“EU starts sale of Green Bond…”

The European Union started selling its first ever green bond on Tuesday, reported Refinitiv news service, taking its first step to potentially becoming the biggest issuer of environmentally-friendly debt with a record-sized deal.  The 15-year green bond, which is due in February 2037, will raise Euros 12 billion, said lead managers on Monday.  This makes it the largest green bond launch in the government bond market to date.  The bond will finance member states’ environmentally beneficial projects as part of the bloc’s coronavirus recovery fund.  With 30% of up to Eur 800 billion recovery fund set to be financed by green bonds, the deal is the first step for the EU towards becoming a leading force in the fast-growing green bond market.  The EU hired BofA Securities, Credit Agricole, Deutsche Bank, Nomura and TD Securities to lead the sale on Monday.   

UK Jobs

Data showed the biggest month-on-month increase in the number of employees on the companies’ books up by 207,000 from August.  Separate official data showed on Tuesday that the unemployment rate edged down to 4.5% in the three months to August from 4.6% in the May-July period.  The BOE is keeping an eye on how many people became unemployed after the end of the furlough programme.  The BOE is also monitoring pay growth as it tries to gauge how persistent a recent jump in inflation is likely to be.  Average weekly earnings were 7.2% higher than in the same three months of 2020, slowing from the previous reading of 8.3%.  Excluding bonuses, earnings rose by 6% in the June to August period, also losing some momentum.  The ONS estimated the underlying pace of wage growth, taking into account how job losses during the coronavirus lockdowns affected predominantly lower-paid workers, stood between 4.1% and 5.6% for regular pay in nominal terms.

US Jobs Opening

US jobs opening fell in August, however, remained significantly high amid labour shortages that are affecting employment growth.  Job openings, which is a measure of labour demand, dropped by 659,000 to 10.4 million on the last day of August, said the Labour Department in its monthly Job Openings and Labour Turnover Survey (JOLTS) report on Tuesday. Hiring declined by 439,000 to 6.3 million.  Meanwhile, the government had reported that nonfarm payrolls increased by only 194,000, the smallest gain since December, 2020, after increasing 366,000 million in August.

US Consumer Prices

US Consumer prices increased solidly in September as Americans paid more for food, rent and a range of other goods.  This has put pressure on the Biden administration to address the issues raised by strained supply chains, that are hampering economic growth. Supply chains have been impacted by robust demand as economies emerge from the COVID-19 pandemic.  Prices are expected to rise even higher in the months ahead due to a surge in the costs of energy products, which put doubts on the Federal Reserve’s view that high inflation is transitory.  The consumer price index rose 0.4% last month after climbing 0.3% in August, the Labour Department said on Wednesday.  Food and rents accounted for more than half of the increase in the CPI in September. In the 12 months through September, the CPI increased by 5.4% after advancing 5.3% year-on-year in August.  Excluding the volatile food and energy components, the CPI climbed 0.2% after increasing 0.1% in August, the smallest gain in six months.  The core CPI was lifted by a 1.3%  increase in the cost of new motor vehicles, which marked the fifth straight month of gains above 1%. 

US Weekly Jobs

The number of Americans filing new claims for unemployment benefits fell close to a 19-month low last week.   This is further evidence that a shortage of workers was behind the slower job growth rather than the weakening demand for labour.  Initial claims for state unemployment benefits dropped 36,000 to a seasonally adjusted 293,000 for the week ended 9 October.  That was the lowest level since mid-March 2020.  With the second straight weekly decline, claims are now in the upper-end of the 250,000-300,000 range that is viewed as consistent with a healthy labour market. Claims have dropped from a record high of 6.149 million in early April 2020.

FED Minutes

The Federal Reserve indicated on Wednesday it could start reducing its crisis era support for the US economy by the middle of next month, with a growing number of its policymakers worried that high inflation could continue longer than previously thought.  However, no decision on the taper of the US Central bank’s $120 billion in monthly asset purchases was reached at its 21-22 September policy meeting.  According to the minutes, “participants generally assessed that, provided that the economic recovery remained broadly on track, a gradual tapering process that concluded around the middle of next year would likely be appropriate.”  The minutes which were released on Wednesday said that policymakers discussed cutting the FED’s purchases of Treasuries by $10 billion a month and those of mortgage-backed securities by $5 billion a month.  However, “several” participants preferred a faster reduction.  The minutes further said, that if a decision to begin tapering takes place at the FED’s 2 to 3 November policy meeting, the process could begin in either the middle of that month or mid-December.  The minutes also indicated there were intensifying worries within the FED over inflation, with “most” policymakers now seeing upside risks and “some” concerned about elevated inflation feeding through to inflation expectations or more broadly into prices.  Several other policymakers attributed the upward in price pressures to pandemic related supply bottlenecks that could be expected to subside.   With regards to the timing of future interest rates, the FED has promised to keep its benchmark overnight lending rate at the current near-zero level until the economy reaches full employment, and inflation has not only reached its 2% goal but is on track to remain modestly at that level for some time.  In the minutes, “various” policymakers thought that economic conditions would likely justify keeping rates near their current level for “the next couple of years.” However, a “number” felt that rates would need to rise by the end of next year because they felt full employment would have been reached.  Some also thought inflation would remain elevated with risks to the upside. 

China’s Exports

China’s export growth unexpectedly accelerated in September, as the solid global demand offset some of the pressures on factories from power shortages, supply bottlenecks and a resurgence of domestic COVID-19 cases.  Although China has showed an impressive rebound from the pandemic there are signs that the recovery is losing steam.  Resilient exports could provide a buffer against weakening factory activity, persistently soft consumption and a slowing property sector.  Outbound shipments in September jumped 28.1% from a year earlier, up from a 25.6% gain in August. 

Oil

Oil prices on Monday jumped to the highest levels in years, fuelled by rebounding global demand that has contributed to power and gas shortages in key economies like China.  Brent crude rose 1.5% to settle at $83.65 a barrel while US West Taxes Intermediate crude gained 1.5% to settle at $80.52 after touching its highest since late 2014 at $82.18.  The pace of economic recovery from the pandemic has supercharged energy demand at a time when oil output has slowed due to cutbacks from producing nations during the pandemic, focus on dividends by oil companies and pressure on governments to transition to cleaner energy. Oil prices reversed early losses to extend the gains on Tuesday into a fourth day amid a rebound in global demand that is contributing to the energy shortages in major economies.  Brent crude was up 0.3% to $83.36 a barrel, the highest in three years, after rising 1.5% on Monday.  US oil gained 0.2% to $80.65 a barrel, a seven-year high, having also gained 1.5% in the previous session.  Power prices have risen to records in recent weeks, driven by energy shortages in Asia, Europe and the US.  Higher energy prices are also adding to inflationary pressures in recovering economies.  Oil prices edged down on Wednesday as expectations grew that demand growth will drop as inflation and supply chain issues will put a strain on major economies.  Brend crude futures were down 0.9% at $82.66 a barrel while US West Texas Intermediate crude futures dropped by 0.9% to $79.84 a barrel.   According to OPEC Secretary General Mohammed Barkindo, the oil market continues to face uncertainties stemming from the COVID-19 pandemic. 

Market Wrap

On Monday US stocks ended a choppy session lower as investors grew nervous amid the third quarter earnings reporting season.  The Dow Jones Industrial Average dropped 0.72% to 34,496.06, the NASDAQ 100 declined by 0.72% to reach 14,713.73 and the S&P 500 dropped by 0.69% to close at 4,361.19. Supply chain problems and higher costs for energy and other things have fuelled concern about earnings.  In Europe, CAC 40 increased by 0.16% to 6,570.54, DAX dropped 0.05% to reach 15,199.14 and FTSE 100 increased 0.72% to close at 7,146.85.

Asian shares dropped onTuesday as a global energy crunch raised fears of inflation, clouding investor sentiment before the US corporate earnings season.  The debt troubles of Evergrande and worries of contagion have sent shockwaves across global markets in recent months.  China Evergrande Group on Tuesday missed its third round of bond payments.  The developer wrestles with more than $300 billion in liabilities. Meanwhile also on Tuesday, the two-year Treasury yields jumped to a more than 19-month high as investors sold US debt, reckoning that surging energy prices would fuel inflation and add to pressure on the Federal Reserve to raise interest rates.  Prices for gas, coal, oil and other commodities have soared in recent weeks, and there is growing evidence that costs are flowing through supply chains.  European shares lost ground on Tuesday as investors feared that soaring commodity prices would hamper a recovery in corporate profits.  Economically sensitive mining, banking and chemical all dropped more than 1%. 

Wednesday saw Asian shares on edge amid an uneasy mood from soaring power prices that weighed on inflation.  Stocks in China closed higher lifted by consumer and technology stocks as better than expected domestic trade data eased fears arising from power crunch and Evergrande’s debt crisis.  In the US markets the Dow Jones Industrial Average closed at 34,377.81, NASDAQ 100 closed higher by 0.77% to 14,774.6 and the S&P 500 closed higher by 0.3% to close at 4,363.8.  In Europe, the CAC 40 moved higher by 0.75% to 6,597.38, the DAX increased by 0.68% closing at 15,249.38 whilst the FTSE 100 closed higher by 0.16% to close at 7,141.82.

Currency Roundup

Dollar

The dollar on Tuesday traded close to a one-year high last month amid surging energy prices and expectations that the US central bank would soon start normalising policy.  The dollar eased back from a one-year high versus major peers on Wednesday ahead of US Consumer price data that could provide additional clues on when the Federal Reserve will taper stimulus and raise interest rates.  Thursday saw the dollar touching its lowest point this week against major peers taking a breather from a rally that had lifted it to a one-year high amid expectations for a rise in interest rate by the Federal Reserve. 

Sterling

Sterling stood near a two-week high against the dollar on Tuesday as UK jobs data came mostly in line with forecasts, keeping expectations for future rate rises from the Bank of England intact.  Against the Dollar the pound hit a two-week high on hawkish comments from the Bank of England Andrew Bailey, who stressed the need to prevent inflation, and policymaker Michael Saunders, who said households must brace for “significantly earlier” interest rate rises. On Wednesday, sterling strengthened by 0.19% to $1.36135 however, remained around the middle of this month’s range. On Thursday sterling moved up to $1.3666, extending Wednesday’s 0.55% advance and approaching to its highest level this month as traders focused on hopes a post-Brexit trade war with the European Union will be avoided and on expectations the Bank of England will increase rates this year.

EURO

On Wednesday, Euro climbed 0.18% reaching $1.1551, off Tuesday’s $1.1522 its lowest in nearly 15 months. On Thursday Euro was mostly flat from Wednesday at $1.15935, but earlier touched $1.1601 for the first time since 5 October. 

Gold

Gold traded flat in early Asian trading on Tuesday as the dollar held firm amid expectations that the Federal Reverse will announce a tapering in its bond purchases next month.  Spot gold was unchanged at $1,753.77 per ounce while US gold futures were little changed at $1,754.90.  Gold is seen as a hedge against inflation and currency debasement.  Gold held steady on Wednesday amid a slight pullback in the dollar and US Treasury yields.  Spot gold rose 0.1% to $1,762.00 per ounce while US gold futures were up 0.2% at $1,762.50.  Thursday saw gold prices hitting their highest in almost a month drawing support from a subdued dollar and the US bond yields.  Spot gold rose 0.3% to $1,797.27 per ounce, having earlier hit its highest since 15 September at $1,797.31.  US gold futures gained 0.2% to $1,797.90.

Malta:  Residential Property Transactions – Q3/2021

A press release dated 12 October, 2021 presents the provisional data on residential property sale transactions based on the date of registration with the tax authority.  In September, 2021, the number of final deeds of sale relating to residential property amounted to 1,017, a 4.4% increase when compared to those registered a year earlier.  The value of these deeds totalled EUR 252.2 million, 33.6% higher than the corresponding value recorded in September, 2020. In the third quarter of 2021, 3,564 final deeds of sale were registered, a annual increase of 16.4%.  The value of deeds registered during this period rose by 37.1% over the same quarter of the previous year and amounted to EUR 788.8 million.   With regard to the region the property is situated in, the highest numbers of final deeds of sale were recorded in the two regions of Għawdex, and Il-Mellieħa and San Pawl Il-Baħar, at 502 and 426 respectively. The lowest numbers of deeds were noted in the region of Il-Birgu, L-Isla, Bormla and Il-Kalkara, and the region of L-Imdina, Ħad-Dingli, Ir-Rabat, L-Imtarfa and L-Imġarr. In these regions, 52 and 116 deeds were recorded respectively. The highest annual increase was registered in the Ħ’Attard, Ħal Balzan, L-Iklin and Ħal Lija region, at 90.0 %. The second highest increase was noted in the region of Il-Mosta and In-Naxxar, a 55.2 % rise compared to the previous year. In contrast, the largest annual decreases were observed in the two regions of Il-Birgu, L-Isla, Bormla and Il-Kalkara, and Għawdex, with declines of 1.9 % and 1.4 % respectively. 

Malta: Retail Price Index (RPI) – September 2021

In a press release dated 11 October, 2021, in September 2021, the annual rate of inflation as measured by the RPI was 2.25% up from the 2.08% in August, 2021.  The largest upward impact on annual inflation was measured in the Food Index, 0.78%.  The RPI measures monthly price changes in the cost of purchasing a representative basket of consumer goods and services and is closely linked with the Cost-of-Living Adjustment (COLA) increases and periodic rent payment adjustments. A closely related measure of price movements is the Harmonised Index of Consumer Prices (HICP).

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