“Fresh Stimulus Package By The ECB…”

Fresh Stimulus Package By The ECB

As Mario Draghi’s eight-year mandate as president of the European Central Bank draws to an end, the ECB approved a fresh stimulus package by cutting interest rates and approving a new round of bond purchases to push down borrowing costs even lower, kick-start activity and address concerns over a drop-in inflation expectations.  The ECB cut its deposit rate to a record low of -0.5 percent from -0.4 percent and will restart bond purchases of 20 billion euros a month from November, it said in a statement.  In a regular statement the ECB said, “The Governing Council expects (bond purchases) to run for as long as necessary to reinforce the accommodative impact of its policy rates, and to end shortly before it starts raising the key ECB interest rates.”  Furthermore, the ECB also eased the terms of its long-term loans to banks and in order to help banks, has introduced a tiered deposit rate. The ECB said, “The Governing Council now expects the key ECB interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2 percent within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics.”   The ECB has cut its growth projections for this year and next, predicting growth at just above 1 percent, below what is considered as its natural potential.

German Exports

German exports unexpectedly rose in July, data showed on Monday. Exports rose 0.7 percent in July on a seasonally adjusted basis, while imports fell 1.5 percent, said the Federal Statistics Office.  The trade surplus rose to EUR 20.2 billion euros after a downward revision of EUR 18 billion the month before.  Germany’s gross domestic product contracted by 0.1 percent quarter-on-quarter in the second quarter on weaker exports.  The decline in foreign sales is mainly driven by Britain and below-average demand from China.  The data released on Monday showed that in the January-July period German exports rose by 1 percent.  The strongest contribution is coming from markets beyond the European Union, which registered growth of 2.9 percent.  The BGA foreign trade association said that in contrast to business in Europe, which was being hampered by Brexit uncertainty, business with the United States was going well. Meanwhile, seasonally adjusted unemployment rose in August.

US Core Consumer Prices

US underlying consumer prices increased solidly in August, leading to the largest annual gain in a year.  The Labour department said on Thursday its consumer price index, excluding the volatile food and energy components, gained 0.3 percent for a third straight month.   The so-called CPI was boosted by a surge in healthcare costs and increases in prices for airline tickets, recreation, used cars and trucks.  On a yearly basis through August the core CPI increased 2.4 percent, the most since July 2018 after climbing 2.2 percent in July.  A decline in energy prices held back the increase in the overall CPI to 0.1 percent last month.  The FED which has a 2 percent inflation target, tracks the core personal consumption expenditures (PCE) price index for monetary policy.  The core PCE price index rose 1.6 percent on a year-on-year basis in July and has fallen short of its target this year.

US Producer Data

Data showed that core US producer prices rebounded in August after falling the previous month, suggesting a pick-up in inflation.  According to the Labour Department, the producer price index for final demand edged up 0.1 percent last month, exceeding forecasts of no growth.  This followed an 0.2 percent gain in July.  Excluding the volatile food, energy and trade services components, producer prices jumped 0.4 percent last month after dipping 0.1 percent in July, the first decline since October 2015.

China

In August China’s factory-gate prices shrank at the sharpest pace in three years, falling deeper into deflationary territory.  This reinforces the need for Beijing to step up economic stimulus amid the trade war with the US.  China’s producer price index (PPI) dropped 0.8 percent from a year earlier in August.  This is bigger than the 0.3 percent decline seen in July and the worst year-on-year contraction since August 2016, said the National Bureau of Statistics (NBS) on Tuesday.

Japan’s Economy

Japan’s economy grew at a slower pace than it was originally estimated in the second quarter amid the China-US trade war that has prompted a downward movement in business spending and calling central banks to deepen stimulus this month. The weakness in global economy has added pressure for the Bank of Japan to expand stimulus in its next meeting.    The economy grew an annualised 1.3 percent in April-June, as revised by the Cabinet Office, data showed on Monday, which is weaker than the preliminary reading for 1.8 percent annualised growth.  Capital spending rose just 0.2 percent from the previous quarter, much lower than the preliminary 1.5 percent rise.  Household spending rose for an eight-straight month in July, marking the longest run of expansion since comparable data became available in 2000.  Also, the consumer sector has expanded for three straight quarters, although the pace of growth has slowed.  Japan’s exports slipped for an eight month in July, dragged down by China-bound shipments of car parts and semiconductor production equipment.  Manufacturers’ confidence turned negative for the first time since April 2013.

Trade War

In the latest sign that the trade tensions with the US could be cooling, China’s finance ministry said 16 types of US goods would be exempted from additional retaliatory tariffs effective 17^th September. It would be valid for a year through to 16^th September 2020.  Amongst the products exempted are whey and fish meal which are fed to animals and some lubricants, according to a statement from the Ministry of Finance.  Meanwhile, markets now are awaiting the next move from Washington after months of tit for tat moves that has hurt the global economies and resulted in jittery markets.  On Monday US Secretary Steven Mnuchin said that there was “a lot of progress” in trade talks with China and that Washington will seal an agreement if it “can get a good deal” in the coming weeks.

Currency Roundup

On Tuesday the US dollar firmed against the euro trading within its recent range before the ECB meeting on Thursday.  Meanwhile the yen and the swiss franc fell to a five-week trough on Tuesday as investors searched at riskier currencies as the chances of a no-deal Brexit lessened, hopes of a breakthrough of the trade war and a Reuters report of German stimulus plans.  The latter focused on the possibility that Germany may set up public investment agencies to boost fiscal stimulus without breaching national spending rules.  The Australian dollar fell on Tuesday amid a dismal business survey showing the country’s corporate sector was losing momentum.  It fell to $0.68505 from Monday’s high of $0.68755 after a closely watched survey of business confidence deteriorated in August to below average levels.  The British pound steadied just below a six-week high on Wednesday after its recent rebound after investors assessed the chances that Prime Minister Boris Johnson can strike a Brexit deal with the EU.  It rose to $1.2369 and gained 0.2 percent to 89.20 pence per euro. On Wednesday the Japanese yen fell as the rush by investors to safe-haven assets dropped as they moved into more risky assets.  After initially surging on the ECB announcement on Thursday, the euro fell back below $1.10.  After trading as high as $1.1070, the single currency then dropped to $1.0961, as investors digested the news from the ECB and the asset purchases.

Market Wrap

Monday saw European stock markets opening slightly higher after data showed a surprise rise in German exports and on hopes of more stimulus by the European Central Bank later in the week.  European shares fell in early trading on Tuesday amid a sell-off in defensive sectors and on disappointing data from China that increased the recession worries.  US stocks likewise opened lower.  In early morning trading on Wednesday, the US benchmark 10-year note yields rose to 1.729 percent from 1.702 percent late on Tuesday.   Whilst the 10-year yields hit a four-week high of 1.744 percent, the yields on the 30-year bonds advanced to 2.207 percent from 2.181 percent on Tuesday, moving away from record lows of 1.905 percent touched in late August.   Germany’s 30-year government bond yield rose into positive territory also on Tuesday for the first time in over a month, lifted by uncertainty over the extent of the ECB stimulus and the solution to the China-US trade agreement.   European shares rose to six-month highs on Wednesday, as China eased trade worries by stating that it would exempt some US goods from additional tariffs.  Meanwhile eyes were on the ECB meeting, as many expected it to deliver more economic stimulus.  Euro zone stocks were up 0.5 percent with investors piling into banks, miners and autoparts shares for a second day.   As the trade tensions between the US and China could be cooling, all of the major European indexes have recouped the losses sustained in August, and the STOXX were up about 7 percent since touching a low of 361.07 last month.  On Thursday shares in the Hong Kong stock exchange fell more than 3 percent as investors put doubt on the merits of the $39 billion takeover approach to London Stock Exchange plc.  The deal would create a global financial giant.   Thursday also saw the bond yields tumbling across the eurozone and the single currency fell towards recent 28-month lows (the euro hit a 28-month low earlier this month of $1.0926) after the ECB cut interest rates and resumed asset purchases.  Italy led the rally in government bond markets as the 10-year bond yields dropped 20 basis points to a record low at 0.78 percent.   European stocks went into positive territory after the EU announcement and the eurozone banking index jumped as much as 1.4 percent, amid the introduction of rate tiering.  Such a move should mitigate the impact of lower interest rates on the financial sector.  The shares later slipped 1.6 percent.  Britain’s 10-year gilt yields dropped 6 basis points on the day to 0.58 percent, dragged down by the drop in European bond yields.  US treasury yields also tumbled as the ECB policy action spread across international markets.

Oil

Oil futures rose for a fifth day, rising to their highest in almost six weeks over optimism that OPEC and other producing countries may agree to extend output cuts to support prices.  WTI gained more than 2 percent on Monday, while Brent finished the day 1.7 percent higher as the market reacted positively to the appointment of the son of Saudi Arabia’s king as energy minister on Sunday. Prices were lower on Tuesday over speculation that sanctions-hit-Iran could revive its crude exports after Trump adviser John Bolton, left his post.  Meanwhile, oil prices rose on Wednesday after data from the American Petroleum Institute (API) late on Tuesday showed US crude stocks fell last week by 7.2 million barrels.   OPEC on Wednesday cut its forecast for growth in world oil demand in 2020 due to an economic slowdown,  an outlook the producer group said highlighted the need for ongoing efforts to prevent a new glut of crude.  In a monthly report OPEC said oil demand worldwide would expand by 1.08 million barrels per day, 60,000 bpd less than previously estimated, and indicated the market would be in surplus.  This weaker outlook arising from the US-China trade war and Brexit could raise the case for OPEC and its allies to maintain or adjust their policy of cutting output.  OPEC, Russia and other producers since the beginning of this year implemented a deal to cut output by 1.2 million bpd.  The alliance, known as OPEC+ in July renewed the pact until March 2020.

Malta:  Registered Employment February And March 2019

In March 2019, registered full-time employment increased by 6.1 percent reaching 215,750.  This was mainly attributed to a year on year increase in the full-time registered employment (12,370) and a decline in registered unemployment (182).  Comparing March 2019 to March 2018, the highest increase in employment was brought about by professional, scientific and technical activities, human health and social work activities.  Meanwhile, part-time employment in March 2019 went up by 5.3 percent when compared to a year earlier.

Malta:  Inbound Tourism July 2019

Total inbound visitors in July were estimated at 305,588 representing an increase of 5.4 percent when compared to the corresponding month in 2018.  A total of 275,667 inbound tourist trips were carried out for holiday purposes.  Inbound tourists from Non-EU countries went up by 9.9 percent when compared to the corresponding month in 2018.  Total tourist expenditure was estimated at EUR 285 million an increase of 1.8 percent over the corresponding month in 2018.  Meanwhile, inbound tourist trips for the first seven months of 2019 amounted to 1,512,388 an increase of 4.2 percent over the same period in 2018.  Total tourist expenditure was estimated at almost Eur1.2 billion, 4.3 percent higher than that recorded for 2018.

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