“ECB Meeting…”

Source: Reuters

The ECB engaged into more stimulus measures on Thursday to support the economy.  It expanded its debt purchase scheme and agreed to provide banks with even more ultra-cheap liquidity as long they keep passing cash to companies.  In a statement the ECB said, “Uncertainty remains high, including with regard to the dynamics of the pandemic and the timing of vaccine roll-outs.”  “The Governing Council therefore continues to stand ready to adjust all of its instruments as appropriate.”  The ECB increased the overall size of its Pandemic Emergency Purchase Programme by 500 billion euros to 1.85 trillion euros, in line with market expectations. Furthermore, the scheme was extended by 9 months to March 22, with the aim of keeping the government and corporate borrowing costs at record lows.  Reinvestments of cash maturing from the emergency bond purchase scheme were extended by one year until the end of 2023.  The ECB further extended the period during which banks will get a 1% interest rate from the central bank for borrowing at its long-term cash auctions by one year to June 22.  With the aim to give banks more liquidity, the ECB will also hold three additional tenders for three-year loans with the last one now scheduled for December 2021.  Meanwhile, exceptionally easy collateral requirements that were introduced in the spring were also extended until June 2022. 

German Exports

German exports increased less than expected in October although giving a boost to the economy at the start of the fourth quarter.  Seasonally adjusted exports increased by 0.8% on the month after an increase of 2.3% in September, said the Federal Statistics Office on Wednesday. Exports to China rose by 0.3% in October from a year earlier while those to the US and to the UK dropped 10.5% and 11.7% respectively.   Meanwhile, imports rose 0.3% after an upward revision in the prior month’s figure to an increase of 0.2%.  The trade surplus expanded to 18.2 billion euros.  The trade figures showed that industrial output surged in October, a sign that the export-oriented manufacturing sector helped the economy get off to a solid start in the current quarter.  Meanwhile lockdown measures that caused most of the services sector to close from 2 November are clouding the outlook for the economy which is expected to stagnate or shrink in the final three months of the year. The German economy grew by 8.5% quarter on quarter from July through September after dropping 9.8% in the second quarter during the first wave of the COVID-19 pandemic.  The government engaged in stimulus actions to support businesses and consumers. 

UK GDP Growth

The UK’s economy  almost came to a halt in October amid the surge in coronavirus cases that dealt to a blow to the hospitality sector, said official figures on Thursday.  Gross domestic product climbed 0.4% on the month after expanding 1.1% in September, the Office for National Statistics said, representing the weakest growth since output collapsed in April during the first lockdown.  Britain has the highest death toll from the pandemic, with more than 62,000 fatalities and GDP dropping by an unprecedented 19.8% in the second quarter of this year.   According to the ONS, output in October was 7.9% lower than in February before the pandemic.  

US Weekly Jobless

The number of Americans filing first-time claims for unemployment benefits increased more than expected last week as new COVID cases caused more business restrictions.  On Tuesday the number of confirmed coronavirus infections reached the 15 million mark.  Stricter stay-at-home orders went into effect in California earlier in the week, affecting about three-quarters of the nearly 40 million people in the most populated state.  Meanwhile other states and local governments have also imposed restrictions on businesses, which economists are expecting to lead to a fresh round of layoffs in winters particularly without additional aid from the government.  A deal on another rescue package remained elusive on Wednesday with Congress still looking for a way forward.  The previous Friday the government reported that the economy created 245,000 jobs in November, the smallest gain in nonfarm payrolls since the jobs recovery started in May and the fifth straight monthly slow down in employment growth.  Only 12.4 million of the 22.2 million jobs lost in March and April have been recovered. 

Inflation in the US

In a report on Thursday the Labour Department said its consumer price index (CPI) climbed 0.2% in November (unchanged in October).  In the 12 months through November, the CPI increased 1.2% after a similar gain in October. 

Brexit

  British Prime Minister Boris Johnson and European Commission President Ursula von der Leyen gave themselves until the end of the weekend to seal a new trade pact after failing to overcome rifts during the dinner on Wednesday over fishing rights in UK waters, fair competition and ways to solve future disputes..  Should no agreement be reached it would upset financial markets and disrupt delicate supply chains across Europe and beyond.  Around $1 trillion in annual trade currently free from tariffs and quotas is at stake.  

Currency Roundup

The pound took a beating on Monday as negotiators struggled to reach consensus on a post-Brexit trade deal.  The dollar index remained near the previous Friday’s two and a half year low after weak US jobs data increased the expectations of economic aid. 

The dollar rose for a fourth straight session on Wednesday as the selling momentum eased with stocks under pressure.  In the afternoon trading, the dollar gained 0.1% against a basket of currencies to 91.027.  The dollar hit session highs versus the yen and the Swiss franc.  The euro fell 0.2% to $1.2080 but was still on track for an annual gain of roughly 8%, its largest since 2017. The pound dropped late on Wednesday after the dinner between UK Prime Minister Boris Johnson and the European Commission President Ursula von der Leyen ended with both sides still “far apart”. 

On Thursday, the ECB President Christine Lagarde said that the European Central Bank will keep a close eye on the strength of the euro as it tends to push down prices and thereby inflation in the single-currency bloc.  In a post policy meeting conference, she said “we do not target the exchange rate, but clearly exchange rates and particularly the appreciation of the euro play an important role and exercise downward pressure on prices.  So we will continue to monitor it very carefully going forward.” So far the ECB said that it would monitor developments in the exchange rate as the euro reached new 2 ½ highs against the US Dollar at $1.2177.  Meanwhile, the pound extended its losses against the dollar and the euro on Thursday as market participants became more cautious about the risk of a no-deal Brexit.  

Oil

Oil stocks slipped 1.3% on Monday amid the continued surge in coronavirus cases globally that put pressure on crude prices as it forced a series of renewed lockdowns.  Oil prices were little changed on Tuesday as the most populated US State tightened its pandemic lockdown through Christmas and COVID-19 cases surged in the US and Europe countering the offsetting news over the vaccines. Brent crude settled at $48.84 a barrel (gaining 5 cents) while US West Texas Intermediate crude futures settled at $45.60 (16 cents lower).  Oil prices increased after the world’s first-fully-tested COVID-19 vaccine shot was given to a grandmother in the UK.  However, investors focused on the reduction in fuel demand amid the pandemic.  On Wednesday oil prices climbed higher matching earlier losses as positive news on COVID-19 vaccines lifted investor hopes for a recovery in fuel demand, outweighing concerns over an unexpected jump in US oil inventories last week.  Brent crude climbed 0.2% to $48.95 a barrel at 0746 GMT after gaining 5 cents the previous day while US West Texas Intermediate crude futures climbed 0.2% to $45.69.   

Market Wrap

European shares slipped on Monday amid tension between the US and China.  After increasing about 14% over the last five weeks, the pan-European STOXX 600 index dropped with banks leading losses as eurozone bond yields dropped.  France CAC 40 dropped 1% while finance-heavy indices in Spain and Italy slipped more than 0.8%.  German’s trade-sensitive DAX index lost 0.8% after Reuters reported that the US was preparing to impose sanctions on some Chinese officials over their alleged role in Beijing’s disqualification of elected opposition legislators in Hong Kong.  London’s FTSE 100 increased 0.3% after in early trade moved between losses and gains as consumer and healthcare stocks led the gains.  Japanese shares closed at a near 30 year high on Wednesday as Britain’s COVID-19 vaccine rollout and progress over a US stimulus deal boosted hopes of swift global economic recovery.  The benchmark Nikkei share average climbed 1.33% to 26817.94, its highest closing since 17 April 1991.   Meanwhile the S&P and the NASDAQ index reached record highs overnight.  Asian shares rose to a record high. European shares were little changed on Thursday after a meeting between Britain and European leaders on a trade deal that failed to yield a breakthrough.  Also, a European Central Bank (ECB) decision due later in the day kept investors from making large bets.  The pan-European STOXX 600 index was flat, while London’s FTSE 100 climbed 0.5% as the pound continued with its slide.  London’s exporter-heavy FTSE 100 edged higher on Thursday due to the absence of a Brexit deal that pressured the pound.  The fears surrounding the economic damage from the pandemic kept the mid-cap index subdued.  The FTSE 100 was up by 0.5% led by consumer staples, materials and energy stocks.  On Thursday Wall Street’s main indexes dropped at the open due to a jump in weekly jobless claims that suggested a stalling recovery in the labour market. Meanwhile, negotiations over fresh economic stimulus dragged on.  The Dow Jones Industrial Average fell 0.38% to 39,954.08 at the opening bell, while the S&P 500 dropped 0.52% to 3653.71 and the NASDAQ Composite dropped 0.8% to 12,240.15.   

Malta:  Index of Industrial Production – October 2020

In October 2020 the seasonally adjusted index of industrial production increased by 1.4% over the previous month.   The largest increases were registered in the production of consumer goods (2.5%), capital goods (2%) and intermediate goods (1.7%).  Meanwhile the production of energy dropped by 4.7%. In comparison to October 2019 the working day adjusted index of industrial production increased by 1%.  Increases were registered in the production of consumer goods and intermediate goods at 7.5% and 0.5% respectively.   The production of energy and capital goods dropped by 7.6% and 5.5% respectively.

Antonella Mercieca

Client Relationship Manager

Source:

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

Date:

December 11th, 2020


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