“China And US Sign “Phase 1” Deal …”

China And US Sign “Phase 1” Deal

An initial trade deal was signed by China and the US on Wednesday.  In a letter from President Xi Jinping read by China’s Vice Premier Liu He, the Chinese leader praised the deal as a sign that the two countries could resolve their differences with dialogue. In the deal China is pledging to buy at least an additional $200 billion worth of US farm products and other goods and services over two years, above the baseline of $186 billion in purchases in 2017, said the White House.  President Donald Trump hailed the agreement as a win for the US economy and the trade policies of his administration but acknowledged that there are still a host of issues to be solved.

Inflation In The UK

Consumer prices rose an annual rate of 1.3 percent in December compared with 1.5 percent in November, which marks the smallest increase since November 2016, according to the Office for National Statistics.  These figures brought the sterling under further pressure.  It has fallen in recent days, after several policymakers, including BOE governor Mark Carney, hinted that they could vote for a rate cut unless economic data improves significantly, raising expectations of a rate cut in the next meeting to be held at the end of January.  These expectations further increased with worse-than-expected growth and industrial production data this week.  Before the release of inflation data, the BOE interest rate setter Michael Saunders said that he was sticking to his view that borrowing costs should be cut because of weakness in Britain’s labour market and its broader economy.

Germany’s Slow Growth in 2019

The German economy grew by 0.6 percent in 2019, cooling from previous year and marking the weakest expansion since 2013.  Manufacturers in Germany whose business is export dependent faced challenges from trade disputes and lower demand internationally.   Whilst stronger private consumption, higher state spending and booming construction helped to support growth in 2019, struggling manufacturers dragged on activity.

China Posts Weakest Growth In 29 years

In 2019, the economy of China has cooled to its weakest in nearly 30 years amid a trade war with the US.  Data from the National Bureau of Statistics showed that as expected, China’s growth slowed to 6.1 percent last year, from 6.6 percent in 2018.  Despite being strong, and within the government’s target range, it was the weakest since 1990.  Fourth quarter GDP rose 6 percent from a year earlier, steadying from the third quarter, although it was still the weakest in nearly three decades.  Industrial output, investment and retail sales all rose more than expected after the improvements shown in November.  On a quarterly basis, the economy grew 1.5 percent in October-December, also at the same pace as the previous three months.  Data for December which was released along with GDP showed a surprising acceleration in industrial output and a more modest pick in investment growth while retail sales remained solid.  China is expected to engage in more stimulus to boost sluggish investment and demand.

Currency Roundup

On Monday Sterling dropped sharply after another Bank Of England policymaker said he would vote  for a rate cut later this month unless economic data proved significantly.  On Tuesday sterling dropped to a seven-week low against the euro and to a new 2020 low versus the dollar as investors were concerned about the state of the economy and on speculation that the BOE will cut interest rates this month. The swiss franc rose on Tuesday to its strongest against the euro since April 2017 after the US added Switzerland to its watchlist of currency manipulators. Just a day before the signing of the Phase 1 trade deal, the US Treasury on Monday dropped China’s designation as a currency manipulator, a sign of a more cordial relationship between the two countries.   On Wednesday the pound fell after data showed that UK inflation rose at its weakest rate in three years, increasing the expectations of a rate cut from the Bank of England at its January meeting.  Against the dollar, sterling fell as much as 0.25 percent to $1.2985 following the inflation release, before recovering slightly against to around $1.30.  Sterling was however weaker against the euro at 85.65 pence a quarter of a percent lower on the day.

Market Wrap

US Stock indexes traded just below all-time highs on Monday as investors awaited the signing of the preliminary trade agreement and the start of the fourth-quarter earnings season.  High profile tech companies and internet companies such as Apple Inc, Facebook Inc, Microsoft Corp and Amazon which have recently increased to all time highs boosted the main indexes.  Google owner Alphabet Inc was on course to become the fourth publicly traded US company to be valued at $1 trillion.    Meanwhile, French yields hit an 11-day high of 0.079 percent following Saturday’s news that Prime Minister Edouard Philippe offered a major concession to unions contesting his government’s overhaul of the pension system.  Such a move is aimed at ending strikes which are now in the fifth week.  Whilst falling considerably last Friday, after Italian industrial production unexpectedly rose in November, Italian yields this time round were again the outliers, rising by 5 bps at 1.382 percent.   Asian shares rallied on Tuesday amid signs of goodwill between the US and China as they prepared to sign a trade deal after an 18-month long tariff dispute that affected the global economy.   Benchmark 10-year government bond yields in the euro area hovered near their highest levels in almost two weeks on Tuesday amid the signing of the trade deal and a fresh wave of bond supply dented the demand of fixed income.  After the signing of the deal between the US and China on Wednesday, key stock market indexes climbed to record highs, but later stalled amid concerns that it may not ease trade tensions for long as there are still outstanding issues to be resolved.  On Thursday European shares climbed after the US and China signed the awaited Phase 1 trade deal, giving some relief to markets. Thursday saw most of the 10 year bond yields in the euro area touching higher, with the German bund yields just below the two-week highs following the signing of an initial US-China trade deal and two days of new bond offers.  On Friday Italian government bonds rallied after Italy’s highest court rejected a proposed change in electoral law that would probably have benefited the far-right League.

Oil

Oil prices fell about 1 percent on Monday amid the ease of tensions in the Middle East. Investors turned their focus to the dull seasonal demand following a bearish US report showing a large fuel stock build-up.  Tuesday saw oil prices edging higher after five days of decline.  API data indicated that US crude inventories rose by about 1.1 million barrels in the week to 10 January.  In the US, the EIA projected the pace of oil production growth would slow to 3 percent in 2021, the lowest since 2016 when the output declined.

Gold

Gold prices dropped to their lowest in nearly two weeks on Tuesday amid stronger than expected China economic data and the signing of the US-Trade deal.  Spot gold slipped 0.4 percent to $1,541.81 per ounce and also reached their lowest since 3 January at $1,535.63.

Malta:  Inbound Tourism

Total inbound visitors for November 2019 were estimated at an increase of 8.3 percent when compared with the corresponding month in 2018.  During the month of November 2019, a total of 158,425 inbound tourist trips were undertaken for holiday purposes, while a further 24,362 were made for business purposes.  Total tourist expenditure was estimated at EUR 136.2 million, an increase of 10.3 per cent over the corresponding month in 2018.  Meanwhile from January to November 2019 the inbound tourist trips surpassed the 2.6 million mark, an increase of 5.3 percent over the same period in 2018.  Total expenditure was estimated at EUR 2.1 billion, which is 4.9 percent higher than recorded in 2018.

Malta:  Quarterly Accounts For General Government:  3rd Quarter 2019

 In the third quarter of 2019, the General Government recorded a surplus of EUR 57.4 million.  Total expenditure in the third quarter of 2019 amounted to EUR 1,158.3 million an increase of EUR 51.8 million over the previous quarter in 2018.  Meanwhile, during the period July to September 2019, total revenue stood at EUR 1,215.7 million, a decrease of EUR 3.6 million when compared to the corresponding quarter in 2018.  At the end of September, General Government debt stood at EUR 5,614.9 million showing an increase of EUR 71.3 million over the corresponding quarter in 2018.

Antonella Mercieca

Client Relationship Manager

Source:

Reuters. https://nso.gov.mt

Date:

January 17th, 2020


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