“Eurozone Industry Output…”

Eurozone factory output dropped in June as Germany, faltered amid supply bottlenecks, showed estimates released from the European Union on Thursday.  Eurostat, the EU’s statistics office said that industrial output in the 19 countries sharing the euro dropped 0.3% month-on-month. The drop in production was mainly due to Germany’s unexpected decline in output which Eurostat estimated at 1% on the month, less than the 1.3% calculated last week by the country’s Federal Statistics Office.  The drop in Germany was mainly offset by the production increases in France and Italy, which recorded respectively a 0.4% and 1% increase on the month.  The Eurozone indicator was driven down by a 1.5% drop in the output of capital goods, like machinery, which for a second straight month was the worst performing sector in the eurozone industry pointing to lower output in the future.  Consumer goods such as clothes and foodstuffs, went up 1.6% whilst the production of intermediate and durable consumer goods each rose by 0.1%.  Compared to last year output in the eurozone increased in June by 9.7% as the eurozone continued to recover from the high drop caused by the pandemic last year. 

The British Economy

Official data on Thursday showed that the British economy grew by a faster than expected 1% in June, after many hospitality firms restarted their indoor service in mid-May and as many people visited doctors after the pandemic, lifting healthcare.  The Office for National Statistics (ONS) lowered its estimate for growth in May to 0.6% from an original reported increase of 0.8%.  Gross domestic product in the three months to the end of June was 22.2% higher than in the same period of 2020.  The service sector grew by 1.5% in June from May, with health activities contributing the most to growth as visits to General Practitioners increased in June while food and beverage services jumped by more than 10%.  Industrial output dropped by 0.7% as maintenance of oil field production sites and swings in the pharmaceutical industry impacted the sector, but manufacturing grew by 0.2%.  Construction output fell by 1.3%.  The ONS further said that compared with the first quarter of this year, during the third lockdown the British economy was up by 4.8%. 

China’s autosales

Vehicle sales in China slid in July for a third consecutive month impacted by flooding in some parts of the country, the outbreak of the COVID-19 in other areas and the global shortage of semiconductors.  The sales of the world’s biggest automarket saw sales dropping 11.9% from the same month a year earlier to 1.86 million vehicles according to data from China Association of Automobile (CAA).  For the first seven months of the year, China’s vehicle sales jumped 19% as the market recovered from the lows reached in the pandemic. An important fact in July is the continued strong sales of new energy vehicles which more than doubled to 271,000.  These include battery-powered electric vehicles, plug-in petrol-electric hybrids and hydrogen fuel-cell vehicles.  The promotion by the Chinese government of green vehicles to cut pollution has prompted electric car makers such Nio Inc, Xpeng Inc and BYD Co Ltd to expand manufacturing capacity in China.    

US Small Business Optimism

Small business owners across the US grew less confident about the economic recovery in July as labour shortages remained an issue.  The National Federation of Independent Business Optimism Index dropped 2.8 points to  a reading of 99.7 in July almost erasing all of the gains of June.  While the economy is expected to expand this year at its fastest pace since the 1980s there are signs that it may be cooling.  Supply chain issues continue to impact manufacturing growth, and consumer sentiment has declined recently on concerns about inflation. 

US Consumer prices

The increase in US consumer prices slowed in July, remaining at a 13 year high on a yearly basis and there were signs that inflation peaked as supply chain disruptions caused by the pandemic impact the economy.  The consumer price index increased 0.5% last month after climbing in June, said the Labour Department on Wednesday.  Meanwhile, in the 12 months through July, the CPI advanced 5.4%.  The prices for used cars and trucks which accounted for an outsized amount of the boost in inflation in recent months, rose 0.2% a sharp drop from the 10.5% increase in the prior month.  Excluding the volatile food and energy components, the CPI rose 0.3% after increasing 0.9% in June.  This is the first deceleration in the core CPI since February.  The FED’s preferred inflation measure which is the core personal consumption expenditure price index, jumped 3.5% in June, the largest gain since December 1991.

Market Wrap

European stocks were mixed in early trading on Monday amid a drop in commodity prices that weighed on the UK’s blue-chip index.  Later European stocks reached a record high after healthcare, utilities and technology gains were higher than the declines triggered by the drop in commodity prices earlier on.  The pan-European STOXX 600 index rose 0.2%.  Technology stocks climbed 0.5% led by a 4.5% jump in British food delivery company Deliveroo after Germany’s Delivery Hero took a 5.09% stake in it. 

European stocks hit record highs on Tuesday extending the gains for a seventh straight session as investors were comfortable with the strong reported earnings and the economic recovery prospects despite the concerns about the Delta variant. The travel and leisure sectors were the top gainer as the world’s largest online betting group Flutter Entertainment jumped 8.6% after forecasting its US business would turn a profit by 2023.  This month saw the benchmark STOXX 600 reaching fresh peaks as stronger than expected earnings in particular economically sensitive sectors such as energy and financials made investors optimistic that European equities which have long underperformed their US peers have more room to run. 

Wednesday saw Japanese shares closing higher for a four straight session amid strong earnings from Bridgestone and other firms while banking stocks received support from increasing US Bond yields.  European shares hit record highs and were on track for their longest winning streak in two months, with gains in banking and mining stocks supporting the upbeat mood of investors and strong earnings season.  Miners increased the most with a gain of 0.7% while steady government bond yields supported banking stocks.  Euro zone bond yields steadied ahead of crucial US inflation data. US consumer prices are expected to have increased by 5.3% year-on-year in July according to a Reuters poll slightly below the 5.4% reached last month.  Germany’s 10-year yield, which is the benchmark for the euro area was unchanged on the day however, below the highest reached on 2^nd August.  The outperformance of German Bunds has further increased the gap between the 10 year German and US Treasury yields to over 181 bps, the widest since June.  The divergent outlook of the ECB from that of the FED especially after its revision of its inflation target means that it keeps rates lower for longer, supporting the euro area government bonds.  Meanwhile, London’s FTSE 100 rose on Wednesday and the domestically focussed mid-cap index hit a record high.

European stocks held steady on Thursday, trading just below record highs as strong earnings from a number of insurers and M&A activity in the UK helped offset a decline in miners.  The CAC 40 and the DAX closed higher by 0.36% and 0.7% reaching 6,882.47 and 15,937.51 respectively, while the FTSE 100 dropped by -0.37% to close at 7,193.23.  Meanwhile, the Dow Jones Industrial Average increased by 0.04% to 35,499.85, the NASDAQ 100 closed higher by 0.41% reaching 15,088.98 and the S&P 500 climbed by 0.3% to 4460.83.

Currency Roundup

Sterling rose to an 18 month high against the euro on Tuesday on signs of economic recovery and falling COVID-19 rates that raised the expectations of a far earlier interest rate rise compared to the eurozone.  Against the dollar the pound traded near two-weeks high, however, after comments by two Federal Reserve presidents Rafael Bostic of Atlanta and Eric Rosengren from Boston, that strengthened the bets that the US Central bank will start tapering by year-end or even sooner.  Sterling has performed well in recent weeks amid a drop in COVID-19 cases that allowed the British government to lift most social distancing rules.  Furthermore, the Bank of England last week indicated that it might gradually hold back the stimulus.

The dollar traded just below this year’s high against the euro on Wednesday and hit a five-week peak  against the yen ahead of US inflation data.  The dollar has been lifted by last week’s impressive US jobs data and from remarks by FED officials about tapering the bond buying and eventually raising rates sooner.  Meanwhile, six straight sessions against the euro sent the common currency to its lowest since late March on Tuesday.  The yen which has dropped for five consecutive sessions against the dollar, dropped marginally to 110.69 per dollar in early trade, its lowest since mid July. 

Sterling was little changed on Thursday after the Office for National Statistics said the economy grew by 4.8% in the second quarter.  British GDP remained 2.2% smaller than it was before the pandemic mainly arising of the damage done by Britain’s long coronavirus lockdown last year.  The dollar stood near a four-month peak against major peers on Thursday after retreating overnight amid cooling in consumer inflation.  The euro was little changed at $1.17435 after retreating from a four month low of $1.1706 on Wednesday.  The dollar was mostly flat at Yen 110.4 after pulling back from a five-week high of Yen 110.8 overnight.  

Oil

Oil majors Royal Dutch Shell, BP and Total Energies slipped about 1% each as crude prices dropped more than 2.5% amid fears that the curbs due to the pandemic in Asia and China would impact the demand for fuel.  Miners also dropped due to weaker metal prices after data showed China’s export growth unexpectedly slowed in July.  This week investors are keen to watch US inflation data to see if the numbers are sufficient for an early tapering announcement by the FED.  Oil prices rose more than 2% on Tuesday, rebounding from recent losses on signs of rising fuel demand in the US despite the increase in COVID-19 cases.  Brent crude rose by 2.3% to settle at $70.63 a barrel and the US oil climbed 2.7% to end the session at $68.29 a barrel. 

OPEC on Thursday stuck to its prediction of a strong recovery in world oil demand in 2021 and further growth next year despite concerns about the Delta coronavirus variant that impacted prices.  In a monthly report OPEC also raised its forecast of supply from rivals, including US shale producers, next year, a potential headwind for the efforts of the group and allies to balance the market.  In the report OPEC said that “the global economy continues to recover”.  It further said, “However, numerous challenges remain that could easily dampen the momentum. In particular COVID-19 related developments will need close monitoring.”  OPEC also said that oil demand will rise by 5.95 million barrels per day this year, or 6.6%.  In 2022, the use of fuel will expand by 3.28 million bpd.   Oil was trading above $71 a barrel after the report was released . 

Gold Prices

Gold prices rose on Wednesday on worries over the  increase in the number of cases of the Delta coronavirus variant that overshadowed the pressure from a stronger dollar and bond yields. Spot gold was up 0.1% at $1,730.31 per ounce and US gold futures rose 0.1% to $1,732.70.  The risk sentiment in wider financial markets remained subdued as the number of cases in several Asian countries continued to increase, with investors shifting to safe-haven assets.  The indications in recent days of an improving labour market raised fears of a sooner than expected US interest rate hike, sending gold prices to a four-month low on Monday.  Gold prices edged higher on Thursday amid worries of an early tapering in economic support eased after data showed US consumer inflation cooled in July and dragged the dollar. Spot gold rose 0.1% to $1,753.90 per ounce having recorded its biggest one day percentage gain since 6 May on Wednesday. 

Malta:  Index of Industrial Production June 2021

In a press release dated 10^th August 2021, after adjusting for seasonal effects and the working day pattern, the index of industrial production registered an increase of 5% between May and June 2021.  Increases were registered in the production of consumer goods (8.2%), capital goods (3.8%) and energy (3.4%).  Meanwhile the production of intermediate goods decreased by 1.6%. In June 2021, total industrial production increased by 13.6% on an annual basis after adjusting for the working day pattern.  Almost all the main industrial groupings saw production increases with the exception of intermediate goods production which decreased by 2.4%.  The highest increase was registered in the production of capital goods (22.9%) followed by the production of consumer goods (19%) and energy 10.8%).

Malta:  International Trade in Goods – June 2021

In a press release dated 9^th August 2021 provisional data recorded a total trade in goods deficit of EUR274.7 million during June, compared to a deficit of EUR242.3 million in the corresponding month of 2020.  Imports amounted to EUR 528.5 million while exports totalled EUR253.8 million.  This represents an increase of EUR 47.5 million and EUR 15.2 million respectively, over the same month of the previous year.  The increase in the value of imports was mainly due to mineral fuels, lubricants and related materials while on the exports side, the main increase was registered in Chemicals, partly offset by a decrease in machinery and transport equipment. 

During the first six months of the year the total trade in goods deficit widened by EUR 21.2 million when compared to the corresponding period of 2020, reaching EUR 1,314.3 million.  Both imports and exports decreased by EUR 79.8 million and EUR 101 million respectively and amounted to Eur 2,832.4 million and EUR 1,518.1 million.  Lower imports were mainly recorded in machinery and transport equipment.  Meanwhile, on the exports side, mineral fuels, lubricants and related materials, machinery and transport equipment and Food accounted for the main declines, partly offset by an increase in chemicals. 

‘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.’