“EU launches Legal Case Against the UK Over Internal Market Bill…”

On Thursday the European Union launched legal action against Britain’s new Internal Market Bill on the grounds that it undercuts London’s earlier legal commitments under the Brexit divorce treaty, according to the head of bloc’s executive.  This could lead to hefty fines being imposed by the EU’s top court although it could take years. The UK can in the meantime change direction.  London has one month to reply to the formal letter of complaint from the Commission.  This came about as British and EU negotiators struggle to close the gap on state aid in parallel trade negotiations that have been overshadowed by the Internal Market Bill. 

German Unemployment

The number of jobless people in Germany dropped for the third month in a row in September, according to data on Wednesday.  This is a positive sign for household spending which is expected to boost the economy from the coronavirus crisis.  The Labour office said the number of people out of work fell by 8,000 in seasonally adjusted terms to 2.907 million.  The unemployment rate fell to 6.3% from 6.4% in the previous month.  The number of people on short-time work schemes have protected the labour market from the brunt of the pandemic, dropped to 4.24 million in July from its peak of nearly 6 million reached in April at the height of the pandemic.

Recovery in German Manufacturing

Germany’s manufacturing sector accelerated in September, with output growing at the fastest pace in more than two years a survey showed on Thursday.  IHS Markit’s final Purchasing Manager’s Index (PMI) for manufacturing, that accounts for about a fifth of the economy increased to 56.4 in September (August:  52.2). 

UK Gross Domestic Product

In the second quarter of 2020 Britain suffered a record collapse in economic output in the second quarter of 2020 due to the lockdown measures.  The Office for national statistics said that Gross Domestic Product plunged by 19.8% in the three months to June in comparison with the first quarter, slightly less than the initial 20.4% estimate, however, still more than any other major advanced economy.   The drop was the biggest since the ONS records began in 1955.  Britain’s economy had already shrunk by 2.5% in the first quarter as the country entered lockdown in late March.  In the second quarter households saved a record 29.1% of their income, up from 9.6% in the first quarter, as their ability to spend in shops and restaurants were impacted by the lockdown.  Incomes were supported by a government job programme that ends next month.  The UK has suffered the highest death toll in Europe from COVID-19 with more than 42,000 fatalities.  Britain’s current account deficit, shrank sharply to 2.8 billion pounds or 0.6% of GBP its smallest in nine years. The slump in global trade was caused by the pandemic. 

US Goods Trade Deficit

The United States’ trade deficit in goods increased in August, with imports increasing as businesses rebuild inventories that had dropped due to the pandemic suggesting that trade could be a drag on economic growth in third quarter.  However, the widened trade gap reported by the Commerce Department on Tuesday did not change expectations for a record jump in gross domestic product in the third quarter after output plunged in the April-June period at its highest pace since 1947.  Although the economy got a boost from the reopening of businesses and a rescue package from the government, now with the number of coronavirus increases and with government support to businesses running out, economic activity is slowing heading into the fourth quarter.  The goods trade gap increased 3.5% to $82.9 billion last month.  Imports of goods climbed 3.1% to $201.3 billion, while goods exports increased 2.8% to $118.3 billion.   

US Consumer Confidence Rebounds in September

US Consumer confidence rebounded more than expected in September as households’ views of the labour market improved.  The Conference Board said on Tuesday that consumer confidence index increased to a reading of 101.8 this month from 86.3 in August. 

US Economy Contracts in Second Quarter

The US economy in the second quarter of this year suffered its sharpest contraction in at least 73 years amid the impact of the coronavirus as confirmed by the government on Wednesday.  Gross domestic product dropped output since the government started keeping records in 1947, said the Commerce Department in its third estimate of GDP. 

US Private Payrolls

US private employers stepped up hiring in September. The reduced government financial aid and a resurgence in new COVID-19 cases in some parts of the country could slow the labour market’s recovery from the pandemic. Private payrolls increased by 749,000 jobs this month after rising 481,000 in August, showed the ADP National Employment Report.   Employment gains were spread across all industries and company size.  Manufacturing payrolls increased by 130,000 jobs and employment at construction sites rose by 60,000. Hiring in the services industries advanced 552,000, with trade, transportation and utilities leading the gains. The ADP report is based on active and paid employees on company payrolls.

US Weekly Jobless Claims

The number of Americans filing new claims for jobless benefits dropped last week, although remaining at recession levels, highlighting the need for more government support.  Initial claims for state unemployment benefits totalled a seasonally adjusted 837,000 for the week ended 26 September compared to the 873,000 in the prior week, said the Labour Department on Thursday. 

China’s Industrial Profits

Profits at China’s industrial firms grew for the fourth straight month in August amid a rebound in commodity prices and equipment manufacturing, according to the statistics bureau on Sunday.  China’s recovery has been gaining momentum and industrial firm profits grew 19.1 percent year-on-year in August to 612.81 billion yuan, according to the statistics bureau.  This compares with a 19.6% increase in July and is the fourth straight month of profit growth.  Profits of the general equipment manufacturing sector increased by 37 percent in August on the year, with electricity machinery up by 13.3% over the same period.  Economic indicators in August, range from exports to producer prices and factory output, all hint to a further pickup in industrial sector.  Meanwhile factory activity grew at a slower pace with smaller firms facing sluggish market demand and financial constraints.  For the months of January to August, industrial firms’ profits dropped 4.4% from a year earlier to 3.72 trillion yuan, better than the 8.1% decrease in the first seven months.  Earnings of state-owned industrial firms dropped by 17% on an annual basis for the first eight months of the year, against a 23.5% decline in the first seven months.  Private-sector profits also dropped 3.3% in January to August, lower than the January to July’s 5.3% drop.   

Oil

Oil prices climbed by 1% on Monday as global equities rallied amid hopes of another US stimulus package.  Meanwhile increasing numbers of coronavirus cases are raising concerns about fuel demand and kept oil futures from moving higher.  Brent crude settled at $42.43 a barrel or 1.22 % whilst US West Texas Intermediate settled at $40.60 a barrel rising 0.87%.  Oil followed the climb on Wall Street as American political talks continued for another COVID-19 relief bill after US House Speaker Nancy Pelosi on Sunday said she thought a deal could be reached with the White House.  A weaker US Dollar which moves inversely with oil prices also helped crude futures.  Meanwhile, despite the efforts by the Organisation of the Petroleum Exporting Countries and its allies to limit output, more crude is being exported from OPEC producers Iran and Libya.  On Wednesday global benchmark Brent crude pared losses and the US crude price rose on hopes that a US economic stimulus deal would support the market although there are concerns about the coronavirus pandemic.  US House of Representative Speaker Nancy Pelosi and Treasury secretary Steven Mnuchin both expressed hope for a breakthrough.  Progress on the stimulus brought Brent crude for November delivery up from its session low of $40.30 a barrel, ending the session at $40.95. West Texas Intermediate increased 2.4% to $40.22 a barrel.  Supporting the increase in prices was the US weekly crude inventory data that showed stockpiles fell by 2 million barrels in the week to 25 September deeper than analysts had expected. 

Market Wrap

On Monday Wall street surged in a broad rally as investors looked for bargains in sectors that were hard hit by the coronavirus recession.  The three major US stock indexes climbed higher.  Energy, financials and industrials that suffered the most from the economic lockdowns, enjoyed the largest percentage gains among major S&P sectors, all of which were up more than 1%.    On Tuesday Asian markets dropped ahead of the first US presidential debate later in the day, with investors also remaining cautious over prospects of the global economy as the number of deaths due to coronavirus surpassed the 1 million worldwide.  Japan’s benchmark Nikkei average edged up 0.22% into positive territory whilst MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 0.31%. Trade in Asia was subdued ahead of China’s Golden Week holiday, from 1st to 8th October and other national holidays in the region.  Global equity benchmark slipped, and government bonds inched higher on Tuesday as investors remained hesitant ahead of the first US presential debate and watched for any progress in the talks for further stimulus in Washington.  Former Vice President Joe Biden’s campaign went on a fresh line of attack on the eve of the debate with President Donald Trump set for after the US market close accusing the republican incumbent of gaming the system to avoid paying his fair share of taxes.   Meanwhile, Wall Street’s main indexes were muted at the open on Tuesday as investors stayed back. The 10-year Bund yield hit its lowest in over seven weeks on Tuesday as inflation in Germany missed forecasts ahead of a reading for the eurozone while divisions widened between policymakers on how to act amid the second COVID wave.  Meanwhile, German consumer prices, harmonised to compare with other European countries, dropped on the year by 0.4% and declined by 0.4% on the month in September according to preliminary data from the Federal Statistics Office on Tuesday.  Wednesday saw China shares closing lower as losses in real estate and materials stocks outweighed optimism from upbeat factory activity surveys.  Markets recorded their worst monthly loss since May 2019.  For the month the Shanghai Composite index lost 5.23%. European stocks also dropped on Wednesday amid a surge in coronavirus cases and a chaotic debate that underlined the risks from the US presidential election.  US stocks futures traded lower hours after the debate.    The pan-European STOXX 600 index was down 0.3% tracking the lower Wall Street futures.  Britain reported 7,143 new coronavirus cases on Tuesday the highest single figure to date, and Germany was set to tighten restrictions.  Growth sensitive travel and leisure, auto and banking stocks led the declines while defensive sectors such as telecom and utilities helped limit the losses. On Wednesday, the S&P 500 gained 0.83% and NASDAQ Composite added 0.74% even though they marked September with their first monthly declines since March when the lockdowns due to the coronavirus pandemic hammered the economy.   European stocks on Thursday climbed as the Swedish retailer H&M and French-Italian chipmaker STMicroelectronics jumped after they reported forecast-beating results, while hopes of more US stimulus helped global sentiment.  The pan-European STOXX 600 index climbed 0.7% and bourses in Paris and London increased 1%.  German stocks rose 0.3%.  As the European markets ended the third quarter subdued amid worries about a resurgence in COVID cases, Brexit deal and the US election, the mood was brightened about the progress of a US fiscal bill.  Global shares tried to extend the gains on Thursday amid renewed hopes for fresh US stimulus measures however the uncertainty about the US presidential election and technical problems in Japans kept the gains in check.  Technical problems at the Tokyo Stock Exchange (TSE) resulted in suspension of all share trading in Japan.  The TSE said trading would be halted all day and said it was not sure when it can recover its systems.   The U.S. House of Representatives on Thursday approved a $2.2 trillion Democratic plan to provide support from the coronavirus pandemic. Republican President Donald Trump’s negotiating team has suggested a $1.6 trillion response, and the White House dismissed Democrats’ $2.2 trillion plan as not series.  Meanwhile on Friday US President Donald Trump tested positive for coronavirus which rattled markets.  The ramifications for November’s election and leadership depends on the severity of his case. 

Currency Roundup

On Monday the dollar retreated from a two-month high against a basket of currencies as equities rallied after four straight weeks of declines ahead of a week of full of economic data and political developments in the US.  A rebound in US stocks at the end of the last week helped to slow the increase in the dollar, which is considered a safe-haven, however a slowdown in the recovery from the pandemic and political uncertainties have made investors more cautious.  On Tuesday sterling hit a one-week high amid three days of negotiations on Britain’s trade agreement with the EU that started in Brussels.  Talks on a joint legal text of trade agreement, which will also cover energy links and transport, will last until Friday morning.  Sterling was trading 0.4% higher at $1.2878. Meanwhile most other currencies, including the euro and the yen, were weaker against the dollar. It was 0.2% higher versus the euro at 90.71 pence.  The yuan slipped on Tuesday with traders possibly reducing their exposure to the Chinese currency as the market draw close to the Golden Week Holiday.  The dollar was steady against a basket of currencies on Tuesday as traders looked forward to the first U.S. presidential debate later in the day and developments on the U.S. stimulus bill.  On Wednesday the dollar was little changed in Asian trade as the traders analysed the first debate, out of three between Republican President Donald Trump and Democratic rival Joe Biden ahead of the US presidential election.  During the debate the candidates battled over the president’s leadership on the coronavirus pandemic, the economy and taxes.  The euro was firm around a one-week high of $1.1746 hit overnight whilst against the yen the single currency changed hands at 124.01 yen, hovering near a two-week.  Pelosi said on Monday Democratic lawmakers unveiled a new $2.2 trillion fiscal stimulus bill, however, White House economic adviser Larry Kudlow made it clear the White House still views the updated figure as too high.  Sterling was steady at $1.2867 against the dollar.  The British pound gained overnight on hopes for a Brexit deal, but retreated after the Bank of England’s governor kept the door open for using sub-zero interest rates if needed.   On Thursday, the dollar was at a one week low as robust US data and fresh hopes for US fiscal stimulus made investors confident enough about the prospects of an economic recovery to seek out riskier currencies.  Donald Trump’s administration has proposed a coronavirus stimulus package to the House Democrats worth more than $1.5 trillion and hopes are rising that both parties will reach a compromise.  $20 billion is an aid extension for the airline industry.

Malta:  Industrial Produce Price Indices- August 2020

When compared to August 2019, the industrial producer price index rose by 0.46%. Increases were registered in consumer goods and capital goods by 1.74 per cent and 0.48% respectively. Meanwhile, intermediate goods dropped by 0.29%. No price change was registered in the energy sector. Industrial producer prices for the domestic market increased by 1.56%. Price increases were recorded in consumer goods and capital goods by 5.12% and 0.22% while intermediate goods went down by 0.04%.  During the month of August 2020, the industrial producer price index decreased by 1% over the previous month.  Price declines were registered in intermediate goods (2.24 %), capital goods (0.41%) and consumer goods (0.04%). 

Malta:  Unemployment Rate – August 2020

In August 2020, the seasonally adjusted unemployment rate reached 4.1%, a decrease of 0.1% from the previous month.  For the month under review, the seasonally adjusted unemployment rate for males was 3.8% while the rate for females stood at 4.4%.   Meanwhile, for persons aged 15 to 24 year was 9.5% while the rate for those between 25 and 74 years stood at 3.4%. 

Malta:  Labour Force Survey Second Quarter 2020

In a press release dated 30 September 2020 NSO show that Labour Force Survey estimates indicate that during the second quarter, total employment stood at 259,523 accounting for 59.2% of the population aged 15 and over.  This accounts for an increase of 2.8% in employment when compared to the corresponding quarter of 2019 and a drop of 2.5% when compared to the previous quarter.  Whilst unemployed persons stood at 12,031 (2.7%), inactive persons totalled 166,861. 

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