“FED Meeting…”

In a meeting on Wednesday, the FED raised its benchmark overnight interest rate by half a percentage point, the biggest increase in 22 years.  Hence, the FED has set its target federal funds rate to a range between 0.75% to 1% in a unanimous decision. Furthermore, FED Chair Jerome Powell said policymakers were ready to approve half-percentage rate hikes at the upcoming policy meetings in June and July.  However, in a news conference after the release of the FED’s policy statement, Powell explicitly ruled out raising rates by three-quarters of a percentage point in a coming meeting.  Such a comment triggered a stock market rally.  He also made it clear that the rate increases which are in the pipeline, were “not going to be pleasant” as they force Americans to pay more for home mortgages and auto loans, and possibly dent asset values. The FED also said it would start reducing the nearly $9 trillion of assets that were accumulated whilst addressing the impact from the coronavirus pandemic and try to bring inflation under control. Powell and his colleagues are determined to restore price stability even if it means lowering business investment, household spending and lowering economic growth.  However, Powell added that he felt the US economy is performing well and is strong enough to combat the increases in interest rates without leading into recession or significant unemployment.  

Bank of England Raises rates

The Bank of England raised interest rates to their highest since 2009 at 1% on Thursday to counter inflation which is now heading above 10% even as it sent a warning that Britain risks dropping into recession.  Whilst nine rate-setters voted 6-3 for the quarter-point increase from 0.75%, another three called for a bigger increase of 1.25% to combat inflation.  The BOE showed its concerns about the impact of China’s COVID-19 lockdown policies that could re-impact supply chains again and add to inflationary pressures. 

Urgent Meeting of EU Energy Ministers

Energy ministers from the EU held emergency talks on Monday, as the EU tries to find a solution to Moscow’s request for the payment for Russian gas in roubles otherwise they could face supply restrictions.  Russia stopped gas supplies to Bulgaria and Poland last week after they refused to meet Russia’s demand to pay in roubles.  As these countries planned to stop using Russian gas this year, they claimed they could cope with the situation, however concerns increased about other countries following suit, including Germany, which is also gas reliant.  European companies face gas payment deadlines later this month, and the EU states are pressing for clarification as to whether companies can keep buying the fuel without breaching the EU’s sanctions against Russia.  Meanwhile, Moscow said that foreign gas buyers must deposit euros or dollars into an account at the Russian bank Gazprombank which would then convert them into roubles.   Concurrently, the European Commission has told countries that as countries comply with Russia’s scheme, EU sanctions could be breached.  The commission is also suggesting making sanctions-compliant payments if they declare the payment complete once it has been made in euros and before conversion into roubles. 

EU proposes Russian Oil Ban

On Wednesday the EU’s chief executive proposed more tough measures to punish Moscow over its war with Ukraine.  These measures include phased oil embargo on Russia, sanctions on its top bank and to ban Russian broadcasters from European airwaves.  The plan is to be agreed by EU governments.  As the EU is dependent on Russian energy it must find alternative supplies.   The European Commission President Ursula von der Leyen told the European Parliament in Strasbourg, “Putin must pay a price, a high price, for his brutal aggression.” She further added, “Today, we will propose to ban all Russian oil from Europe.” The measures by the commission include phasing out supplies of Russian crude oil within six months and refined products by the end of 2022.  However, Von der Leyen pledged to minimise the impact on the bloc’s economies.  If the embargo is agreed it will follow the US and Britain, which have already imposed bans to cut one of the largest income streams to the Russian economy. 

US Manufacturing Sector Slows

US manufacturing activity slowed for a second straight month in April.  Meanwhile, supply bottlenecks appeared to be easing and the increase in input prices as well as the backlog of unfinished work at factories are also moderating. On Monday, the Institute for Supply Management (ISM) stated that its index of national factory activity dropped to a 55.4 last month from 57.1 in March.  A reading above 50 indicates expansion in manufacturing, which accounts for 12% of the US economy. Nonetheless, spending is also shifting to services such as travel, dining out and recreation, and contributing to the cooling in manufacturing.  The ISM survey’s forward-looking new orders sub-index dropped to 53.5 from 53.8 in March.  The ISM survey’s forward-looking new orders sub-index dipped to 53.5 from 53.8 in March.  The survey’s measure of supplier deliveries rose to 67.2 from 65.4 in March.  A reading above 50% indicates slower deliveries to factories. There are some signs of improvement in supply.  The survey’s gauge of order backlogs dropped to a reading of 56 from 60 in March.  This was the second straight monthly decline. 

Eurozone Factory Output

Eurozone manufacturing output growth stopped making progress last month as factories struggled to source raw materials and demand was impacted by steep prices and fears about the economic outlook, showed a survey.  The S&P Global’s final manufacturing Purchasing Managers’ Index (PMI) dropped to a 15-month low of 55.5 in April from March’s 56.5.  These figures are above the 50 mark that separates growth from contraction. However, an index measuring output, that feeds into a composite PMI due on Wednesday and seen as a good gauge of economic health, sank to 50.7 from 53.1, its lowest since June 2020.  Meanwhile, input costs climbed at one of the fastest rates in the survey’s history and factories passed that on to customers by raising their prices at a record pace.  The output prices index climbed to 77.3 from 74.2, its highest since the S&P global started collecting data in late 2002. 

Oil

Oil prices dropped on Monday amid concerns over weak economic growth in China.  The latter is the world’s top oil importer.  Brent crude futures were down by 3.4% to $103.41 a barrel, while US West Texas Intermediate crude futures dropped 3.8% to $100.71 a barrel.  The markets in Japan, India, Britain and across Southeast Asia were closed for public holidays on Monday.  On Saturday, China released data that showed that factory activity in the world’s economy contracted for a second month to its lowest level since February 2020 due to lockdowns. Such data could have had an impact on oil prices as they dropped more than 2% amid worries about demand stemming from the impact of COVID on China’s economy. Meanwhile, on the supply side, Libya’s National Oil Corp on Sunday said it would temporarily resume operations at the Zueitina oil terminal after it declared force majeure in late April on some shipments as some political protestors forced a number of oil facilities to suspend operations.  Oil prices edged higher on Wednesday as the EU has set plans to phase out imports of Russian oil.  Brent crude futures rose 2.8% to $107.91 a barrel amid thin trading volume as China and Japan were closed for holidays. Meanwhile, West Texas Intermediate crude futures rose 3% to $$105.43 a barrel.  Oil prices climbed further on Thursday amid supply worries after the EU laid out its plans for new sanctions against Russian.  However, a stronger dollar and a drop in global stock markets, however, kept oil prices in check.  Brent futures rose 0.7% to settle at $110.9 a barrel, while US West Texas Intermediate (WTI) crude rose 0.4% to settle at $108.26.  This was the highest close for WTI since 25 March and the highest for Brent since 18 April. 

Gold

Gold prices slipped 1% towards a 2 ½ lows on Monday on bets by investors that the FED will increase interest rates to control inflation.  Spot gold dropped by 1.2% to $1,873.95 per ounce trading at near their last week’s low of $1,871.81 an ounce.  US gold futures dropped 1.9% to $1,876.70.  As interest rates rise gold’s opportunity cost of holding non-yielding assets and strengthen the dollar in which gold is priced, making bullion expensive for holders of other currencies. Meanwhile, on Tuesday, gold slightly tracked a retreat in US Treasury yields and the dollar, while investors were expecting an aggressive interest rate hike from the FED a the end of the two-day policy meeting.  Spot gold was up by 0.4% to close at $1,870.56 per ounce. 

Malta – Inbound Tourism

A press release dated 6 May 2022 shows that during March 2022 a total of 95,395 inbound tourists visited Malta for holiday purposes, followed by 8,562 tourists for business purposes.  Inbound tourists were French, German and Italian.   The total tourist expenditure surpassed €80.1 million while the average expenditure per night amounted to circa €108.04.  Meanwhile, for the first quarter of 2022 inbound tourists amounted to 235,295 and total tourist expenditure was estimated at €167.1 million.  The total expenditure per capita declined from €916 in 2021 to €710.    

‘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.’