“General Election in Turkey”

General Election In Turkey

Recep Tayyip Erdogan won Turkey’s presidential election on Sunday 24^th June, and as the head of the country’s electoral body said, overcoming the biggest electorate challenge to his rule in a decade and a half.  As stated by the Electoral board Chairman Sadi Guven with more than 97% of the votes counted, Erdogan had an absolute majority. President Erdogan on 18^th April called a snap election for 24 June, stating that economic challenges and the war in Syria meant Turkey must switch quickly to the powerful executive presidency that goes into effect after the vote.    Erdogan who is 64, and the most popular but also the most divisive politician in modern Turkey, added that Turkish forces would continue to “liberate Syrian lands” so that the 3.5 million Syrian refugees in Turkey could return home safely.  Erdogan’s victory paves the way for another five year term.  Under the new constitution, he could serve a further term from 2023 to 2028.

EU Summit In Brussels

European Leaders gather in Brussels for a two day meeting on the 28^th to 29^th June.   The topics to be discussed range from immigration which is on top of the list,  steps to be taken against the US for the imposition of steel and aluminium tariffs, Brexit, Deeper Eurozone Integration and Defence.

French Business Activity

According to IHS Markit, in a preliminary composite purchasing manager’s index that includes both the manufacturing sector and service sector, rose in June to 55.6 from 54.2 in May.  The 50 point line is what divides an expansion in activity from a contraction.  As Paul Smith IHS Markit economist said, “The French economy showed noticeably divergent trends at the end of the second quarter, with manufacturing and service sectors heading in markedly different growth directions.”  He further added that while the dominant and more domestically focused service sector was benefitting from improved demand at home, manufacturers were seeing weaker export demand as well growing price pressures.  The service sector PMI rose to 56.4 from 54.3 in May.  Meanwhile, in the manufacturing sector, the PMI eased back to a 16 month low at 53.1 from 54.4 in May, falling short of expectations at 53.9.  The flow of manufacturer’s new orders was the weakest since February 2017 but capacity pressures kept factories busy working off backlogs of unfinished work.

Germany’s Manufacturing

Activity in Germany’s private sector rebounded in June after slowing for four months in a row, according to a survey. This indicates that Europe’s largest economy had underlying strength despite losing some steam arising from restrictive trade policies.  IHS Markit’s composite Purchasing Managers’ Index which tracks the manufacturing and services sectors that account for more than two-thirds of the economy rose to a two month high whereby in June it increased to 54.2 from 53.4 in May.  An index that measures manufacturing activity fell to 55.9 from 56.9 in May, the lowest reading in 18 months.  Meanwhile the index for services rose to 53.9 from 52.1 in May, a three-month high.  The figures reflect a cooling trend in the manufacturing sector that started this year after an all-time high reading in December 2017.  According to economists, this is partly due to the increasingly protectionist policies undertaken by President Donald Trump, which has had an impact on the outlook of manufacturers in Germany who are export dependent.

Survey – Business In The UK

In a poll of 800 executives, which was released two years after the Brexit Referendum, shows that Britain’s departure from the European Union has led nearly half of big companies from the rest of the bloc to cut investment in the country.  The survey by law firm Baker & McKenzie, also found that three quarters of bosses wanted Brussels to make concessions to Britain to secure a better trading relationship after it leaves the EU in nearly 2019.  The law firm surveyed executives in France, Germany, Sweden, Ireland, Spain and the Netherlands working at companies in a range of industries with annual sales of at least 250 million pounds.  Two thirds of respondents said they wanted a free-trade deal while 45 percent were in favour of a customs union.

OPEC

OPEC agreed to a modest increase in oil production from July, after the leader of Saudi Arabia persuaded rival Iran to cooperate, following calls from major consumers to help reduce the price of crude and avoid a shortage.  The decision has however, confused some in the market as OPEC gave opaque targets for the increase, making it difficult to understand how much more it will pump.  With the news oil prices rose three per cent.  US, China and India were urging OPEC to release more supply to prevent an oil deficit that would hurt the global economy.  OPEC said in a statement that it will go back to 100 percent compliance with previously agreed output cuts but gave no concrete figures.  Saudi Arabia said the move would translate into a nominal output rise of around one million barrels per day or one per cent of global supply.  Iran had rejected calls from President Donald Trump for an increase in oil supply, arguing it had contributed to an increase in prices by imposing sanctions on Iran and fellow member Venezuela.  In May, Trump placed fresh sanctions on Tehran and market watchers expect Iran’s output to drop by a third by the end of 2018.  That means the country would gain from a deal to raise OPEC output, unlike Saudi which is a top oil exporter.  The Saudi Energy Minister convinced his Iranian peer to support the increase just hours before the OPEC meeting.

China

Chinese industrial firms experienced a sharp rise in profits in May, keeping the increase of the previous month, despite signs of slowing momentum in China’s economy and trade war with the United States.  Policy makers are freeing up more funds for lending by cutting required reserve levels for banks twice since April.  The latest cut came on Sunday as authorities moved fast to avoid any potential drag on growth from trade disputes.  Industrial profits rose 21.1 percent to 607.1 billion yuan in May, according to data published by the National Bureau of Statistics on Wednesday, compared to 21.9 percent growth in April.   For the first five months, profits for industrial firms increased by 16.5 percent from a year earlier, versus a 15 percent increase in the January-April period.  The increase in earnings was driven by price gains and lower costs, according to a statement from the statistics bureau official He Ping accompanying the data.  China’s industrial firms have benefited from a hot property and infrastructure construction market over the past two years, which helped stimulate demand for building materials from steel bars to copper pipes, glass and cement.

Malta – International Economic and Financial Transactions:  Q1/2018

During the first quarter of 2018, Malta registered a current account surplus of EUR 390.5 million from a surplus of EUR 247.2 million in the same period in 2017.

Malta – Industrial Producer Price Indices: May 2018

During May 2018, the industrial producer price index registered an increase of 5.63 percent when compared to the same month last year.

Malta – Registered Unemployed:  May 2018

In May, the number of persons registering for work stood at 1,791 decreasing by 28.4 per cent when compared to the corresponding month in 2017.

Cryptocurrency Exchanges

The financial regulator in Japan said on Friday it had ordered cryptocurrency exchanges in bitFlyer Inc. which is one of the biggest in the country to make improvements to lax measures on money laundering.  The Financial Services Agency slapped six exchanges with business improvement orders after it found flaws in their anti-money laundering systems and controls during on-site inspections.  The FSA has cracked down on cryptocurrency exchanges since the $530 million theft of digital money from Coincheck, one of Japan’s biggest earlier this year.  Since the theft the exchange has rejected applications to run exchanges and ordered others to cease or improve business over weaknesses in customer protection.  Japan will chair the G20 in 2020, and hopes to take a global lead in the efforts to combat money laundering at cryptocurrency exchanges and is also pushing for the adoption of new binding rules by 2019.

Yields

US yields edged higher on Tuesday on concerns that trade wars could harm economic growth, however buying of bonds was capped by expectations that the Federal Reserve will continue to raise interest rates.   Fears of trade war were filled by reports that the Treasury was drafting curbs that would block firms with at least 25 percent Chinese ownership from buying US companies with “industrially significant technology”.  Furthermore, Trump said that the government was completing a study about increasing import tariffs on cars from the European Union and suggested he would take action soon.  The demand for treasuries was effected by hesitation to buy bonds in view of the expectations that the FED would raise interest rates.  On Wednesday government bond yields in Germany fell towards recent one- month lows over a row on migration policy.  There were concerns that the biggest economy within the EU will head to snap elections.  On Tuesday a four hour of talks between Chancellor Angela Merkel and her conservative Bavarian allies failed to solve the row, just before a summit of EU leaders who are also divided on the issue.  The German 10 year bond yield briefly dipped 2.5 basis points to 0.305 percent within a short time-frame from a one-month low hit this week.  Meanwhile, the US Treasury and UK gilt yields hit a one-month low as the stock market renewed the selling pressures due to trade war concerns.

Oil

Oil prices steadied on Thursday, with the US crude pulling back from a 3 ½ year highs, however, supply remained tight as investors are concerned by the prospect of a big fall in crude exports from Iran due to US sanctions.  After hitting $73.06 on Wednesday which was the highest since November 2014,  US light crude was at $72.71 a barrel.  The United States this week demanded that all countries halt imports of Iranian oil from November.  With this position taken, the Trump administration hopes will cut off funding to Iran.  This move followed the decision OPEC took last week to increase production to try to moderate oil prices that have rallied more than 40 percent over the last year.  Oil prices have rallied for much of 2018 on tightening market conditions due to record demand and voluntary supply cuts by the Middle East.  Furthermore, supply disruptions which were unplanned from Canada to Libya and Venezuela have added to those cuts.

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