.01 billion yuan. The data combines figures for January and February to smooth out distortions caused by the week-long China’s Lunar New Year. The drag was mainly due to price contractions in key industrial sectors such as auto, oil processing, steel and chemical industries, said Zhu Hong from the statistics bureau in a statement accompanying the data, adding that production and sales are slowing as well. The trade war between the US and China has put a dent on factory activity, corporate earnings, business sentiment and overall consumption in a blow to the economic outlook.

“Belt and Road” Infrastructure Project

China’s President Xi Jinping visited Europe this week trying to increase support for the “Belt and Road” trade project. Europe’s top leaders told Chinese president Xi Jinping that they wanted a fairer trading relationship with China, signalling an openness to engage with Beijing’s “Belt and Road” infrastructure project if it meant more access to the Chinese market. The Belt and Road Initiative, championed by Xi, aims to link China by sea and land with Southeast and Central Asia, the Middle East, Europe and Africa, through an infrastructure network along the lines of the old Silk Road (refers to the terrestrial routes connecting East Asia and Southeast Asia with East Africa, West Asia and Southern Europe).

Brazil

Brazil posted a current account deficit of $1.134 billion in February, narrowing from a deficit of $2.043 billion a year earlier, said the central bank on Monday. Net foreign direct investment in Brazil totalled 8,400 billion in the month, up from $4.712 billion a year earlier.

Precious Gold

Gold prices rose to a more than three-week high on Monday, amid a weaker dollar, concerns over global economic growth, and political turmoil in Britain that moved investors into safe-haven assets. Spot gold has risen by 0.5 percent to $1,320.94 an ounce after touching its highest on 28th February. Last week it posted its third consequently weekly gain, rising about 1 percent. US gold futures were up 0.6 percent at $1,319.60. Gold has gained more than 13 percent since touching more than 1 ½ year lows last August, mainly driven by the dovish US FED and global growth concerns.

Oil

On Monday oil prices slipped with concerns of a sharp economic slowdown offsetting the support from the tighter supply from OPEC production cuts and US sanctions on Iran and Venezuela.

Markets Wrap

Volatility returned with a vengeance to Asia, after experiencing some of the best stock returns this year, before Monday. The MSCI Asia Pacific Index slumped 2.1 percent, heading to its biggest decline since October and erasing the monthly gains. Shares in China, Hong Kong and Japan lost 2 percent or more. Wall Street indexes also fell on Monday dragged down by declines in high-growth technology shares on fears of a global slowdown that roiled the market for a second straight session. Europe suffered a fourth day of losses, as persistent worries about the pace of global growth and Brexit uncertainty took their toll on shares in the region. On Tuesday, Wall Street’s indexes rose, supported by gains in technology and financial stocks, looking to rebound from the declines in the previous two sessions driven by concerns over global growth. Technology gained over 1 percent, as Apple Inc, increased by nearly 1 percent, a day after the iPhone maker unveiled its video streaming service, a credit card and an online gaming arcade. Meanwhile, sterling rallied on Tuesday on fresh hopes that Theresa May would avoid a no-deal Brexit, while global stock markets recovered. On Wednesday the pound hovered below a recent nine-month high before a series of indicative votes in the British parliament on how to break the Brexit impasse.

Malta: Registered Unemployment – February 2019

In February, the number of persons registering for work stood at 1,829 decreasing by 8.8 percent when compared to the corresponding month in 2018. Registrants for work decreased when compared to February 2018, irrespective of how long they had been registering for work. The largest decrease in registrants was recorded among persons who had been registering for more than one year. The largest share of males and females on the unemployment register sought occupations as clerical support workers with 18.2 percent and 36.9 percent respectively.

Malta: Industrial Producer Price Indices – February 2019

During February 2019, the industrial producer price index registered an increase of 3.10 per cent when compared to the same month of the previous year. This was due to a rise of 7.27 percent in intermediate goods, 0.87 percent in consumer goods and 0.24 per cent in capital goods. No price changes were registered within the energy sector.

Antonella Mercieca

Client Relationship Manager

Source:

Bloomberg, Reuters, nso.gov.mt

Date:

March 29th, 2019


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