“European Central Bank Meeting…”

Source: Reuters

In a meeting on Thursday the European Central Bank said that it was ready to accelerate money-printing to keep a lid on eurozone borrowing costs.  Whilst concerned about the rise in bond yields that could delay recovery across the EU, the ECB said it would use its 1.85 trillion Pandemic Emergency Purchasing Programme (PEPP) more generously over the coming months in order to stop any unjustified rise in debt financing costs.  The ECB in a statement after its regular policy meeting said, “The Governing Council expects purchases under the PEPP over the next quarter to be conducted at a significantly higher pace than during the first months of this year.” This move comes after a steady rise in yields since the beginning of the year.  Such an increase also happened with US Treasuries.  Growth in the eurozone is currently weaker than expected amid the new wave of coronavirus pandemic, a slow rollout in vaccine that requires longer lockdowns and the challenging expectations for a rapid rebound in spring.  In a news conference ECB President Christine Lagarde told a news conference that “While the overall economic situation is expected to improve over 2021, there remains uncertainty surrounding the near-term economic outlook, relating in particular to the dynamics of the pandemic and the speed of vaccination campaigns.”

UK Spending

The UK’s Office for National Statistics Office (ONS) said on Thursday that a measure of spending saw a 10% increase in the week to 4th March to reach 83% of its February 2020 average.   “Since the substantial fall in spending at the beginning of 2021 that followed the Christmas period and introduction of national lockdowns across the UK, the CHAPS-based indicator of debit and credit card purchases has increased in all four consumption categories,” the ONS said. The indicator was based on debit and credit card purchases handled by the Clearing House Automated Payment System (CHAPS). 

German IWH Institute cuts German 2021 GDP forecast

On Thursday Germany’s IWH economic institute cut its 2021 growth forecast for Europe’s largest economy to 3.7% from 4.4% in December as the country risks a third wave of the coronavirus pandemic.  The institute was nonetheless more upbeat about the economy’s prospects this year than the government, which is forecasting 2021 growth of 3%, after a 4.9% slump last year. Germany’s Robert Koch Institute (RKI) has warned of the risk of a third wave of coronavirus infections in Germany.

US Consumer Prices

February saw US consumer prices increasing solidly however inflation remained tepid amid weak demand arising from airline travel and hotel accommodation.   The mixed report from the Labour Department on Wednesday did not change the expectations of higher inflation exceeding the 2% target set by the Federal Reserve as COVID-19 infections drop and faster vaccinations are carried out.  The consumer price index increased 0.4% last month after rising 0.3% in January.  An increase in 6.4% in gasoline prices accounted for more than half of the increase in the CPI.   In the 12 months through February, the CPI shot up 1.7%, the largest rise since February 2020, after climbing 1.4% in the 12 months through January.  The core CPI increased by a surprise pick-up in rents as well as rising costs for recreation, medical care and motor vehicle insurance, which offset declines in prices for airline fares, hotel and motel rooms, used cars and trucks and apparel.

U.S. weekly Jobless Claims

Fewer than expected Americans filed new claims for unemployment benefits last week.  As the situation improves more segments of the economy are reopening putting the labour market recovery back on track. Initial claims for state unemployment benefits totaled a seasonally adjusted 712,000 for the week ended March 6, compared to 754,000 in the prior week, the Labor Department said on Thursday.

The largest Economic Stimulus in US history

The house of representatives gave final approval on Wednesday to one of the largest economic stimulus measures in US history, a $1.9 trillion COVID-19 relief bill. The measure provides $400 billion for $1,400 direct payments to most Americans, $350 billion in aid to state and local governments, an expansion of the child tax credit and increased funding for vaccine distribution. The approval in the Democratic-controlled chamber came without any Republican support after weeks of partisan debate and wrangling in Congress. Biden plans to sign the bill on Friday, the White House said. Amongst the criticism from the republicans was that it was too costly, packed with wasteful progressive priorities.   They said the worst phase of the largest public health crisis in a century has largely passed and the economy is headed toward a rebound.

China February Factory Prices 

In February China’s factory gate prices rose at the fastest pace since November 2018 as manufacturers   raced to fill export orders, raising expectations for robust growth in the economy. The producer price index (PPI) rose 1.7% from a year earlier, National Bureau of Statistics data showed on Wednesday.  China’s exports in February grew at a record of 154.9% in dollar terms from a year earlier.  Chinese officials continue with their warnings of difficult external conditions that impacts demand.  The consumer price index dropped 0.2% from a year earlier, said the statistics bureau in a separate statement. 

Market Wrap

Shares of banks and automakers lifted European shares on Monday as investors continued to invest in economy-linked sectors on hopes of a solid economic rebound from the coronavirus downturn.  European shares continued catching up with Friday’s rally on Wall Street, while oil companies such as Royal Dutch Shell and BP jumped as crude prices were boosted by reports of attacks on Saudi Arabian facilities.  The oil and gas sectors jumped 1% in Europe, while travel, leisure and banks gained more than 1.3% each. US Treasury Secretary Janet Yellen on Monday said that the coronavirus aid package by President Joe Biden would provide enough resources to fuel a “very strong” US economic recovery and noted that “there are tools” to deal with inflation.  Investors are however unsure as to whether the stimulus will help global growth rebound faster from the COVID-19 pandemic or whether the US will overheat, and inflation increase.  Asian markets and Wall street futures were weaker on Monday as US Senate passage of the $1.9 trillion stimulus bill put new pressure on Treasuries whilst a jump in Brent crude futures above $70 a barrel for the first time since the COVID-19 pandemic stoked concerns about inflation.

On Tuesday global stocks gained amid hopes of a robust in economic recovery that boosted confidence in riskier assets.  Furthermore, a pullback in US and European bond yields also buoyed equity markets.  Germany’s DAX reached its third record high in a week after a surprise increase in January exports.  Meanwhile, the faster rollout of COVID-19 vaccines in some countries and the United States planned $1.9 trillion stimulus package helped underpin a brighter global economic outlook, the Organisation for Economic Cooperation and Development said, as it raised its 2021 growth forecast to 5.6%. European stocks extended their gains after posting their best session in four months a day earlier amid gains in shares of oil and utility companies that helped to offset the losses in miners.  Major European indexes have done better than some of their tech-heavy US peers.

Faster vaccine rollouts and the fiscal stimulus on the horizon raised bets of higher inflation, triggering an increase in Treasury yields that pushed the tech-heavy Nasdaq down as much as 12% from its Feb. 12 record close last week.  On Wednesday, the 10-year U.S. Treasury yield slipped from its session highs after data indicated the core consumer prices index, which excludes volatile items such as food and energy, rose less than expected last month. Euro zone bond yields rose on Wednesday, with the market’s focus mostly on a benchmark bond auction and inflation report out of the United States, a day ahead of the EU’s meeting.  Although the rise in European yields is seen as less justified given a weaker economic outlook, euro area yields closely track moves in the United States hence attention remains on market moves.  European stocks pulled back on Wednesday after surging close to pre-pandemic levels a day earlier, as worries about rising inflation kept investors on edge, with mining and travel stocks leading the retreat. Economically sensitive sectors such as miners, travel & leisure, and industrial companies led the declines in Europe, while telecoms and real estate stocks edged higher. Meanwhile, data showed China’s factory gate prices rose at the fastest pace since November 2018 in February.

On Thursday world stocks climbed to their highest in just over a week after a report on U.S. consumer prices calmed investor nerves about inflation and lifted the Dow Jones Industrial Average to a record close.  European stocks also climbed on Thursday hitting a new one-year high as worries about a spike in inflation eased while investors awaited the ECB’s policy decisions and its views on a recent rise in bond yields. Technology, mining and retail sectors were the top gainers in Europe rising between 1.2% and 2% whilst banks fell the most.   Britain’s FTSE 100 index rose 0.14%, France CAC 40 0.2% and Italy’s FTSEMIB 1% while Germany’s DAX traded flat.   British shares rose on Thursday, as higher commodity prices boosted mining and energy stocks after the United States passed a massive stimulus bill.  Earlier in Asia, an index of regional stocks excluding Japan rose 1.7%, led by a 2.3% increase in South Korea’s Kospi, and was on track for its first three-day advance in three weeks.  China’s Shanghai Composite rallied 1.9%, helped by local lending data. Japan’s Nikkei 225 gained 0.5%.  The announcement at the ECB meeting pushed bond yields lower, Germany’s 10-year yield, the benchmark for the region, extended its fall and was down 4 basis points to its lowest in over a week at -0.36%. 

Currency Roundup

On Tuesday sterling touched a two-week high against the euro and gained against the dollar supported by the progress in the vaccine rollout.  The governor of the Bank of England was cautiously optimistic about the recovery.  So far more than 22 million people have had their first dose of COVID-19 vaccine in the UK.  In early London trading, the pound rose to a two-week high against the euro at 85.57 pence while it was flat later at 85.76.  Against the weakening dollar sterling rose by 0.4% to $1.3877.

As currency markets calmed down on Wednesday the pound was little changed against the dollar but it continued to climb versus the euro amid Britain’s success in the rollout of the vaccine.  Meanwhile, the dollar edged up in early London trading, recovering some of the losses it suffered in the previous session when U.S. treasury yields slipped.  Sterling moved by less than 0.1% against the dollar at $1.3899 having dropped in recent weeks. Against the euro, the pound was up around 0.2% at 85.53 pence per euro.  Sterling has gained around 4.3% against the euro in 2021.  The dollar rose on Wednesday getting back some of its losses incurred overnight as US yields found a floor following their drop from one-year highs. Meanwhile currencies such as the Australian and New Zealand dollars retreated after reaching big gains on Tuesday.    The euro moved 0.05% lower at $1.18940 after bouncing off a 3-1/2-month low of $1.18355 on Tuesday. Against the yen, a traditional safe-haven currency, the dollar traded 0.2% higher at 108.68 yen, following its retreat from a nine-month high of 109.235. 

The dollar index fell to its lowest in a week early on Thursday and there was a mild “risk on” tone in currency markets, as attention turned to the European Central Bank’s policy meeting. Softer consumer prices data in the United States on Wednesday helped to ease fears about a possible increase in inflation when economies re-open from the COVID-19 pandemic. The dollar was down around 0.2% at 91.606 against a basket of currencies after having dropped from the three month high of 92.506 it reached on Tuesday.  The euro was around 0.3% higher against the dollar at $1.19585.  So far this year it dropped 2.1%. Elsewhere, currency markets showed signs of mildly increased risk appetite.  The Australian and New Zealand dollars were up for the third session in a row, both at their highest in a week versus the U.S. dollar, helped by rising commodity prices.  Sterling made little gains on Thursday, holding above $1.39 as the dollar weakened and investors remained focused on hopes that the UK’s COVID-19 vaccine programme would support its economic recovery. 

Oil

Oil prices rose on Wednesday on an upbeat forecast for global economic recovery and as U.S. gasoline inventories plummeted.  Prices, however, were limited due to a surge in crude oil inventories after last month’s Texas winter storm. Brent crude settled at $67.90 a barrel, gaining 38 cents, or 0.6%. whilst U.S. West Texas Intermediate crude settled at $64.44 a barrel, rising 43 cents, or 0.7%. U.S. gasoline stocks dropped by 11.9 million barrels last week and distillates, which include diesel and heating oil, fell 5.5 million barrels, the Energy Information Administration said.  Oil prices rose by 2% on Thursday amid a weaker dollar as fears of rising U.S. inflation eased however a steep fall in U.S. fuel stocks meant a surplus of crude would be short-lived as refiners restart in Texas after a rare freeze caused outages.

Malta:   Inbound Tourism – January 2021

In a press release dated 9th March 2021 the National Statistics Office shows that total inbound visitors for January 2021 were estimated at 13,806, a decrease of 90.8% when compared to the corresponding month in 2020.  The main markets were France and Italy with a joint share of 47.3% of total inbound tourists.  Total tourist expenditure was estimated at €11.7 million, a decrease of 87.6 per cent over the corresponding month in 2020.

Antonella Mercieca

Client Relationship Manager

Source:

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

Date:

March 12th, 2021


‘Disclaimer: The information provided on this website is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning investments or investment decisions, or tax or legal advice. Similarly, any views or options expressed on this website are not intended and should not be construed as being investment, tax or legal advice or recommendations. Investment advice should always be based on the circumstances of the person to whom it is directed, which circumstances have not been taken into consideration by the persons expressing the views or opinions appearing on this website. Timberland Finance has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website. You should always take professional investment advice in connection with, or independently research and verify, any information that you find or views or opinions which you read on our website and wish to rely upon, whether for the purpose of making an investment decision or otherwise. Timberland Finance does not accept liability for losses suffered by persons as a result of information, views of opinions appearing on this website. This website is owned and operated by Timberland Invest Ltd.’

Timberland Finance,
Aragon House Business Centre,
Dragonara Road,
St Julian’s, STJ 3140,
Malta