“Eurozone Inflation…”

Eurozone inflation soared at its highest rate on record this month amid surging energy costs.  The growth in consumer prices accelerated to 4.9% in November, the highest level since the figure has been compiled and up from the 4.1% a month earlier.  Energy prices were up 27% in comparison to last year’s as oil prices soared but inflation in services and non-energy industrial goods, were both above 2% suggesting a rapid increase in underlying price pressures. Despite this inflation currently stands at more than twice the ECB’s 2% target rate and it is unlikely to trigger any policy action, although it could trigger political pressure on the ECB to address the price growth.  Meanwhile the ECB has long argued that the increase in inflation is temporary and will subside over time, hence policy action will be counterproductive and could impact economic growth just when inflation eases on its own.  The ECB has promised to continue supporting with bond purchases and record low rates throughout 2022, even though central banks around the world are already tightening policy.  Also, underlying prices excluding volatile food and energy prices have surged. This is a key measure for policyholders.

German Unemployment

German unemployment dropped in November showing official figures on Tuesday as the job market continued to recover despite the surging COVID-19 cases in the country.  The Labour Office declared that the number of people out of work dropped by 34,000 in seasonally adjusted terms to 2.428 million.  The seasonally adjusted jobless rate dropped to 5.3%.

German Inflation

German consumer price inflation climbed further in November hit by another record, preliminary data showed on Monday, increasing pressure on the European Central bank to react.  Consumer prices, which are comparable to inflation data from other European Union countries, rose 6% year-on-year following an increase of 4.6% in October, said the Federal Statistics Office. The national consumer price index (CPI) rose by 5.2% year-on-year, which was the highest sine June 1992.  The recent increase in inflation was caused by a number of factors, including the base effects, higher energy prices, a pandemic-related temporary VAT rate in the previous year and material shortages. 

UK Retailers Raise Shop Prices

British retailers increased their prices for the first time in more than two years in November as the coronavirus pandemic hit global supply chains, limited the availability of staff and pushed up inflation for shoppers, showed a survey on Wednesday.  The British Retail Consortium said shop prices rose by 0.3% compared with November 2020, the first annual increase since May 2019.

Italy’s 3^rd Quarter GDP

Italy’s economy grew by 2.6% in the third quarter from the previous three months due mainly to strong consumer spending, national statistics bureau ISTAT declared on Tuesday.  On a year-on-year basis, third quarter gross domestic product was revised slightly up to 3.9%.  The GDP is madeup of consumer spending, contributing 1.7% to the overall quarterly increase and net exports contributing 0.5 points.

US Manufacturing Sector

The US manufacturing activity picked up in November amid a strong demand for goods, keeping inflation high as factories continued to face shortages of raw materials.  The Institute for Supply Management (ISM) said on Wednesday its index of national factory activity increased to 61.1 last month from 60.8 in October.  A reading above 50 indicates expansion in manufacturing which accounts for 12% of the US economy.  Meanwhile the ISM survey’s measure of supplier deliveries dropped to a reading of 72.2 from 75.6 in October.  A reading above 50 indicates slower deliveries.   Prolonged delivery dates has kept inflation at the factory gate rising.  Factories are passing the rise in costs to consumers. 

US Private Payrolls 

US private employers continued to hire in November at a higher pace. However, worker shortages remain a challenge.  Private payrolls increased by 534,000 jobs last month, showed the ADP National Employment Report. The ADP report is developed together with Moody’s Analytics and is published before the release of the Labour’s Department employment report to be issued on Friday. Meanwhile data for October was revised slightly lower to show an addition of 570,000 jobs rather than initially reported at 571,000. The shortage of workers is hindering faster job growth.  At the end of September there were 10.4 million job openings. 

Market Wrap

On Monday Wall Street stocks closed higher regaining some of the losses from Friday’s sell-off, as investors hoped that Omicron coronavirus variant will not lead to lockdowns after reassurance from US President Joe Biden.  Biden said that Omicron-related lockdowns were off the table for now and urged Americans not to panic about the variant, whilst recommending vaccination and mask wearing indoors.  He also added that the US is working with pharmaceutical companies to make contingency plans if new vaccines were needed. Vaccine makers such as Pfizer, BioNtech and their rivals Moderna and Johnson and Johnson said on Monday that they are working on vaccines that specifically target Omicron in case existing vaccinations are not effective against the variant.   The Dow Jones Industrial Average gained 0.68% to close at 35,135.94, the NASDAQ 100 closed higher by 2.33% to reach 16,399.24 and the S&P 500 closed higher by 1.32% to reach 4,655.27.  The NASDAQ advanced amid increases in the technology sector.  European shares rose on Monday after their worst selloff in more than a year as investors awaited clues on whether coronavirus would negatively impact economic recoveries and the withdrawal of monetary policies by central banks.  Travel and leisure stocks rose and financial stocks added 1.7% while energy and basic material stocks were also amongst the biggest boosts as prices of the underlying commodities rose.  London’s FTSE 100 jumped 0.9% with investors also speculating that the Bank of England may have to rethink its monetary policy tightening next month.  On Wednesday European indices traded higher with the CAC 40 closing at 6,881.87, DAX closed higher by 2.467% at 15,472.67 whilst the FTSE 100 gained 1.55% to reach 7,168.68.  Meanwhile US indices continued to drop with the DJ industrial average dropped by 1.34% closing at 34,022.04, the NASDAQ 100 closing lower by 1.6% to reach 15,877.72 and the S&P 500 closed lower by 1.18% to 4,513.04.  Wall Street was hit by a late selloff after confirmation of the first US case of Omicron variant and the comment by US Federal Reserve Chair Jerome Powell that inflation may not retreat in the second half of next year. 

On Thursday European shares dropped following the decline in the US equities overnight due to uncertainty from the Omicron variant and the possibility of a faster interest rate rises.  STOXX 600 dropped by 1.1% earlier in the day after posting the best session in almost 6 month on Wednesday.  Technology stocks dropped the most on the index followed by a 2% drop in the travel stocks. 

Wall Street Indices have extended their losses on Tuesday after Federal Reserve Chair Jerome  Powell said the risk of higher inflation has increased and that it was appropriate to consider whether they should withdraw stimulus measures sooner. 

The Dow Jones industrial Average closed lower by 1.86% at 34,483.72, the NASDAQ 100 dropped by 1.61% to close at 16,135.92 and the S&P 500 closed at 4,567.  Likewise, with European indices the CAC 40 dropped by 0.81% closing at 6,721.16, the DAX closed lower by 1.183% at 15,100.13 and the FTSE 100 closed at 7,059.45 lower by 0.71%.   European stocks dropped more than 1% on Tuesday as vaccine maker Moderna’s head showed doubts over the efficacy of COVID-19 shots against the new Omicron coronavirus variant.  The pan European Stoxx 600 dropped 1.3% to hit its lowest levels in nearly seven weeks.  Whilst oil stocks dropped by 1.6%, following a drop in crude prices, bank stocks also dropped 1.6% to their lowest in more than two months.  Travel stocks also dropped by 1.1%.  Sectors which are sensitive to the pandemic slumped last week with the discovery last week of the Omicron variant in South Africa, pushing the benchmark STOXX 600 to its worst performance in more than a year on Friday.

More countries tightened their borders due to uncertainty about the Omicron variant whilst air travellers to the US will face tougher COVID-19 testing rules.  Japan and Hong Kong said they would expand travel curbs and Malaysia temporarily banned travellers from countries that are considered risky.  The World Health Organisation said, “blanket travel bans will not prevent the international spread, and they place a heavy burden on lives and livelihoods,”.  They also advised to those who are unwell and at risk or over 60 and unvaccinated to postpone travel. 

Thursday saw the US markets closing higher with the Dow Jones Industrial Average rising 1.82% to 34,639.79, the NASDAQ 100 closing higher by 0.71% at 15,990.76 and the S&P 500 reached 4,577.1 rising by 1.42%.  European stocks however dropped with the CAC 40 dropping by 1.25% to close at 6,795.75, the DAX closed lower by 1.354% to 15,263.11 and the FTSE 100 closed lower by 0.55% to close at 7,129.21. 

Currency Roundup

Sterling

Sterling moved back to an 11-month low on Monday as investors weighed the discovery of the Omicron coronavirus variant on the outlook of the British economy. Sterling dropped to a two-week low against the euro on Tuesday as traders feared that the Bank of England could keep interest rates unchanged amid concerns about the Omicron coronavirus variant.  Against the euro sterling dropped 0.3% to 85.02 pence, after touching a two-week low versus the euro.  It rose 0.3% against the weakening dollar.  Against the euro the pound has risen around 5% this year, finding support on the expectations that the BOE could raise interest rates faster than the European Central Bank.  Markets are pricing in around 8 bps of an increase in interest rates by the Bank on 16 December having dropped from more than 12 pbs at the beginning of the week.  Thursday saw sterling firming amid the discovery of the first case of the Omicron variant in the US that weighed overnight on the dollar.  Uncertainty as to whether the BOE will raise interest rates will also cap the sterling’s gains. Sterling moved higher by 0.2% higher to $1.3307 after hitting a fresh 2021 on Tuesday of $1.3195. Against the euro sterling recovered from a two-week low to reach 85.10 pence. 

Dollar

The dollar slid against its rivals and the yen moved back to more than two-weeks highs on Tuesday amid Moderna’s CEO comments that COVID-19 vaccines are unlikely to be as effective against the Omicron variant as they were with other types.  Risk appetite took a beating across world markets with the greenback weakening 0.3% against its rivals while the Japanese yen climbed 0.4% versus the dollar to its highest level since early November at 112.95 yen. 

Oil

Oil prices tumbled more than 3% on Tuesday amid comments from Moderna’s CEO that put doubts on the efficacy of COVID-19 vaccines against the Omicron coronavirus variant also impacting financial markets.  This drop in prices followed from Friday’s slide which was the biggest since April 2020 reflecting fears that the travel bans could impact demand.   Brent crude futures dropped by 3.2% to $71.12 a barrel after slipping to an intraday low of $70.52, the lowest since 1 September.  US West Texas Intermediate crude futures fell $2.15 or 3.1% to $67.80 a barrel.  Oil prices rose on Thursday, recovering the losses encountered the previous day, as investors adjusted positions ahead of the OPEC+ meeting.  Brent crude futures rose $1.24 or 1.8% to $70.11 having eased by 0.5% in the previous session.  Meanwhile US West Texas Intermediate crude futures gained 1.7% to $66.70 a barrel. OPEC and its allies agreed on Thursday to stick to their present policy of monthly oil output increases despite fears that a release by the US from crude reserves and the new Omicron coronavirus variant could lead to oil price rout.   

Gold

Gold prices rose on Tuesday after Moderna’s chief comments of the unlikely effectiveness of the COVID-19 effectiveness against the Omicron.  Spot gold rose 0.3% to $1,790.92 per ounce and US Gold Futures increased to $1,792.90. Gold prices were steady on Friday, however, a hawkish standpoint taken by US FED officials on stimulus tapering and interest rate hikes took the metal on course for a third straight weekly drop.   Spot gold was little changed at $1,768.26 per ounce after touching its lowest in nearly a month on Thursday.  Meanwhile US gold futures rose 0.4% to $1,770.20.  So far this week, gold has dropped by 1.4% as a number of officials suggested the central bank might accelerate stimulus tapering and Chair Jerome Powell stating that the decision could be taken in the upcoming policy meeting. 

Bitcoin

Bitcoin dropped 0.5% on Monday and lost about 17% of its value from a record $69,000 over the past 19 days.  Rival Ether has actually fared better.  Adidas’s the German sportswear retailer said it was partnering with Coinbase Global Inc. causing some waves.  The company also purchased a piece of virtual land called “adverse” in the blockchain-based world The Sandbox, with the German company indicating it would build that to offer virtual reality products.  The price of SAND, the virtual currency used to buy property and other items, climbed 90% to $7.18 on the news. Bitcoin was impacted by news of Omicron. Last week’s biggest impact on bitcoin and ether came from an Indian government announcement of a bill that would ban most private cryptocurrency transactions by the country’s estimated 15 million to 20 million crypto investors.

Malta:  Industrial Producer Price Indices – October 2021

A press release dated 30 November, 2021 shows that the industrial producer price index increased by 5.06% when compared to October 2020.  Price increases were registered in all the main industrial groupings with the exception of energy which remained constant.  The highest increase was recorded in intermediate goods (8.55%), consumer goods (4.32%) and capital goods (1.84%).  Meanwhile, industrial producer prices for the domestic market increased by 1.51%, non-domestic prices increased by 7.36%.  and in October, 2021, the industrial producer price index decreased by 0.19% when compared to September, 2021. Intermediate goods dropped by 0.74% whilst capital goods and consumer goods rose by 0.32% and 0.27% respectively.  The energy sector experienced no price change.  Domestic market prices increased by 0.08% due to the increase in consumer goods by 0.26%.  Non-domestic market prices declined by 0.36%. 

Malta:  Unemployment Rate – October 2021

A press release dated 30 November, 2021 shows that in October the seasonally adjusted monthly unemployment rate was 3.6%.  For the month under review, the unemployment rate for males was 3.9% while the rate for females stood at 3.1%.  The unemployment rate during October, 2021 for persons aged 15 to 24 years, was 8.2% while the rate for those aged between 25 and 74 years  reached 3%. 

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