“Eurozone Business Activity…”

Source Reuters

Eurozone business activity unexpectedly grew this month according to a preliminary survey despite most of Europe is suffering from a third wave of coronavirus infections and renewed lockdown measures.  IHS Markit’s flash composite PMI, a measure which acts as a guide to economic health, in March stood  at 52.5the highest since late 2018 and higher than February’s 48.8.A value higher than 50 shows a separation between growth and contraction. German factory activity rose to a record high and the services sector expanded after five successive months of contractions.  In France, activity held up better than expected with manufacturing surging ahead at the fastest pace in more than three years.  Meanwhile a rush of new orders prior to the easing of lockdown restrictions and Britain’s swift roll-out of COVID-19 vaccines also prompted a much stronger rebound for British companies who are outside the Eurozone and within the EU.  A flash PMI covering the Eurozone services industry climbed to 48.8 from February’s 45.7.  Although still in contractionary territory it is the highest reading since August 2020.  An increase in input costs led services to increase their prices for the first time in just over a year.  The output prices index climbed to 50.8 from 48.1.  Meanwhile, the increase in demand for manufactured goods helped the flash factory PMI excel to 62.4 from 57.9, the highest reading since the survey began in June 1997. The manufacturing upturn was led by a record surge of factory production in Germany, accompanied by the fastest production growth since January 2018 in both France and the whole region according to IHS Markit. 

The UK’s Jobless Rate

On Tuesday, official figures showed that UK’s jobless rate dropped unexpectedly to 5% in the first quarter of 2021. Separate official data based on tax records showed an increase of 68,000 in the number of employees on business payrolls in February from January, though the total is 693,000 lower than a year earlier before the pandemic started.  The average wage growth rose to 4.8%, the highest since March 2008. This reflects how job losses have highly impacted blue-collar jobs such as retails and hospitality rather than white-collar jobs who could have easily worked from home. ONS data also indicated that the number of expat workers in the final quarter of 2020 was half a million lower than 2019, based on an analysis of payroll data.

German Consumer Morale

In a survey by GfK research institute, German consumer morale improved for the second consecutive month, heading into April boosted by the easing of lockdown measures at the beginning of March.  However, a recent decision to extend restrictions is clouding this outlook. GfK research said its consumer sentiment index, which is based on a survey of around 2,000 Germans, rose to -6.2 points from a revised -12.7 in March.    This was the best result since November 2020 when a partial lockdown to contain a second wave of infections began.

EU Recovery Plan

On Thursday, the Bundestag’s Vice President commented that the Lower House of Parliament in Germany voted in favour of a European Union plan to take joint debt on a large scale and channel the money to member states worst hit by COVID-19. A large majority of 478 out of an overall 645 lawmakers supported ratification while 95 rejected the measure and 72 abstained. 

Home Sales in the US

U.S. home sales dropped to a six-month low in February due to the cold weather in many parts of the country, record low supply, and a rebound that could be muted by rising mortgage rates as well as higher house prices. However, the report from the National Association of Realtors on Monday showed robust demand, with houses only staying on the market for a record-low 20 days last month after being listed. Growth is seen boosted by the White House’s massive $1.9 trillion fiscal stimulus and increased vaccinations against COVID-19, which are allowing more parts of the economy to reopen.

US Weekly Jobless

The number of Americans filing new claims for unemployment benefits dropped to a one-year low last week as economic activity rebounds after weather-related disruptions in February.  The Labour Department reported on Thursday that 18,953 million people were still receiving unemployment cheques in early March.  Initial claims for state unemployment benefits tumbled 97,000 to a seasonally adjusted 684,000 for the week ended 20 March, the lowest level since mid-March.  Data for the previous week was revised to show that 11,000 more applications were received than previously reported.   

Treasury Secretary Janet Yellen and US FED Chair Jerome Powell at Congress

Investors awaited a closely watched Congressional appearance by US Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen on Tuesday.  Yellen said that America’s economy remains in crisis from the pandemic as she defended developing plans for future tax increases to pay for new public investments. Yellen spoke at a hearing of the House Financial Services Committee. Republican members of the committee challenged her and Powell on issues like plans to build climate change into financial regulation, and specifically quizzed Yellen on how the United States can simultaneously be in crisis and healthy enough to consider raising taxes.  Yellen replied the immediate hole remains deep and said, with “a huge problem of joblessness.” Federal Reserve Chair Jerome Powell told U.S. lawmakers that a coming round of post-pandemic price increases will not fuel a destructive breakout of persistent inflation. On Wednesday during a second day of testimony to Congress Janet Yellen and Jerome Powell expressed their confidence in the US recovery.  Yellen told Senate lawmakers she was open to banks buying back stock and paying dividends, an updated view showing her confidence in the economy.  Powell also said he thinks that 2021 will be a “very, very strong year in the most likely case”.  A day earlier the treasury secretary had put investors on the alert after embracing tax hikes to pay for President Joe Biden’s plans for upgrading infrastructure and other investments.  Inflation could also factor in as disruptions in the supply chain exert cost pressures for manufacturers, with US factory picking up in early March. 


On Monday, oil prices were steady amid hopes of a pickup in demand later in the year. Prices however remained under pressure as new European coronavirus lockdowns made a quick recovery look less likely. Brent crude ended the session up $0.09 or 0.1% at $64.62 a barrel, while U.S. oil for delivery in April fell $0.13, or 0.2%, to settle at $61.55 a barrel as it expired.  The more active U.S. crude futures for delivery in May rose $0.12 or 0.2% to settle at $61.56 a barrel. Both contracts fell more than 6% last week after making steady gains for months on the back of output cuts and an expected demand recovery.  Meanwhile on Tuesday, oil prices plunged about 6% amid concerns over the slow vaccine rollouts in Europe that added to the oversupply. According to trading sources, quoting from the American Petroleum Institute, a group which forms part of the industry, the drop came after U.S. Crude Oil Stocks rose and gasoline inventories fell in the most recent week. Extended lockdowns in Europe are being driven by the threat of a third wave.  The physical crude markets are indicating that demand is lower, much more than the futures market. 


Gold slipped 1% on Monday, with a dip in the Dollar and U.S. Treasury yields offering little respite as U.S. equities gained, which reduced the gold’s appeal. Gold fell as much as 1% during the session as investors flocked to the Dollar and government bonds, spooked by Turkey’s decision to replace its head of central bank with a critic of high interest rates.  Gains on Wall Street also negatively pressured gold. Gold gained on Thursday due to  lower US Treasury yields that increased the appeal of the non-yielding metal and pressure from a strengthening Dollar.  Spot gold rose 0.3% to $1,739.60 per ounce while US gold futures were up 0.3% at $1,739.30 per ounce. Besides the continued drop in the US benchmark yields that translated in a lower opportunity cost of holding bullion, sentiment in financial markets remained weak as investors grew wary about the new round of coronavirus restrictions in the Eurozone. 

Currency Roundup

On Monday, the pound slipped against the Dollar and dropped to its lowest in six days against the Euro, as investors weighed the impact of the European threat to impose a ban on vaccine imports to Britain.  The pound has strengthened around 3.6% against the Euro this year, in a move which analysts largely attribute to the UK’s vaccine rollout being one of the fastest in the world. But the EU’s leaders were due to discuss imposing a possible ban on vaccine exports to Britain at a Summit on Thursday. On Sunday, Boris Johnson, the British Prime Minister, spoke to the EU’s most powerful leaders, German Chancellor Angela Merkel and French President Emmanuel Macron to lead them away from the bans.  Johnson also warned on Monday that a third wave of COVID-19 infections happening across Europe could be also heading towards the UK.  The Dollar held near a four-month high on Monday as rising US Treasury yields fuelled the demand for the currency and prompted hedge funds to cut bearish positions.   Furthermore, the Turkey’s shock weekend decision to replace its hawkish Central Bank Governor supported the Dollar’s safe-haven appeal. 

The Dollar edged higher on Wednesday helped by the US Treasury yields recovering from one-week lows and concerns about the economic impact of COVID-19 in Europe that led investors to show preference for the US currency.  The Euro-Dollar was down 0.25% at $1.1820 on Wednesday.

The Dollar hit a fresh four-month high against the Euro on Thursday as the US pandemic response continued to outpace that of Europe, which has been extended by lockdowns and delayed vaccine rollouts.  The safe-haven Dollar held on to its two-day advance fuelled by worries over Europe’s third COVID-19 wave and the potential US tax hikes.   Furthermore, the reversal of a call for a strict lockdown over the Easter period did not help with boosting the region’s economic outlook.  It created discontent with Chancellor Angela Merkel’s handling of the pandemic. The Euro traded near the four-month low of $1.1809, levels reached earlier in the Asian session.  The Dollar gained against the Yen, another safe-haven currency, reaching ¥108.905, as the pair continued to consolidate below ¥109. The Australian Dollar, which is considered as a liquid proxy for risk appetite, climbed 0.3% after earlier dropping to AUD0.7579 the lowest level since early February. Sterling steadied against the Dollar and the Euro, on Thursday, after two consecutive days of losses prompted by fears that the EU might ban vaccine exports to Britain that relies on them for its inoculation campaign.  Meanwhile, the European Commission that oversees trade policy for the 27 EU member states, set out a proposal to ensure that planned exports by drug makers do not threaten the already reduced EU supply. 

Market Wrap

A drop in Turkish lira and worries about prolonged lockdowns in Germany pushed European stocks lower on Monday with banks and travel shares taking the largest hit.  The German DAX was down 0.5%, while France’s CAC 40 fell 0.9% and UK’s FTSE 100 dropped 0.8%.

European stocks retreated from a one-year peak on Tuesday as a new wave of coronavirus infection and the fresh lockdown in Germany raised fears of a slow economic recovery.  The German DAX dropped 0.8% after Chancellor Angela Merkel announced on Tuesday the extension of the lockdown until the 18th of April and called on citizens to stay at home for five days over the Easter holidays.  Travel and leisure dropped again with British Airways owner IAG, Easyjet and travel company TUI dropping between 2% and 3%.  Meanwhile Asian stocks reversed earlier gains on Tuesday weighed by Chinese markets as investors took profit on a recent rally in some mainland firms.   

Global equities dipped and the Dollar climbed to a four-month high on Wednesday amid concerns over extended lockdowns in Europe and the potential for higher taxes in the US that weighed on investor sentiment.  In the early hours of Wall Street on Wednesday, the Dow Jones Industrial Average rose 0.58% to 32,610.69, the S&P 500 gained 0.44% to 3927.67 and the NASDAQ composite added 0.24% to 13,259.95.  European stocks were also subdued on Wednesday amid concerns about the new lockdown measures.  Eurozone stocks also cut losses after the IHS Markit’s flash composite PMI.  

Global equities traded close to two-weeks lows on Thursday on worries that Europe’s response to the COVID-19 pandemic was falling behind that of the US.  In early morning trading European stocks traded lower as investors were concerned about the economic outlook amid new restrictions in the Eurozone and new regulatory concerns that hit Chinese stocks.  Weighing on sentiment was a selloff in Chinese technology shares amid concern they will be delisted from U.S. exchanges and worries about a semiconductor shortage.

European stocks rose on Friday helped by gains in commodity-linked companies as investors offset the worries about the increase in the coronavirus cases with the optimism of a stimulus-driven recovery in the US.   Mining, oil and gas stocks were the top gainers in Europe up 2.1% and 1.8% helped by commodity prices. 

Malta:  Retail Price Index (RPI)- February 2021

On the 23rd of March there was a press release which announced that the annual rate of inflation in February 2021, as measured by the RPI was 0.19% down from the 0.3% in January 2021. The largest upward impact on annual inflation was measured in the Personal Care and Health Index (+0.22%) while the largest downward impact was recorded in the Transport and Communication Index (-0.27%). 

International Investment Position of Malta: 2020

In a press release dated 23rd March as at the end of 2020, the Maltese economy recorded a net international investment position of €8 billion.  When compared to the position as at the end of 2019, total foreign assets increased by €7.9 billion in 2020 while total foreign liabilities increased by €7.2 billion, resulting in an overall increase in the net International Investment Position (IIP) of €0.7 billion. The level of Malta’s total foreign assets abroad amounted to €258.7 billion as at the end of 2020. Portfolio Investment accounted for 49.1% while Direct Investment represented 27.8% of total foreign assets. The increase in Malta’s foreign assets was driven mainly by a €6.6 billion increase in Portfolio Investment and a €1.9 billion increase in Other Investment. At the end of December 2020, Malta’s stock position of foreign liabilities stood at €250.7 billion. Direct Investment amounted to €209.1 billion, or 83.4% of total foreign liabilities, up from €200.5 billion recorded in December 2019. Other Investment represented 14.5% of total foreign liabilities and totalled €36.3 billion as at the end of 2020. 

Antonella Mercieca

Client Relationship Manager


Reuters, www.nso.gov.mt


March 26th, 2021

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