“End Of Waivers …”

End Of Waivers

Last year before the imposition of sanctions, Iran, was the fourth-largest producer among the OPEC countries at around 3 million barrels per day.  On Monday the United States demanded that buyers of Iranian oil stop buying oil by 1^st May or face sanctions.  This has ended six month of waivers which allowed Iran’s eight biggest buyers, most of them in Asia, to continue importing limited volumes.  The end of waivers on imports of sanctions-hit Iranian oil would end next week, pressuring importers to stop buying from Tehran and further tightening global supply.  With the news, oil prices hit their highest.  The move to impose pressure on Iran came amid other sanctions Washington has placed on Venezuela’s oil exports.     Spare capacity from other suppliers such as Saudi Arabia, might be able to ensure oil markets cope with a cut in Iranian exports.  According to Saudi Energy Minister, on Monday his country would “coordinate with fellow oil producers to ensure adequate supplies are available to consumers while ensuring the global oil market does not go out of balance”.     On Thursday oil prices hit $75 per barrel for the first time this year, as quality concerns forced the suspension of some Russian crude exports to Europe, while the United States prepared to tighten sanctions on Iran.  Poland and Germany have suspended imports of Russian crude citing poor quality. Oil prices dipped on expectations that OPEC will raise output to counter effect the shrinking exports from Iran after sanctions imposed by the US.

New Home Sales In The US

Sales of new US single-family homes jumped to a near 1 ½ year high in March, boosted by lower mortgage rate and house prices.  The Commerce Department said on Tuesday new home sales increased 4.5 percent to a seasonally adjusted annual  rate of 692,000 units last month, the highest level since November 2017.  This was the third straight monthly increase in new home sales.  Meanwhile a report on Monday showed home resales tumbled in March, weighed down by a persistent shortage of lower-priced houses.  After the data, the dollar index hovered near a 22 month peak.

Trade Talks Next Week

US Trade Representatives will travel to Beijing for trade talks beginning on 30 April, said the White House in a statement on Tuesday.  It further said that Chinese Vice Premier Liu He who will lead the Beijing talks for China, will also be travelling to Washington for more discussions starting on 8^th May.  The White House said that the topics that would be covered are trade issues including intellectual property, forced technology transfer, non-tariff barriers, agriculture, services, purchases and enforcement.  Beijing and Washington are seeking to reach a deal to end a trade war which is marked by tit-for-tat tariffs that have cost the world’s two largest economies billions of dollars, disrupted supply chains and rattled financial markets.  The United Sates is seeking changes from China that range from reducing industrial subsidies to halting forced technology transfers by US companies seeking to enter the Chinese market.

Italy’s Bond Yields

Italy’s 10-year government bond yield climbed to its highest in seven weeks on Tuesday.  The factors contributing to this increase are the unease over the government infighting and an upcoming ratings review.   Last Friday, Italy’s coalition partners clashed over mutual allegations of corruption, with relations between the League and the 5-Star movement at their lowest since they formed a government last May.  The 10-year Italian bond jumped 7.5 basis points to 2.67 percent, its highest since March.  Outside Italy, bond yields across the euro zone rose 2 to 3 bps as rising oil prices lifted inflation expectations.  Germany’s benchmark 10-year bond yield rose  2.5 bps to 0.049 percent.  The Italian/German yield gap increased at around 261 bps which is its widest in two weeks.  Meanwhile ratings agency S&P Global is due to review Italy’s credit rating today.    S&P rates Italy BBB which is two notches above junk, but has a negative outlook on the country.  A weak economy and concerns about a growing budget deficit have raised worries about Italy’s ratings outlook.

Cyprus

Cypriot borrowing costs hit a one-month high ahead of a debt sale as the country attempts to take advantage of favourable market conditions with its first-ever syndicated 30-year bond sale.  Cyprus on Tuesday appointed banks for a syndicated sale of debt maturing in December 2024 and May 2049, with the deal largely expected to be launched later on Wednesday.  Cyprus 10 year bond yield hit a one-month high of 1.61 percent in early trade on Wednesday, while the 15 year note touched a three week high of 2.277 percent.

German Business Morale

German Business Morale dropped in April, as trade tensions hurt the industrial engine of Europe’s largest economy, with domestic demand supporting slowing growth.  The munich-based Ifo economic Institute said on Wednesday its business climate index fell to 99.2 in April from an upwardly revised 99.7 in March, the first rise after six straight declines.  Last week Economy Minister Peter Altmaier said that Berlin expected gross domestic product to grow by 0.5 percent this year after a 1.4 percent expansion in 2018.  The government has already cut its 2019 forecast in January to 1 percent growth from a previous 1.8 percent.  Amongst the factors contributing to weaker demand faced by German exporters are weaker demand from abroad, trade tensions triggered by US President Donald Trump and business uncertainty caused by Brexit.  The sole driver of growth this year seems to be Germany’s vibrant domestic demand, helped by record-high employment, inflation-busting pay increases, and low borrowing costs.

Bank Of Canada

The Bank of Canada held interest rates steady on Wednesday as expected but removed the wording around the need for future hikes and lowered its growth forecast for 2019.  Governor Stephen Poloz said that the Central bank had shifted to a position of watching and waiting.  He did not rule out the chance of a rate cut.  Rates were held steady at 1.75 percent after they were raised five times since July 2017, but had stayed on the sidelines in the bank’s last four decisions.  The central bank expects economic growth for the first half of 2019 to be lower than anticipated in January, when it released its last monetary policy report, amid a slowdown in Canada’s oil sector, the negative impact of global trade policies and a weaker than expected housing sector.

South Korea Economy

South Korea’s economy unexpectedly shrank in the first quarter, its worst performance since the global financial crisis, as companies cut investment and exports slump amid the US-China trade tensions and cooling demand from China.  The bank of Korea said on Thursday, that a worse than expected downturn in the memory chips sector hit first quarter capital investment, while falling exports offset gains in private consumption.  Gross domestic product (GDP) in the first quarter declined a seasonally adjusted 0.3 percent from the previous quarter, the worst contraction since a 3.3 percent drop in the late 2008 and falling from 1 percent growth in October to December.

Bank Of Japan

For the first time the Bank of Japan told investors on Thursday that it will keep interest rates at super-low levels for at least one more year.  The decision by the Bank to  provide more specific guidance to financial markets comes amid signs of weaker global demand whilst China-US trade tensions are having an impact on the economy which relies on exports.  This move has put the Bank of Japan in line with the Federal Reserve and the European Central Bank, as they pause efforts to scale back their policies in view of the heightened uncertainty over the global economic outlook.  The BOJ Governor said the central bank was ready to adjust the policy swiftly if necessary, in order to sustain the economy’s momentum for achieving its 2 percent inflation target.  As it was widely expected, the Bank of Japan maintained its short-term rate target at minus 0.1 percent and that of long-term yields around zero percent at the two-day meeting that ended on Thursday.  It also reiterated that it will keep buying assets such as government bonds and exchange-traded equity funds.

Gold

On Wednesday Gold prices fell hovering around a four-month low touched in the previous session, as the dollar gained after strong US housing data dampened concerns about an economic slowdown in the country and an upbeat risk appetite.  Spot gold reached $1,269.93 per ounce this week.    Gold prices were hit by the recent uptick in global equities due to better than expected data and a supportive policy environment giving a boost to risk appetite.

Deutsche Bank Merger Talks With Commerzbank Collapse

Germany’s two banks announced that after nearly six weeks of high-level negotiations about merger talks, ended due to the risks of doing a deal, restructuring costs and capital demands.  Both CEOs said the deal would not have created sufficient benefits to offset the risks and costs of a merger, which had been opposed by unions fearing 30,000 job losses which raised concerns among investors and regulators.  German government officials, led by Finance Minister Olaf Scholz, had pushed for a merger to create a national banking champion and end questions over the future of both banks, which have struggled to recover since the financial crisis.

Markets Wrap

The S&P index and the NASDAQ registered record closing highs after a rally on Tuesday as better than expected earnings reports eased concerns about a slowdown.  The S&P has risen 17 percent so far this year, with the help from a dovish stance taken by the Federal Reserve and on hopes of solutions to the US-China trade conflict.  An upbeat start to the first-quarter earnings seasons also helped.  On Tuesday the Nikkei edged lower, as investors were cautious before earnings results, but it remained around a 4 ½ high, as sentiment was supported by a rally in US stocks.  Nissan stocks tumbled 4 percent.  After the market close, Nissan cut its earnings outlook and now expects a net profit of 390 billion yen, compared to previous forecast of 410 billion yen.  On Wednesday the Asian markets faltered amid losses in South Korea and on concerns that China has put any further stimulus on hold as the economy shows signs of recovering.  Meanwhile, Australian shares jumped as much as 1.1 percent to a more than 11 year high, after a sharp slowdown in Australian inflation raised the likelihood of an interest rate cut.  The mixed day in Asia came after upbeat earnings from Coca Cola, Twitter, United Technologies and Lockheed Martin which helped the NASDAQ and the S&P 500 indexes reach record closing highs on Wall Street overnight.  According to analysts alongside the better than expected corporate earnings, a more supportive policy environment has helped to boost risk appetite.  US Treasury yields declined alongside most Asian equities. While US Treasury yields ticked lower, a steepening of the US yield curve indicated a persistent bullish outlook for the US economy.  The yield curve steepens when longer-dated yields rise faster than shorter-dated yields suggesting bullish investor sentiment.  On Thursday European shares fell weighed down by energy stocks and Nokia shares.  Meanwhile investors analysed mixed earnings in the region amid concerns from the eurozone economy.  UBS, the Swiss biggest bank, advanced after its first-quarter results surpassed analysts expectations.  This followed a surprise profit from its small rival Credit Suisse on Wednesday.  Britain’s Barclays fell after reporting a 10 percent drop in the quarterly profit.  Germany’s benchmark 10-year government bond yield held below zero percent on Thursday, a day after a disappointing German IFo sentiment survey increased concerns about Europe’s economic outlook.

Currency Roundup

On Tuesday the sterling was stuck under $1.30 as Britain’s parliament returned from its Easter break and the Conservative party tried to move talks forward with the opposition Labour party over a Brexit agreement.  After the European Union and London agreed to delay Brexit by six months, removing the risks of an immediate no-deal Brexit that could have hit hard the sterling, volatility in sterling has fallen sharply in recent weeks.  On Tuesday sterling rose 0.1 percent to $1.2993 after earlier falling to as low as $1.2975, its weakest since 11 March.  Against the euro it gained 0.2 percent to 86.555 pence per euro.  Meanwhile the dollar held near three-week highs as a drop in market volatility ramped up the demand for riskier assets.  As the 10-year US Treasury yields climbed to more than 20 basis points over the past four weeks to a one-month high, demand for US-denominated assets has grown.   As the markets reopened after the Easter holiday, broader market moves were quiet.  On Wednesday the Australian dollar dropped one percent after weaker than expected inflation numbers increased the prospect of an interest rate cut. The consumer price index was flat in the January-March quarter, below forecasts and the lowest since early 2016.  Meanwhile the US dollar held firm amid strong US housing data, an indication of a strong economy, encouraging investors to snap up the US currency in recent weeks. On Thursday the euro declined near a 22 month low weighed down by Germany’s weak growth and spectre of political uncertainty in Spain.   The Chinese yuan eased to a one month low against a broadly stronger US Dollar before recovering partially, as major state-run Chinese banks sold dollars.  The currency did not react to comments from a vice governor at the central bank saying that the People Bank of China had no intent to tighten or relax monetary policy.

Malta:  Registered Unemployment – March 2019 

In March the number of persons registering for work stood at 1,772 dropping by 9.3 percent when compared to the corresponding month in 2018.     The largest share of men and women on the unemployment register sought occupations as clerical support workers with 18.2 percent and 39.1 per cent respectively.

Malta:   General Government Surplus for 2018

In 2018, the general Government registered a surplus of EUR 250.8 million, equivalent to 2 percent of GDP. This is a decrease of EUR 136.4 million from the previous year  The gross consolidated debt amounted to Eur 5,664.70 million or 46 percent of GDP.

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