“Cryptocurrencies …”

Cryptocurrencies

There have been some signs that the love affair with cryptocurrencies is cooling!  Cryptocurrencies dropped  for the second time in less than 24 hours, falling to a nine-month low amid concerns that the broader adoption of digital assets will take longer than some have expected.  Bitcoin which is the largest cryptocurrency, dropped more than $1,000 over the last two days trading at $6,358.  The Bloomberg Galaxy Crypto Index which is a gauge of the largest digital assets, traded near its lowest level since November 2017 as rival coins Ripple, Ether, and Litecoin also slipped more than 4 percent each.  US stocks with exposure to the digital-coin market also fell substantially.  The selloff comes as Goldman Sachs Group joins a list of traditional financial players that have abandoned or delayed crypto currency projects after a rout this year.  Bitcoin lost half of its value in 2018, while trading on crypto exchanges has fallen by 80 percent.  The market for the tokens currently stands at $223 billion (as at January 2018: $800 billion) according to Coinmarketcap.com.

Global Economy

Surveys of purchasing managers released on Monday showed mounting pressure on factories across Europe and Asia.  Growth remained relatively robust and was unlikely to deter major central banks from moving towards tighter monetary policy.  Global stock markets fell for a third straight day on Monday amid worries over further escalation of global trade tensions and the huge sell-off across emerging market currencies.  The trade push of “America First” by US President Donald Trump has had an impact on confidence in many countries and the fear is that the escalating tariff conflict will freeze business sentiment and will be a blow to trade and global growth.  Asia is fragile with China’s vast manufacturing sector which grew at the slowest pace in more than a year in August, with export orders shrinking for a fifth month.  Furthermore, export orders also shrank in Japan and South Korea  suggesting increasing protectionism, whilst concerns of slower Chinese demand are weighing on Asia’s export-reliant economies.  China’s Markit Manufacturing Purchasing Managers’ Index (PMI) fell to 50.6 in August.  Although the index remained above the 50 point mark that separates growth from contraction for the 15^th consecutive month, it was the weakest since June 2017.  Growth in India’s manufacturing sector unexpectedly slowed in August suggesting a slight loss of momentum for the country’s economy that expanded at its fastest pace in more than two years in April-June.  Meanwhile Japan’s manufacturing activity expanded in August at a slightly faster pace than the previous month, with export orders falling, a sign of the damage from intensifying global trade frictions.

Markets Roundup

This week was a short week for the US market due to Labour Day on Monday.  On Tuesday European shares rebounded following a late rally in Chinese stocks, although investors were likely to remain cautious over the new US tariffs.  Financials were the biggest gainers supported by the strength among some Italian banks, after top figures from the government appeared to play down the chances that the country’s 2019 budget would break European Union spending rules. Their gain helped in lifting the pan-European STOXX 600 index 0.16 while other European benchmarks were also slightly higher.  The FTSE added 0.12 percent.  On Thursday world shares fell for a fifth straight day with emerging stocks in their sixth day of declines, as investors prepared for an escalation in the trade war between the US and China.

Eurozone Growth 

A survey showed that Eurozone business activity has picked up a bit last month, extending a period of solid growth, but a growing global trade war kept optimism in check and suggests the pace may not be maintained.  IHS Markit’s Euro Zone Composite Final Purchasing Managers’ Index (PMI) went up to 54.5 (July: 54.3).   Anything above 50 indicates growth.   An index measuring optimism sank to a near two-year low of 61.6 from 63.1.   IHS Market said that purchasing managers were alarmed about the impact of trade wars.  US President Donald Trump said he is ready to implement new tariffs on Chinese imports as soon as Thursday, which would be a major escalation after Washington has already applied tariffs on $50 billion of exports from China.  German services growth was supported by an upswing in the domestic economy reaching a six-month high whilst French activity also picked up according to earlier surveys.  In Britain, its large services sector picked up more strongly than expected last month.  Italy’s services sector has slowed for a second month running in August according to an earlier PMI.  Recent data in Italy, which is the eurozone’s third-largest economy have pointed to a slowdown, posing a challenge for the anti-establishment government of the 5-Star Movement and the right-wing League which took office in June.  A PMI that covers the eurozone’s dominant service industry, rose to 54.4 from 54.2 and was far from the readings witnessed around the beginning of the year.  Eurozone retail sales increased at a more moderate rate than expected year-on-year in July, mirroring a steady weakening of consumer sentiment since the start of the year.

Eurozone Q2 GDP Growth

On Friday, EU statistics agency Eurostat confirmed that the Eurozone economy grew at 0.4 percent in the second quarter as business and other investments rose sharply while net trade was negative. Gross fixed capital formation rose by 1.2 percent during the second quarter, contributing 0.3 percentage points to GDP growth.  Changes in inventories, household spending and government expenditure each contributed 0.1 percentage point.  Exports rose by 0.6 percent while imports increased by 1.1 percent during the quarter, where the net impact of foreign trade on GDP was 0.2 percentage points.  Among the Eurozone countries growth was strongest in Malta, Estonia and Slovakia at 1.9, 1.4 and 1.1 percent respectively and weakest in France, Greece and Italy all at 0.2 percent.  The German economy expanded by 0.5 percent during the quarter.

Italian Debt

On Tuesday, Italian government bond yields fell sharply, pulling further away from the three-month highs as investors felt encouraged with the soothing comments from Italian ministers on the forthcoming budget proposals.    Italian bond yields fell 8-18 basis points in early Tuesday trade while tumbled between five and nine basis points on Monday.  The closely watched Italy/Germany 10 year bond yield spread narrowed to 273 basis points (bps), 18 bps tighter than last week’s close.   On Thursday Italian debt extended the gains made earlier this week on remarks from Italian ministers that suggested spending in 2019 would remain within the European Union rules.  Italy’s 10 year bond yield fell another six basis points to 2.88 percent making it 36 basis point drop for the week so far.  Yields are still well above the levels of April and early May, when Italy’s 10 year borrowing costs went as low as 1.71 percent.  Investors have offloaded Italian bonds since the new government took office in June amid concerns that the coalition may implement budget plans that would put the country’s already-huge debt under strain and breach EU fiscal rules.

Emerging Markets

The rout in emerging markets showed no sign of relief, with most currencies weakening and an index of stocks nearing a bear market.  The South African rand led the sell-off, falling to the lowest level in more than two years followed by the Mexican peso.  The MSCI Emerging Markets Index of shares dropped for a sixth day, set for its steepest slide in three weeks.  Indonesia was the worst hit where shares dropped the most in three years.

Egypt’s Tourism

The tourism sector is a pillar of Egypt’s economy and tourism revenue jumped 77 percent in the first half of 2018 to around $4.8billion compared with the same period last year according to a government official. Tourism in Egypt, has been gradually recovering from a 2011 downturn triggered by the uprising that ousted President Hosni Mubarak, helped by a currency float in late 2016 that halved the pound’s value.  Egypt has become a relatively cheap destination for visitors.

Argentina Announced ‘Emergency’ Austerity Measures

Argentine President Mauricio Macri on Monday announced new taxes on exports in the world’s third biggest soy producer and steep cuts to spending in an “emergency” bid to balance next year’s budget, as his centre-right government aims to persuade the IMF to speed up a $50 billion loan program.  The new austerity measures which were announced by the President and Finance Minister Nicolas Dujovne, were prompted after a 16 percent slide in the peso last week that brought its losses to almost 50 percent against the dollar this year.  Dujovne said that spending cuts will make up about half of the savings needed to balance the budget next year, a year earlier. He further added that the contraction of the Argentine economy this year will be steeper than the 1 percent recession projected, but by 2020, Argentina should be able to post a primary fiscal surplus of 1 percent of GDP.    Investors have sought determined action from Macri’s government to close its budget gap amid concerns, that a recession this year and the sliding currency would leave the government struggling to service its debt which is mostly in dollars.

NAFTA Talks

On Wednesday Canada heads went into talks with Washington to renew NAFTA and were determined not to go down on key issues despite there were threats from US President Donald Trump to retaliate against the Canadian economy.  Trump said that he was ready to slap auto tariffs on Canada or exclude the country from the pact altogether.  According to Trump, the 1994 pact which underpins $1.2 trillion in annual trade caused many jobs to leave the United States.  The Trump administration wants to scrap a dispute-resolution mechanism that Canadian Prime Minister Justin Trudeau says is crucial.  The two countries failed to settle their differences last week and are arguing over the US, demanding for more access to Canada’s closed dairy market. Trudeau said on Tuesday, “there are a number of things we absolutely must see in a renegotiated NAFTA,” and reiterated he would not sign a bad deal.

South African Dollar Debt Selloff

South African sovereign dollar bonds sold off for a sixth day running on Wednesday as the rand took another heavy tumble.  The rand lost another 1.5 percent against the dollar.  Data on Tuesday showed South Africa’s economy had fallen into recession for the first time since 2009, contracting 0.7 percent in the second quarter.

China

China’s central bank deputy governor said in an interview with Chinese financial news that the central bank will “firmly push forward” the deepening of reform and further opening of China’s bond market.  He further said that the central bank will support foreign rating agencies market entry and the development of their ratings business in the country.  China will promote a friendlier and more convenient investment environment for foreign institutional investors in China’s bond market.

China’s Manufacturing Growth

China’s manufacturing activity grew at the slowest pace in more than a year in August, and export orders shrunk for a fifth month according to a private survey.  The Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) fell to 50.6 in August from July’s 50.8.  Although the index remained above the 50 point mark that separates growth from contraction for the 15^th consecutive month, it was the weakest since June 2017.  Before the trade war started, the economy was already showing signs of stress.  A regulatory crackdown on financial risks and debt, was pushing borrowing costs and making it tougher for firms to get funding.  Steady reports of weaker export orders suggest, that the trade dispute is adding to that pressure and the impact is starting to ripple through to China’s factory floors.  The Caixin PMI showed that new export orders, which is an indicator of future activity, have contracted for the longest stretch since the first half of 2016.  The Caixin survey which focuses more on small and mid-sized firms, shows that facing rising costs and sluggish demand, China’s manufacturers have been reducing their payrolls for five years. An analysis of financial data of Shanghai-listed companies published by the Shangai Stock Exchange on Sunday confirmed that some companies are struggling with cost pressures.  Some firms are facing operating difficulties due to trade frictions between the United States, China and economic restructuring.

Oil

On Tuesday oil prices rose with US crude breaking through the $70 a barrel after the evacuation of two Gulf of Mexico oil platforms in preparation for a hurricane.  Global oil markets have tightened over the last month, pushing up Brent prices by more than 10 percent since the middle of August.  Meanwhile investors are expecting less supply from Iran as US Sanctions start on Tehran.  Wednesday oil fell towards $77 a barrel as a tropical storm Gordon hitting the US Gulf coast weakened, offsetting the support from forecasts of lower US inventories and sanctions against Iran.

Commodities

Gold fell on Monday as the dollar remained firm on worries over the trade tensions.  Spot gold was down 0.2 percent to $1,198.43 an ounce after hitting an intra-day low of $1,195.36.  Gold prices have fallen about 8 percent so far this year amid rising US interest rates, international trade disputes and the Turkish currency crises, with investors parking their money in the US Dollar.  The Dollar Index .DXY which measures the greenback against a basket of currencies was up 0.1 percent.  Liquidations continued in the SPDR Gold, which is the world’s largest gold-backed exchange-traded fund whereby holdings have fallen over 13 percent since a peak in late April.  Spot silver fell to $14.47 an ounce after earlier falling to its lowest in more than two weeks at $14.37. Platinum rose to $786.60 an ounce, while palladium was down to $978.50 (lower by 0.3 percent) after hitting a 10 week high on Friday at $984.97.

Coca Cola Agreed To Buy Coffee Chain Costa

Coca-Cola has agreed to buy coffee chain Costa for $5.1 billion to extend into healthier drinks and the booming global coffee market.  Coke will use its distribution network to supercharge Costa’s expansion as it chases coffee chain market leader Starbucks.  According to Coca-Cola CEO James Quincey, beyond coffee shops, Costa would provide an important growth platform, ranging from beans to bottled drinks in an attractive category, growing by around 6 percent a year.  He further said that,” Coffee is one of the strongest growing categories in the world, and Coca-Cola needs to expand into coffee and hot drinks”.

Amazon Touches $1 Trillion 

Amazon on Tuesday briefly joined Apple Inc. to become the second $1 trillion publicly listed US company after its stock price more than doubled in a year as it grew rapidly in retail and cloud computing.  Its shares traded at $2050.50 before easing a little and ending the session at $2039.51 up to 1.3 percent and just short of the milestone level of $2050.2677.  Whilst Apple took almost 38 years as a public company to achieve the trillion dollar milestone, Amazon managed to get there in 21 years.  Amazon has managed to diversify into virtually every corner of the retail industry, altering how consumers buy products and putting pressure on stores.  Amazon also provides video streaming services and bought upscale supermarket Whole Foods.  Its cloud computing services for companies have become its main profit driver.  Amazon was founded as an online book retailer in the CEO Jeff Bezos’ garage in 1994 and started trading on 15 May 1997 at $1.50 on a split adjusted basis.  In October 2009 the price went up to $100 and hit $1000 for the first time on 30^th May, 2017.  It has held above that level since 27^th October, 2017.  On 30^th August 2018 the price hit $2000 for the first time.  Year to date the stock is up 74.5 percent.

Malta:  Prices In Malta Have Increased By Over 41% Between 2000 And 2017

Prices in Malta have increased by 41.2 percent since 2000, according to new research published by Eurostat.  Education was the biggest increase by 135.5 percent.  Whilst rising education prices is common across the EU, the increase in Malta was one of the highest.  Food prices have risen by 68.7 percent, while alcoholic beverages and tobacco increased by 100.2 percent.  Housing, water, electricity, gas and fuel prices rose by 66.3 per cent while dining out or going to a hotel is much more expensive too, increasing by 60.7 percent.  Private health services marked a price increase of 63.5 per cent.  Clothing and footwear are now 13.2 per cent cheaper to buy than they were in 2000 and postal services and telephone equipment are 13.8 per cent cheaper.  On the whole, prices have gone up.  While Malta remains on the cheaper side within the EU, the price increase in Malta is higher than the average across the EU, which saw prices increasing by 36 percent overall.

Malta:  Short-Term Services Indicators:  Q2/2018

During the second quarter of 2018, working-day adjusted turnover in selected services activities increased by 7 percent over the same quarter in 2017.  Seasonally adjusted services turnover increased by 1.2 per cent over the previous quarter.  Increases in turnover were registered in real estate activities, transportation, storage activities, in the accommodation and food service activities, in the motor trade activities, in the wholesale trade activities, and retail trade activities.  Meanwhile decreases were recorded in the professional, scientific and technical activities, in the information and communication activities and the administrative and support services activities.

Malta:  Index Of Industrial Production: July 2018

In July 2018, seasonally adjusted industrial production decreased by 6 percent over the previous month, whilst when compared to July 2017, the index of industrial production adjusted for working days also decreased by 6 per cent.

Malta:  Inbound Tourism: July 2018

Total inbound visitors for July were estimated at 290,041, an increase of 13.1 per cent when compared to the corresponding month in 2017.

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