“European Central Bank Policy Meeting…”

The European Central Bank signalled on Thursday it will trim the emergency bond purchases a notch over the coming quarter.  The ECB pulled out all the stops last year as COVID-19 impacted the economy but with the growth and inflation now rebounding, policymakers have been under pressure to formally acknowledge that the worst is over.  Whilst the move was modest, the ECB gave no indication of its next policy move, including how it might pull back the EUR 1.85 trillion pandemic Emergency Purchase Programme (PEPP) which has kept borrowing costs low for governments and businesses.   In a statement the ECB said, “The Governing Council judges that favourable financing conditions can be maintained with a moderately lower pace of net asset purchases under the Pandemic Emergency Purchase Programme than in the previous two quarters”.  In the past two quarters the bank has bought around 80 billion euros worth of debt each month. It provided no numerical guidance for the three months ahead.  The ECB further said that “The Governing Council stands ready to adjust all of its instruments, as appropriate, to ensure that inflation stabilises at its 2% target over the medium term.” With Thursday’s decision the ECB key rate remains unchanged at minus 0.5%, PEPP remains on track to end next March and purchases under the older Asset Purchase Programme (APP) remain at Euros 20 billion a month.  The ECB President Christine Lagarde said, “What we have done today… unanimously is to calibrate the pace of our purchases in order to deliver on our goal of favourable financing conditions.  We have not discussed what comes next.”  The ECB upgraded its growth forecast for this year to 5% from a previous 4.6% target and raised inflation expectations. Inflation is now seen at 2.2% this year, falling to 1.7% next year and 1.4% in 2023, well below the ECB’s 2% target.  Lagarde said policymakers continued to believe that wage pressures were modest and that supply bottlenecks currently hitting materials and equipment would start to ease.

UK to raise Taxes

Prime Minister Boris Johnson announced plans to raise taxes on workers, employers and some investors to fix the health and social care system.  This has angered some within his party amid the breaking of an election promise.  Johnson outlined what he described as a new health and social care levy, which will see the rate of National insurance payroll taxes paid by workers and employers rising by 1.25%.  The same increase will be applicable to the tax on shareholder dividends.  British lawmakers backed Prime Minister Boris Johnson’s plan to raise taxes in a parliamentary vote on Wednesday, clearing the way to direct more funds into the country’s health and social care system.

US Weekly Jobless Claims

The number of Americans filing new claims for jobless benefits dropped last week to the lowest level in nearly 18 months, offering more evidence that job growth is being hindered by labour shortages.  The initial claims for state unemployment benefits dropped 35,000 to a seasonally adjusted 310,000 for the week ended 4 September, said the Labour Department on Thursday.  This was the lowest level since mid-March 2020.  Claims have dropped from a record 6.149 million in early April 2020.  They however remained above the 200,000-250,000 range which is considered as consistent with healthy labour market conditions. The claims report, which is the timeliest data on the economy’s health, suggested that the labour market was holding up, despite the resurgence in the COVID-19 infections. 

Currency Roundup

US Dollar

The dollar erased all losses from the previous week’s poor US jobs report and extended gains versus its rivals on Monday on concerns about the slowing global growth that boosted the appeal of the currency as a safe haven for central banks. The dollar index that measures the currency against six rivals edged 0.2% higher to 92.31.  It dipped for the first time since 4August on the previous Friday when a closely watched US labour report showed the world’s largest economy created fewest jobs in seven months in August. The Benchmark US Treasury yields firmed to more than one-week highs also boosted by the dollar.  The dollar pared gains on Wednesday as Treasury yields dipped after a Federal Reserve Official offered a dovish outlook on the economy, a day ahead of the ECB policy decision. The dollar was supported on Thursday as doubts over the strength of the global economy subdued risk sentiment. 

A cautious mood also helped the safe-haven Swiss franc and the yen.  The latter was stronger with the dollar losing 0.2% to Yen 129.99. 


Sterling dropped for a second consecutive day against the broadly stronger dollar on Tuesday and hit its lowest in more than six weeks against the euro, with most of the losses arriving after the British government set out a plan to raise taxes to fund health spending and social care.  On Wednesday sterling also dropped but steadied on Thursday at $1.3778 after falls earlier in the week.


Wednesday saw the euro dropping to 0.13% on the day at $1.1823.  Euro edged higher on Thursday before an expected reduction in the pace of the ECB’s bond buying. The euro extended modest gains against the dollar on Thursday after the ECB as expected said it would slightly reduce the pace of bond buying under its emergency scheme.  The euro rose 0.3% to the day’s high of $1.1840 immediately after the announcement but then dropped back to trade at $1.1837 well below the previous Friday’s high of $1.1909.    

Markets Wrap

European shares climbed on Monday to end the near record levels led by technology stocks that climbed to their highest this year as a surprise rise in German factory orders pointed to improving global demand and boosted sentiment.  The recent uncertainty over monetary policy and the rising COVID-19 cases has pushed investors into technology stocks which were the best performing sector through the pandemic. Media and retail stocks were also among the best performing European sectors for the day.   German stocks rose 1% after a rise in July in German factory orders that boosted sentiment.  This suggests a strong demand for goods from Europe’s biggest economy.  Investors also focused on the European Central Bank meeting later in the week as some of the policymakers are calling for the paring back of bond purchases with the inflation surge and the growth in the eurozone resilient.  US markets were closed for a holiday on Monday.

The Dow Jones and S&P 500 dropped on Tuesday amid worries of a slowing pace of economic recovery that overshadowed hopes that the Federal Reserve would keep its accommodative stance a little longer after the soft US payroll report.  The heavy tech NASDAQ hit record high before losing steam as the fast increase in the benchmark bond yields, which were at their highest since July, weighed on the sector that generally performs better in a low-interest rate environment.  European stocks ended lower on Tuesday as investors were cautious ahead of the ECB meeting whilst focus turned to telecom deals by Deutsche Telekom.  Utilities, healthcare and chemical stocks were among the top decliners. 

Wall Street Indexes dropped on Wednesday amid concerns over the spread of the Delta coronavirus variant that could slow economic growth and raise uncertainty.  US stocks have come under pressure in recent days, as investors turned cautious following the previous Friday’s weak payrolls data.  The S&P 500 and the NASDAQ gained 18.5% and 19.8% respectively so far this year amid support from easy central bank policies however a jump in coronavirus infections and the recent weak economic data have raised worries on the pace of the recovery.   European stocks dropped on Wednesday as worried about slowing global growth weighed on sentiment while investors focused on the ECB meeting for hints on tapering plans.  

Asian shares were set for their worst day in two weeks on Thursday, amid the latest regulatory crackdown in China.  Eurozone stocks bounced from session lows and banking shares climbed on Thursday after the European Central Bank meeting. Rate sensitive banking stocks in the bloc turned positive and were last up 0.3%. 

China’s Factory Inflation

China’s factory gate inflation hit a 13 year high in August amid increases in raw material prices despite efforts by Beijing to cool them.  This has put pressure on manufacturers in China.  The produce price index (PPI) rose 9.5% from a year earlier in August, the National Bureau of Statistics (NBS) said on Thursday, higher than the 9% reported in July and the fastest pace since August 2008.  Whilst China’s economy has recovered strongly from last year’s coronavirus slump, it has been losing steam recently due to domestic COVID-19 outbreaks, high cost of raw materials, tighter property curbs and a campaign to reduce carbon emissions.  Commodity prices hurt the profits of many mid-and downstream factories.  China’s coal prices soared to record high on Tuesday amid supply concerns.  Meanwhile, earnings at China’s industrial firms have slowed for five straight months.

Crypto currencies

Bitcoin rose 0.49% to $50,188.4 on Sunday adding $245.24 to its previous close. Cryptocurrencies struggled to rebound from the hefty losses from Tuesday when El Salvador became the first country to adopt bitcoin as a legal tender whilst several trading platforms said they experienced performance issues.  Bitcoin dropped 1.2% to $46,283 after dropping as low as $42,900 on Tuesday.  Earlier on Tuesday it had touched an almost four months high of $52,956.  Meanwhile, cryptocurrency exchange Coinbase Global Inc dropped 3.3% after the US securities regulator threatened to sue the firm if it goes ahead with plans to launch a crypto lending scheme. 


Oil prices dropped on Monday after Saud Arabia’s sharp cuts to crude contract prices for Asia raised concerns over the demand outlook.  Brent crude dropped 36 cents to settle at $72.22 a barrel, whilst US West Texas Intermediate were last down 40 cents at $68.89 a barrel. About 77% of the US Gulf production remained offline on Tuesday.   Global oil supplies are increasing as the Organisation of Petroleum Exporting Countries and its allies, the OPEC+ are raising output by 400,000 barrels per day each month between August and December. Oil prices rose on Thursday recovering from earlier losses as a decline in US Gulf of Mexico output following damages from Hurricane Ida impacted the market.  Brent crude added 0.36% to $72.86 a barrel and West Texas Intermediate crude rose 0.17% to $69.42 a barrel


Gold prices fell on Tuesday as the pressure for a resilient dollar and global equities hit a record high on rising hopes of the US Federal Reserve maintaining an accommodating policy in the near term.  Gold slipped to a two-week low on Wednesday as the strength in the dollar and the higher US Treasury yields outweighed the boost to gold from increased concerns about the global economic growth.  Spot gold was down 0.1% at $1,797.27 per ounce having dropped to $1781.3 its lowest since 26 August.  Worries about the Delta variant slowing economic growth have shaken equities this week, however, flows into gold have been limited by firmer bond yields and a rise in the dollar that made the bullion more expensive for holders of other currencies.  Non-yielding gold tends to gain in a low interest rate environment, while some investors also view the metal as a hedge against higher inflation that could follow stimulus measures. 

Malta:  International Trade in Goods – July 2021

A press release dated 9th September by the National Statistics Office shows that provisional figures for registered trade in goods in Malta recorded a deficit of EUR 521.7 million during July, compared to a deficit of EUR 300.8 million in the corresponding month of 2020.  Imports amounted to EUR 773.7 million, while exports totalled EUR 252 million.  This represents an increase of EUR 221 million and EUR 0.1 million respectively, over the same month of the year.  The increase in the value of imports was mainly due to Machinery and transport equipment.  On the exports side, the main increase was registered in mineral fuels, lubricants, and related materials.  Meanwhile, during the first seven months of the year, the total trade in goods deficit widened by EUR 218.5 million when compared to the corresponding period of 2020 reaching EUR 1,815.7 million. 

Antonella Mercieca

Client Relationship Manager




September 10th, 2021

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