“ECB Meeting …”


ECB Meeting

In an ECB meeting held on Thursday it was decided that interest rates will remain at record lows at least through the end of this year.  In addition it launched a new Targeted Long-Term Refinancing Operation partly aimed at helping banks roll over 720 billion euros in existing ECB loans and avoid a credit squeeze that could further worsen the current economic slowdown.  The ECB said that, “a new series of quarterly targeted longer-term refinancing operations (TLTRO-III) will be launched, starting in September 2019 and ending in March 2021, with maturity of two years”.  The ECB further said that, “Under TLTRO-III, counterparties will be entitled to borrow up to 30 percent of the stock of eligible loans at 28 February 2019 at a rate indexed to the interest rate on the main refinancing operations over the life of each operation.    With the decision taken on Thursday, the ECB’s rate on bank overnight deposits will remain at -0.4 percent.  The main refinancing rate which determines the cost of credit in the economy remains at 0.00 percent while the rate on the marginal lending facility – the emergency overnight borrowing rate for banks remains at 0.25 percent.  These new operations will help to preserve favourable bank lending conditions and the smooth transmission of monetary policy.

Greek Bond Yields

Moody’s late last week lifted Greece’s issuer ratings from B3 to B1 amid the effectiveness of the country’s reform programme.  The 10 year government bond yield dropped to their lowest to 3.6 percent since 2006 on Monday after Friday’s rating increase.  Meanwhile, the country’s debt agency announced a new 10 year bond sale embarking on the positive sentiment.

Automakers In Europe

New car sales in Germany climbed to 3 percent year on year in February, recovering from a decline in January. On Monday the German Association of the Automotive Industry (VDA) said that new car registrations rose to 268,800 vehicles, with German makes accounting for 70 percent of the cars sold.


British Prime Minister Therese May on Monday set plans for a 1.6 billion pound fund to help boost economic growth in Brexit-supporting communities with ministers denying it was a bribe to win support for her EU exit deal.  Britain is due to leave the bloc at the end of the month and May whose exit deal with Brussels was rejected by lawmakers on large majority, has promised parliament it will get to vote on a revised deal by 12th March.  According to the government, the fund would be targeted at places that had not shared fairly in the prosperity of the country.  The aim is to use it to create new jobs, help train people and boost economic activity.  One billion pounds has already been allocated with more than half going to towns across the north of England and a further 600 million pounds will be available for communities around the country to bid for, said the government.

The Backstop

Northern Ireland has come to play an important role in the final weeks before the UK leaves the European Union, as Ireland is the only British land border with the rest of the EU.  The Good Friday agreement of 1998 that ended 30 years of sectarian unrest in the province demands that border control posts are never replaced at the frontier.  Meanwhile EU rules require border checks with countries with countries outside the common market.  The deal that was reached by Theresa May with European leaders last year calls for a “backstop” whereby Northern Ireland would continue to apply many EU rules unless another means can be agreed in future to keep the border open.  Britain is due to leave the EU on 29th March however, the backstop has been a main objection raised by pro-Brexit British lawmakers who voted against May’s deal.   The EU’s Chief negotiator said on Friday that the European Union is ready to give Britain more guarantees that the Irish “backstop” is only intended to be temporary.

US New Home Sales

Sales of new US single-family homes rose to a seven-month high in December (November’s outsized jump was revised lower).  Data on Tuesday showed an acceleration in growth in the services sector in February amid a surge in new orders.  Hiring appeared to be slowing.  Meanwhile, a measure of services industries employment dropped to a six-month low.  The moderate pace of hiring is in line with expectations of slower economic growth as the stimulus arising from the $1.5 trillion tax cut and increased government spending diminishes.  The release of the December report was delayed by the five week shutdown of the government that ended on 25th January.

US Private Sector Job Report

US Treasury yields increased on Wednesday after a report showed that the US created fewer-than-expected private sector jobs in February and the January number was revised sharply.  A report by payrolls processor ADP indicated new private sector jobs of 183,000 lower than market expectations of 189,000.  Figures for January were revised higher to 300,000 from the original estimate of 213,000.  After the report, US Treasury yields edged higher from lows on Wednesday.

US Goods Deficit

The US goods trade deficit surged to a record high in 2018 as strong demand arising from lower taxes increased imports.  This goes against the protectionist trade agenda of safeguarding US manufacturing from unfair foreign competition.  On Wednesday, the Commerce Department said that a 12.4 percent jump in the goods deficit in December had contributed to the record $891.3 billion goods trade shortfall last year.  Overall trade deficit surged 12.5 percent to $621 billion in 2018 the largest since 2008.

US Weekly Jobless Claims

The number of Americans filing applications for unemployment benefits unexpectedly fell last week, a sign to strong labour market conditions although there are indications that job growth was slowing.  Although other data on Thursday showed an improvement in worker productivity in the fourth quarter, the trend remained sluggish.  In the last quarter, labour costs continued increasing at a moderate pace, suggesting benign inflation pressure, supporting the patience stance taken by Federal Reserve of raising the interest rates.  The labour Department said that initial claims for state unemployment benefits slipped 3,000 to a seasonally adjusted 223,000 for the week ending 2nd March. In another report on Thursday, the Labour Department said nonfarm productivity, which measures hourly output per worker, increased at a 1.9 percent annualised rate in the last quarter.

US Job Growth

The US economy created only 20,000 jobs amid a contraction in payrolls in construction and several other sectors.  This could raise concerns of a sharp slowdown in economic activity.  The moderate employment growth reported by the Labour Department is in line with a slowing economy that in July will mark 10 years of expansion.  The February’s job growth was the weakest since September 2017, and unemployment rate fell back to below 4 percent and annual wage growth was the best since 2009.  Although the economy grew 2.9 percent in 2018, which is the strongest in three years it lost momentum as the year ended.  Retail sales, homebuilding, business spending, and exports all declined in December placing the economy on a slower growth path.

Bank Of Canada And Interest Rates

Bank of Canada left interest rates steady as expected on Wednesday amid a global and domestic slowdown, taking a more dovish stance stating that there was “increased uncertainty” about the timing of future rate increases.  The central bank expects that the Canadian economy will be weaker in the first half of 2019 than it had projected in January, and that it was keeping an eye on developments in household spending, oil markets and global trade.  Since July 2017, the Bank of Canada has raised its rates five times, keeping the overnight interest rate steady at 1.75 percent since October of last year.  The bank made it clear on Wednesday that future rate hikes were still on the table however were not imminent.  The Canadian dollar extended its decline after the decision, moving to its lowest point since 4th January.


China is planning to boost the economy through billions of dollars in planned tax cuts and infrastructure spending as economic growth is at its weakest in almost 30 years amid weak demand and the trade war with the United States.  In his speech on Tuesday, at the opening of the annual meeting of China’s parliament, Premier Li Keqiang said that the government is targeting economic growth of 6 percent to 6.5 percent in 2019.  This is less than the 6.6 percent gross domestic product reported last year.  Li warned of the challenges China is facing and pledged to keep it on a safe footing using stimulus measures.  He further added that China’s fiscal policy would become “more forceful” with planned cuts of nearly 2 trillion yuan in taxes and fees for companies.  These tax cuts are more aggressive than the 1.3 trillion yuan delivered in 2018 and include reductions aimed at supporting manufacturing, transport and construction sectors. Last year’s China’s GDP expanded at its slowest pace since 1990 due to the trade war and the efforts of Beijing to crackdown financial risks, that raised corporate borrowing and hurt investment.  The increase in the stimulus acknowledges the fact that authorities remain concerned about growth.  In efforts to ramp up infrastructure investment, China’s finance ministry raised the special bond issuance quota for local governments to 2.15 trillion yuan from 1.35 trillion last year.  The higher government spending and lower tax revenue will push China’s budget deficit target for this year up to 2.8 percent of GDP whereas last year it was 2.6 percent.  Consumer inflation target has been set by the government at around 3 percent.

China’s February Exports

China’s exports tumbled the most in three years in February.  Meanwhile, imports fell for a third straight month, pointing to a further slowdown in the economy.  The weak readings add to the worries about a global slowdown.  Customs data showed that February exports fell 20.7 percent from a year earlier which is the largest decline since February 2016.  The poor china data comes along amid months of intense negotiations between Washington and Beijing aimed at ending the trade war.  China’s data on Friday showed its surplus with the United States narrowed to $14.72 billion in February from $27.3 billion in January.  As part of the trade discussions China promised to buy more US goods such as agricultural products.   As the talks progressed, Trump postponed an increase in US tariffs for early March.

OECD Cuts Global Economic Growth Forecasts

The Organisation for Economic Co-Operation & Development cut forecasts again for the global economy in 2019 and 2020, following a downgrade in November, as it warned that trade disputes and uncertainty over Brexit would hit world commerce and businesses.  In its interim outlook report the OECD forecasts that the world economy would grow 3.3 percent in 2019 and 3.4 percent in 2020.  “High policy uncertainty, ongoing trade tensions, a further erosion of business and consumer confidence are all contributing to the slowdown,” said the OECD in its report.  The factors effecting Europe are the uncertainty over Brexit, the US-China trade war and the signs of recession hitting Italy.  Germany for example which is an export oriented economy is particularly affected by weaker global demand and rising trade barriers.  The OECD more than halved Germany’s GDP growth forecast to 0.7percent from 1.6 percent previously.  Meanwhile, data earlier in the month showed that US personal income had fallen for the first time in more than three years in January while consumer spending fell by the most since 2009 in December, placing the US economy in a relatively weak position in the first quarter.  China has also experienced signs of slow growth.

Markets Wrap

Monday saw the dollar rising against a basket of major currencies as the US and China appeared to be close to a deal that would roll back US tariffs on at least $200 billion worth of Chinese imports.  The greenback gained for a four straight day, bolstered by the rise in US bond yields with the 10 year yield benchmark hitting one-month peak last week.  Furthermore the dollar rose as Donald Trump renewed his criticism of Federal Reserve Chairman Jerome Powell and blamed the central bank’s current monetary stance for boosting the dollar, which he believes is hurting US exports.  Meanwhile the euro was notably weaker against the dollar falling 0.39 percent at 1.1324.   On Tuesday a three day rally across European stocks stopped as the Chinese government downbeat growth forecasts and weak data reinforced concerns about a global economic slowdown.  Investors were digesting downbeat news from China after Premier Li Keqiang cut the government’s growth target for the year from 6 to 6.5 percent as expected and pledged more stimulus including cuts in taxes, increases in infrastructure investment and lending to small firms.  China’s services sector expanded at the slowest pace in four months in February, pressured by fewer new orders at home and abroad.   The S&P fell modestly on Tuesday as gains in tech and retailers were offset by a fall in industrials with General Electric leading the slump.  The Dow Jones Industrial Average fell 0.05% while the NASDAQ composite index lost 0.02%.    European shares stalled on Wednesday amid weak results from the troubled auto sector that dragged the market down.  The markets were also watching the US-China situation.  Investment sentiment has also been effected by the cuts in the growth forecasts for 2019.  Thursday saw world stock stuck in their worst run of the year whilst bonds increased as investors waited for the news from the ECB.  Meanwhile the euro held near three-week lows before the ECB meeting.  After the European Central Bank delayed its interest rate hike to 2020 and offered banks fresh rounds of loans to prevent a credit, crunch prices on Treasury bonds of all maturities rose on Thursday morning, and yields on European government bonds and the euro fell after the announcement.


Oil prices rose on Monday on reports that the United States and China are closer to a deal and also buoyed by OPEC output.  International Brent futures were up 80 cents at $65.87 a barrel while US West Texas Intermediate crude futures were up 55 cents at $56.35 per barrel.  Hope to end the trade war added support to a market that has been rising for the past two months on cuts to production.  In February supply from the Organisation of the Petroleum Exporting Countries fell to a four-year low according to a Reuter’s survey as top exporter Saudi Arabia and its allies over delivered on the group’s supply pact and Venezuelan output registered a further involuntary decline.  On Wednesday oil prices eased on Wednesday as bullish forecasts by two big US producers and a build in weekly US crude stockpiles outweighed the production cuts by OPEC.  Data from the American Petroleum Institute, an industry group, also showed larger than expected gains in US crude stockpiles.

Malta:  Gainfully Occupied Population- September 2018

In September 2018, registered full-time employment increased by 5.9 percent while part-time employment as a primary job increased by 0.6 percent when compared to the corresponding month in 2017.  When comparing September 2018 to September 2017, the highest increase in employment was brought about by professional, scientific, technical activities, administrative and support service activities.  Whilst registered full-time employment in the private sector went up by 10,388 persons to 160,178, public sector full-time employment increased by 1,235 persons to 47,484.

Antonella Mercieca

Client Relationship Manager


Bloomberg, Reuters, nso.gov.mt


March 8th, 2019

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