“Eurozone Inflation…”

Source: Reuters

Data on Wednesday showed that more expensive energy and services boosted inflation in the Eurozone as expected in September. Core inflation was also higher. The European Union’s Statistics office, Eurostat, said Consumer Prices in the 19 countries using the Euro climbed 0.5% month-on-month in September for a 3.4% year-on-year rise, as was earlier estimated. Although the headline number was well above the European Central Bank’ s target of 2%, the attribute for the increase was a result of a 17.6% year-on-year surge in energy prices and a 2% rise in the cost of food, alcohol and tobacco. Without these volatile items, known for the ECB as core inflation, prices grew 0.4% month-on-month for a 1.9% year-on-year increase faster than the 1.6% annual rise in August. Eurostat said energy prices were responsible for almost half of the overall year-on-year inflation reading, adding 1.63 points to the final result. Whilst services added another 0.72 points, and prices of non-energy industrial goods a further 0.57 points. The ECB is expecting consumer prices to start easing again in 2022.

China’s Economy

China’s Gross Domestic Product expanded by 4.9% from 2020, missing estimates as Beijing tries to curb lending to the property sector worsened by the fallout from electricity shortages that sent factory output back to the levels last seen in early 2020, when heavy curbs where in place.
China has staged an impressive rebound from last year’s pandemic slump, but the recovery lost some steam from the 18.3% growth achieved in the first quarter. Under President Xi Jinping, a drive to make structural changes that address long-term risks that has resulted into crackdowns on the property sector and technology giants as well as action to curb carbon emissions, has taken a toll. The weak figures led to lower Yuan and lower Asian stock markets amid broader investor concerns about the world economic recovery.

UK Borrowing

British Public borrowing dropped by almost half in the first six months of the current financial year from a high achieved last year since post World War Two when the economy faced the full impact of the COVID-19 pandemic. Britain’s budget deficit soared in the last financial year to its highest since World War II at 15% of GDP but is expected to drop to just over half this year with the end of emergency economic support and stronger tax revenues. Public sector borrowing for the first six months of the 2021/22 year dropped to 108.1 billion Pounds, down by 101.2 billion Pounds from April-September 2020, but is still more than triple before the pandemic, the office for National Statistics said. Public borrowing for September only dropped to 21.778 billion Pounds. Meanwhile August’s reading was revised down by almost 4 billion Pounds to 16.824 billion Pounds, reflecting stronger corporate tax revenue and lower spending on public services and the job furlough support programme than initially estimated. Compared with a year earlier, tax revenue in the past six months has risen by 20% while day-to-day spending is 6% lower. Last month Finance Minister Rishi Sunak announced a 12 billion Pound tax rise on workers and employers, starting next year, to fund the health and social care. Next week’s budget will include further longer-term plans to bring the budget closer to balance. While the UK has kept interest rates rock bottom and the debt servicing costs near record lows so far, the UK’s large stock of index-linked bonds mean interest costs are now climbing as inflation rises. Interest payments have risen by just over 50% compared with a year earlier, the ONS said.

Bitcoin

Bitcoin traded near six-month highs on Monday, in anticipation of the listing of the first US futures-based Bitcoin exchange-traded funds (ETS).  Investors are hoping it will boost trading volumes of cryptocurrency.  The ProShares Bitcoin Strategy ETF completes a 75-day period since the fund manager filed plans and could begin trading on Tuesday.  The world’s largest cryptocurrency traded at $62,288 not far from its all-time high of $64,895 hit in April.  Ether another popular token used on the Ethereum blockchain traded around $3,866 and has traded in tandem with Bitcoin since mid-September.  Bitcoin hit a high of $64,499 on Tuesday, late in the US session. Earlier in the day, the ProShares Bitcoin Strategy closed up 2.59% at $41.91 after its first day of trading, with around $1 billion worth of shares trading hands on the Intercontinental Exchange Inc’s ICE.N Arca exchange.  Crypto ETFs have launched this year in Canada and Europe amid surging interest in digital assets. Bitcoin traded below record lows on Wednesday, the day after the first US Bitcoin futures-based exchange-traded fund (ETF) began trading. 

Gold

Spot gold dropped on Monday as the US bond yields, and the Dollar strengthened.  Spot gold dipped by 0.2% to $1,764.22 per ounce while the US gold futures declined by 0.2% to $1,764.70.  With the benchmark US 10-year Treasury yields upward move to the previous multi-month highs, the opportunity cost of gold has increased.  As Dollar also strengthened in value, gold has become more expensive for buyers in other currencies.   Gold rose on Tuesday, with a weaker Dollar and US bond yields providing support to the metal.  Spot gold rose 0.7% to $1,776.03 per ounce while US Gold futures gained 0.7% to $1,778.20.  US benchmark 10-year Treasury yields also weakened, reducing the opportunity cost of the non-yielding commodity.   Gold prices climbed for a third straight session on Thursday as a softer dollar lifted the bullion’s appeal.  Spot gold rose 0.1% to $1,782.7 per ounce while gold futures were up 0.1% at $1,786.40

Oil

Oil prices hit their highest level in years on Monday as demand recovers from the COVID-19 pandemic, boosted by more custom from power generators turning away from expensive gas and coal to fuel oil and diesel. Brent crude oil futures rose 63 cents or 0.7% to $85.49 a barrel, after hitting a session-high of $86.04 the highest price since October 2018.  US West Texas Intermediate crude futures climbed 1.2% to $83.23 a barrel, after hitting a session high of $83.73 since October 2014. Oil prices rose on Tuesday from a supply crunch in natural gas, electricity, and coal that continued across the world.  Meanwhile, falling temperatures in China raised concerns over whether the world’s biggest energy consumer can meet domestic demand for heating.  The Brent Crude benchmark rose 0.8% to $84.98 a barrel after dropping 0.6% on Monday.  The contract is still up nearly 7% this month. US West Texas Intermediate futures gained 1.1% to $83.31, having risen 0.2% in the previous session and nearly 10% this month.   While gold is considered a hedge against inflation, reduced stimulus and interest rate hikes tend to drive up government bond yields, raising the opportunity cost for the non-yielding bullion. 

Market Update

On Monday, the CAC 40 closed lower by 0.81% to close at 6,673.1, DAX closed 0.72% lower to reach 15,474.47 and FTSE 100 closed 0.42% lower to 7,203.83.  Equities globally including European shares dropped on Monday after a weaker-than-expected growth data from China hit luxury stocks, while a surge in commodity prices fuelled worries about inflation spiralling.  In the US the Dow Jones Industrial Average closed lower by -0.1% to close at 35,258.61, while both the NASDAQ and the S&P 500 increased by 1.02% and 0.34% to close at 15,300.89 and 4,486.46 respectively.   European stocks inched higher on Tuesday as technology shares rose, mirroring an overnight gain on Wall Street. On Wednesday European shares were flat on strong results from Nestle that boosted the food company stocks and offset the disappointing earnings from a number of firms.  Investors are getting anxious about the impact of higher costs, arising from supply-chain problems and labour shortfalls, in particular when Central Banks across the globe are planning to withdraw their stimulus measures.  Meanwhile, Eurozone Government yields are increasing as recent comments by ECB officials failed to soothe fears arising from a possible monetary tightening.    London’s FTSE 100 edged higher on Wednesday helped by gains in consumer companies and data showing a modest easing in domestic inflation.  A slide in mining stocks capped the advance. European shares slipped on Thursday driven by a gloomy sentiment amid renewed worries about China’s property sector and mixed quarterly results.

Currency Roundup

USD

The US Dollar found its footing on Monday as soft economic data from China and rising oil prices led to investors being nervous about inflation driving interest rates higher.  The Dollar last bought Yen 114.35 and traded at $1.1579 against the Euro and was up roughly 0.2% at $0.7402 per Australian Dollar.  The Dollar retreated on Tuesday to a three-week low, hit by rate-hike bets in other markets and improved sentiment that lifted equities and the Australian Dollar.  The Dollar held steady on Wednesday after an improvement in global risk appetite that saw riskier currencies gain and the safe-haven Yen hit a four year low against the Dollar overnight.  The reduced demand for safe-haven assets saw the Dollar reach a four-year high of 114.695 versus the Yen overnight. 

GBP

Sterling on Monday steadied near a 20-month high versus the Euro after hawkish remarks from Bank of England Governor Andrew Bailey on Sunday during an online panel discussion organised by the Group of 30 consultative group, who said policymakers “will have to act” in its monetary policy meeting on the risk of medium-term inflation.  Whilst continuing to believe that the recent jump in inflation would be temporary, the surge in energy prices would push it higher and make its climb last longer.   Sterling gained 5.5% against the Euro this year.  Sterling on Wednesday was down by 0.2% at $1.37605 after data showed that British inflation slowed unexpectedly last month. Sterling dipped below one-month highs on Thursday, tracking a similar move in risk-oriented currencies which lost some momentum against the Dollar after a rally fuelled by rising prices for commodities.

Malta:  Quarterly Accounts for General Government – 2nd Quarter /2021

A press release dated 21October 2021 shows that during the period April to June 2021, total revenue stood at EUR 1,395.1 million, with an increase of EUR 190.3 million when compared to the corresponding quarter in 2020.    Almost all the components of General Government revenue recorded an increase, with current taxes on income and wealth registering an increase of EUR 116.9 million over the same period last year.  This was followed by Taxes on production and imports at EUR 72.5 million, capital transfers receivable (EUR 17.2 million), market output at EUR 9.5 million and property income receivable by EUR 3.4 million. Meanwhile, net social contributions receivable registered a decrease of EUR 27.9 million, while Current transfers receivable fell by EUR 1.3 million. 

Total expenditure in the second quarter of 2021 amounted to EUR 1,615.2 million, an increase of EUR 41.1 million over the corresponding quarter in 2020.  The largest increase in expenditure was recorded in Compensation of employees by EUR 45.5 million, followed by current transfers payable of EUR 14.8 million, Gross Capital Formation (Eur 14 million) and capital transfers payable (EUR 10.9 million).  Other increases were registered in Social Benefits and Social Transfers in Kind (€6.2 million), Property income payable (€2.4 million) and Current taxes on income and wealth (€0.2 million).

Meanwhile the financial transactions in assets, during the second quarter that includes currency and deposits and Other, accounts receivable increased by EUR 1,179.50 million and EUR 87.3 million respectively.  While equity and investment fund shares increased by EUR 9 million, long-term debt securities rose by EUR 4.3 million.  Long term loans recorded a decrease of EUR 0.5 million.  At the end of June General Government debt stood at EUR 8025.8 million or 59.5% of Gross Domestic Product (GDP).  This represents an increase of EUR 1,368.10 million over the corresponding quarter in 2020, largely reflected in Central Government Debt which amounted to EUR8,022.9 million.  Currency and deposits stood at EUR 468.7 million, an increase of EUR 90.8 million over June 2020.

Antonella Mercieca

Client Relationship Manager

Source:

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

Date:

October 22nd, 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