“FED Chairman Jerome Powell …”

FED Chairman Jerome Powell

In a closely watched speech Federal Reserve Chairman Jerome Powell gave an assessment of the US economic outlook on Wednesday. Powell is the latest of the policymakers to brush off the idea that they might push rates into negative territory. He said, while referring to the FED’s policy-setting Federal Open Market Committee that “The Committee’s view on negative rates really has not changed. This is not something that we are looking at.” Powell also warned that the long-term health of the US economy may depend on more fiscal stimulus to fight the economic impacts from the coronavirus. He further added that “The scope and speed of this downturn are without modern precedent, significantly worse than any recession since World War II”.

China and the US

US President Trump has threatened to implement fresh tariffs on Beijing and on Monday he said he was unwilling to renegotiate the US-China “Phase 1” trade deal after a Chinese state-run newspaper reported some government advisers in Beijing were urging fresh talks and possibly invalidating the agreement. The trump administration is also pressing an independent board charged with overseeing billions in federal retirement dollars to freeze plans to invest in Chinese companies that Washington suspects of abusing human rights or threatening US security. Meanwhile, China has announced a new list of 79 US products including ores of rare earth metals, gold ores and silver ores for waivers from retaliatory tariffs, amid continued pressure on Beijing to boost imports from the US.
The IMF To Back Chile’s Request For Flexible Credit Line
The international Monetary Fund on Tuesday said that its managing director would recommend approval of Chile’s request for a two-year, $23.8 billion flexible credit line, given the sustainable track record of the Latin American country. In a statement, the Fund said that “Chilean authorities intend to treat the credit line as precautionary.” The IMF’s Flexible credit line helps guard against external shocks by giving countries with very strong policy frameworks and track records of economic performance quick access to large amounts of IMF resources with no ex-post conditions.

China’s Factory Deflation Deepens

China’s factory prices fell at the sharpest rate in four years in April, amid the weakening industrial demand due to the coronavirus pandemic that slammed global growth. The producer price index dropped 3.1 percent from a year earlier said the National Bureau of Statistics in a statement on Tuesday. China’s statistics bureau said that the producer price declines were driven by a slump in global crude oil and commodities prices. Nearly 60 percent of the deflation came from fuel extraction and processing and chemical manufacturing. Many manufacturers in China have been affected by the plunge in overseas orders and the increasing levels of inventories and dropping profits. Many have also made workers redundant to reduce costs.

UK Economy

Britain’s economy shrank by a record 5.8 percent in March from February as the crisis from the coronavirus persisted and the government ordering a shutdown of many of the places in the country to stop the spread of the coronavirus, said official data on Wednesday. In the first three months of the year, gross domestic product contracted by 2 percent from the last quarter of last year, said the Office for National Statistics. This was the largest quarter-on-quarter drop in the end of 2008 during the depths of the financial crisis. As companies and consumers spent most of April under lockdown, the figures for April are likely to show a bigger fall in British economic output than in March. The Office for National Statistics said output in Britain’s giant services sector dropped by a record 1.9 percent in the first quarter and there were also significant contractions in production and construction. Meanwhile, Britain extended its job retention scheme, whereby the government pays 80 percent of furloughed worker’s wages till end of October, hence extending it by four months. The UK is issuing debt and is due to issue 180 billion pounds of government debt between May and July, more than was previously planned for the entire financial year. Britain’s debt has exceeded $2.5 trillion and its public sector net borrowing could reach 14 percent of gross domestic product this year, the biggest single-year deficit since World War Two.

COVID-19

Official data published on Tuesday showed that Britain’s death toll from the COVID-19 reached 38,000 as of early May which is far more than Italy as the worst effected country in Europe. There was criticism over Boris Johnson’s plan to ease the lockdown measures as these were seen as unclear. Renewed Coronavirus outbreaks in China and South Korea have revived concerns while Germany has also reported that new coronavirus infections were accelerating exponentially after early steps to ease the lockdown. Governments worldwide are struggling with the question of how to reopen their economies while still containing the coronavirus. In Europe, Spain and France have taken major steps to ease lockdowns, while Britain has announced more cautious moves.

Market Wrap

As equities and riskier assets in recent weeks rebounded sharply as the spread of the coronavirus eased in countries such as Asia and Europe and as parts of the US started to reopen, equities and riskier assets are heading to erasing those gains amid worries that rushing to open factories and shops can be premature. US stocks opened lower on Monday after last week’s rally, with the Dow Jones Industrial Average dropping 0.31 percent at the open and the Nasdaq Composite dropping 0.73 percent at the opening bell. Meanwhile, the S&P 500 ended a volatile session marginally higher on Monday as hopes of an economic rebound were overshadowed with worries over spikes in new coronavirus infection cases. The benchmark index is still about 13 percent below its February all-time high. The first quarter earnings season is nearing its end with about 440 of the S&P 500 companies reporting results so far. On average, earnings are down 12.1 percent during the quarter, according to Refinitiv data. On Monday Italy’s borrowing costs rose as risk appetite dropped and stocks across Europe tumbled 1 percent, which has put pressure on lower-rated bond markets in the EU such as that of Italy. Credit rating agency Moody’s left Italy’s ratings unchanged on Friday, however, DBRS Morningstar cut Italy’s ratings trend to “negative” from “stable”. US stock futures ticked higher on Tuesday amid China’s move to waive off tariffs on some US imports that added hopes that the easing of the lockdown measures will lead to a jump-start to the effected global economy. Meanwhile, eurozone bonds rose in early Tuesday trade as investors focused on the new coronavirus infection rates. The German 10-year bond yields rose 3 basis points to –0.49 percent while Italian 10-year bond yields were down 1 basis point to 1.88 percent after rising 10 bps during the previous session. Focus was on the ECB’s purchases after data on Monday showed it had conducted its largest weekly purchases on record. Stocks and oil prices dropped on Wednesday as fears about a second wave of coronavirus infections affected financial markets, as the leading US infectious disease expert Anthony Fauci on Tuesday warned lawmakers that a premature lifting of lockdowns could lead to additional outbreaks of the deadly coronavirus. His comments hammered Wall Street Stocks overnight, as investors moved from the optimism about easing of the lockdown measures to anxiety about concerns of spikes in new virus cases. MSCI broadest index of Asia-Pacific shares outside Japan was down 0.4 percent. Shares in China where the coronavirus first emerged last year dropped by 0.5 percent. Treasury yields dropped lower amid a caution message from the US Federal Reverse Chairman Jerome Powell and the rising speculation that the US could adopt negative interest rates. Wall Street Shares moved lower after Fauci’s comments including his statement that a treatment or vaccine is unlikely to be in place by late August or early September. On Tuesday, the Dow Jones Industrial Average dropped by 1.89 percent, the S&P 500 lost 2.05 percent and the NASDAQ Composite dropped 2.06 percent. Sentiment was also affected by a proposed legislation by a leading US Republican senator that would authorise President Donald Trump to impose Sanctions on China if it fails to give a full account of events leading to the outbreak of the coronavirus. Australian shares and Japan’s Nikkei slid 0.8 percent. On Wednesday the Dow and S&P futures turned negative as Federal Reserve Chairman Jerome Powell warned of a prolonged U.S. recession due to the coronavirus outbreak in his prepared remark prior to his address. On Thursday Wall Street’s main indexes were lower in choppy trading as renewed worries about Sino-U.S. trade relations added to fears of an extended economic downturn due to the virus outbreak. Meanwhile, a wave of selling hit European shares as investors feared a prolonged economic downturn due to the coronavirus pandemic. Eurozone banks hit all-time lows at one point.

Oil

Oil markets which have plummeted this year amid a drop in demand and a supply glut. In the first quarter of this year, Brent crude prices fell 65.6 percent, before OPEC+ agreed to its deepest oil cuts. OPEC+ will next meet in early June to decide on its output policy. Under the deal, the exporting group is set to scale back the cuts to 7.7 million bpd from July until December. Meanwhile, on Monday Saudi Arabia made a surprise announcement that it will voluntarily deepen oil output cuts from June by 1 million barrels per day, saying it wants to expedite draining a global supply glut and rebalance the oil market. Gulf OPEC producers, the United Arab Emirates and Kuwait have joined Saudi Arabia and pledged to further cut output in June by a combined 180,000 bpd. On Tuesday oil prices climbed following the unexpected cut announcement by the Gulf producers.

Gold

Gold held steady on Monday as pressures from a firmer dollar and a rise in risk appetite was offset by concerns about a pick-up in new coronavirus cases. Spot gold stood at $1,702.64 per ounce having lost about 1 percent on Friday. Meanwhile on Wednesday gold rose after US Federal Reserve Chairman Jerome Powell pledged more stimulus to ease the impact of the coronavirus.

Currency Roundup

On Monday the yuan pulled against the dollar, but losses were capped as sentiment was supported by the pledge by the Chinese central bank that pledged to roll-out more stimulus to help the slowing economy. Sterling dipped against the dollar on Monday as rising US Treasury yields put the US currency in demand, with investors cautious about the easing of the lockdown in Britain. Against the euro, it was 0.2 percent lower at 87.48 pence. On Tuesday Trump again pushed the FED to adopt negative interest rates as data showed that US consumer prices dropped 0.58 percent in April, the biggest decline since the Great Depression. This is a hot topic as the US money market last week started to price in the possibility of negative interest rates. The Dollar clung on to gains on Tuesday as fears grew about a second wave of infections. The euro reached $1.0818 although still not too far from the $1.0636 low touched at the end of March when the pandemic sent markets in turmoil. On Wednesday, ahead of the Federal Reserve Chairman Jerome Powell’s speech, the dollar held below a three-week high. Although the dollar has gained from the recent shift to the safe-haven currency, hedge funds are holding their short bets on the currency while institutional investors remain bullish. The British pound firmed 0.3 percent to $1.2288 as bond yields fell after data showed that in March the British economy contracted by a record 5.8 percent even though consumption dropped less than feared by some market participants. Sterling also extended Monday’s losses hitting a 20-day low versus the euro due to the confusion over government plans to ease lockdown measures. The highest death Covid-19 death toll in Europe and revived Brexit risks all weighed on the pound. The yuan eased against the dollar on Wednesday as some investors began to worry about a potential new wave of coronavirus infections in China. According to traders the situation at home and abroad remained a main concern, along with the Sino-trade tensions and Beijing’s economic stimulus measures. The dollar held gains on Thursday against major currencies after US Federal Reserve Chairman Jerome Powell dismissed speculation that policymakers will adopt negative interest rates. The dollar traded at $1.0805 against the Euro following an 0.3 percent gain in the previous session.

Malta – Registered Employment: November 2019

Data provided by Jobsplus shows that, over a period of one year, the labour supply (excluding part-timers) in November reached 226,409 (an increase of 5.8 percent). Full-time registered employment increased (12,518) whilst registered unemployment declined (136). Comparing November 2019 to November 2018, the highest increase in employment was brought about by administrative and support service activities, and construction. Meanwhile, registered full-time employment in the private sector went up by 11,450 persons to 175,981 and public sector full-time employment increased by 1,068 persons to 48,756.

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