“German Exports to China…”

German Exports to China

German exports to China declined for the first time in nearly a year in July, easing by 3.9% year-on-year to €8.4 billion, said the statistics office on Wednesday.  This was the first decline in exports to China, which is Germany’s largest sales market outside the EU, since August 2020 and it was the biggest slump since May 2020, when the world was hit by the first wave of the coronavirus pandemic.  Exports to the US grew by 15.3% to 10.8 billion Euro, said the statistics office. 

Eurozone Business Activity

Eurozone Business Activity remained strong this month as the roll-up of vaccination allowed more businesses to reopen and customers to venture out.  The IHS Markit’s Flash Composite Purchasing Manager’s Index seen a good guide to economic health, dropped to 59.5 in August from 60.2 last month.  It was higher than the 50-mark separating growth from contraction.  Chris Williamson, the Chief Business Economist at IHS Markit said, “The Eurozone’s economic recovery retained impressive momentum in August, with the PMI dipping only slightly from July’s recent high to put its average in the third quarter so far at the highest for 21 years.”  He further added that “Supply chain delays continue to wreak havoc, however, leaving companies frequently unable to meet demand and pushing firms’ costs higher.”  The PMI covering the block’s dominant service industry moved down to 59.7 from July’s 1-year high of 59.8.  Demand only slowed marginally from July indicating the rebound will continue but the services business expectations index, which measures optimism about the year ahead, dropped to 68.6 from 69.1.  Meanwhile, manufacturers have another solid month, their PMI remaining well above the breakeven mark of 61.5.    

German Consumers and State spending

Private consumption and state spending led to a stronger than expected economic recovery in Germany in the second quarter following the ease of COVID-19 curbs, said the Federal Statistics Office on Tuesday in a revision to an earlier estimate.  Gross Domestic Product grew by 1.6% on the quarter from April to June adjusted for price, seasonal and calendar effects, said the office, slightly up from its previous estimate of 1.5% GDP growth. 

German Business Morale

German business morale dropped for the second month in a row in August as companies took a gloomier view of the upcoming months in Europe’s largest economy due to the rising number of COVID-19 cases and supply bottlenecks, showed a survey on Wednesday.  The IFO institute said its business climate index dipped to 99.4 from a downwardly revised reading of 100.7 in July.   The president of IFO said, “the mood in the German economy has clouded over again.” “Supply bottlenecks for intermediate products in manufacturing and worries about rising infection numbers are putting a strain on the economy.”   

UK Retail Sales

British retailers reported the biggest surge in spending in almost seven years this month and orders hit a new high but stocks dropped to the lowest levels on record, putting pressure on prices, industry data showed on Tuesday.  The Confederation of British Industry’s (CBI) measure of the volume of sales compared with a year earlier soared to +60, the highest since December 2014, from +23 in July.  The CBI said retailers reported that selling prices in the three months to August increased at the fastest pace since November 2017 and the picture for the next quarter looked similar. 

UK Property Sales

The number of homes sold in the UK dropped by more than half last month after the scaling back of a tax break which was designed to encourage home purchases during the coronavirus crisis, showed official data on Tuesday.  Britain’s tax office said 73,740 homes were sold in July on a seasonally adjusted basis, 63% lower than in June when buyers had rushed to complete sales before the COVID emergency tax break was reduced.  Rishi Sunak, the British Finance Minister last year temporarily scrapped the stamp duty tax on the first £500,000  of property purchases in England and Northern Ireland. 

Currency Roundup

The Dollar retreated from more than nine months high against major peers on Monday as a bounce in the markets lifted sentiment despite the continued spread of the Delta coronavirus variant.  The Dollar index that measures the currency against six rivals, declined 0.19% to 93.311 from Friday where it climbed as high as 93.734 for the first time since 4 November.  The Aussie climbed 0.29% to $0.71575 after reaching a 9 ½ month low of $0.71065 on Friday.  Against the Canadian Dollar the greenback slipped 0.25% for C$1.2776.  It surged to an eight-month high of C$1.2949 at the end of last week.  Meanwhile, the Euro appreciated 0.18% to $1.17195 off Friday’s 9 ½ through of $1.1664.  Sterling added 0.18% to $1.36475 up from a one-month of $1.3602 at the end of the previous week.  Sterling edged up higher against the Dollar and was flat against Euro on Monday as risk sentiment across markets recovered somehow after the global growth worries spared a broad selloff last week.  The currency clawed back some of its lost ground against the Dollar on Monday, edging up 0.2% but still pinned below $1.37. 

On Tuesday, Euro eased to $1.1738 after the increase of 0.4% on Monday.  The Japanese Yen and the Swiss Franc both traded just above their 20-day moving average, with the Yen at 109.76 per Dollar and the Franc at 0.9131 per Dollar. 

Wednesday saw Sterling little changed, lacking direction as investors awaited the FED’s annual economic symposium to give new momentum to the Dollar.  Risk appetite was missed with riskier currencies such as the British Pound supported by higher commodity prices at the beginning of the week, however, gains were limited by concerns about the Delta variant of COVID-19.  Against the Euro, Sterling was little changed at 85.60.  Sterling has generally benefited from expectations that the Bank of England will tighten policy before the European Central Bank.  Meanwhile, Hungary’s Central Bank said on Tuesday, it would start slowly withdrawing its bond-buying programme.  The safe-haven Dollar traded near a one-week low versus major peers on Wednesday as concerns eased about the highly contagious Delta coronavirus variant could derail a global economic recovery.  

The Dollar held near a one-week low on Thursday with investors eyeing the FED’s Jackson Hole symposium for any clues on the timing of the tapering of monetary stimulus.  Demand for the Dollar as a haven decreased as investor optimism rose that the Delta coronavirus variant will not stop a global recovery.  The Dollar ticked up 0.15% to Yen 110.16.  The Yen is another safe haven currency.  Against the Euro, the Dollar was little changed at $1.1771 after touching a one-week low of $1.1775 the previous day.   

Britain’s pound steadied against the Dollar consolidating gains made on the back of a risk led recovery this week that saw it reach the $1.37 level.  Sterling has traded in line with the global risk sentiment in financial markets in recent weeks, tracking the direction of the world stock markets.  On Thursday against the Dollar traded 0.1% lower at $1.3739 having made gains of 1% on the greenback this week.  Against the Euro, it was 0.6% lower at 85.61p. 

Market Wrap

European stocks followed Asian markets higher on Monday after a selloff the week before on global growth worries, while investors awaited a raft of business activity data.  The pan-European STOXX 600 index rose 0.6% after worries over a surge in COVID-19 cases and tighter scrutiny on Chinese companies resulted in its worst weekly performance in six months. 

European stocks extended their recovery on Tuesday after a full US approval of a COVID-19 vaccine boosted Wall Street to record highs, while the latest data showed a stronger-than-expected economic recovery in Germany.  Travel, leisure, technology and mining stocks were the top gainers, up between 0.9% and 1.2%. 

Asian shares on Wednesday held to their recent gains after plummeting last week as global equities rebounded thanks to a combination of post COVID-19 vaccine news and the ease of worries over tapering of Federal Reserve stimulus. Markets were mixed with Australian shares gaining 0.16% but Chinese blue chips losing 0.24%.  The Nikkei was flat.  Asia was impacted by the overnight gains in all three major US stock indexes, with the NASDAQ and the S&P 500 closing at all-time high.  Whilst investors continue fretting about the spike of the COVID-19 infections caused by the highly contagious Delta variant, the US Food and Drug Administration granted full approval on Monday to the COVID-19 vaccine developed by Pfizer Inc, raising hopes inoculations could accelerate.  Meanwhile European stocks edged higher on Wednesday with travel stocks rising for a fourth day.  Travel and leisure stocks gained 0.7% to hit their highest level in over a week. Stocks on Wall Street rose as investors were optimistic a day after the House of Representatives passed the $3.5 trillion budget framework and a top health official expressed confidence in fighting COVID-19.

Eurozone government bond yields nudged higher early on Wednesday moving further above recent lows.  After the drop of the previous week, the yields have recovered slightly as investor concerns over a possible pullback in Federal Reserve stimulus and a slowing economic rebound have eased.  US treasury yields rose marginally as investors awaited for the speech on Friday where the Federal Reserve Chair Jerome Powell could give indications on when the US Central Bank is likely to begin paring bond purchases.  The FTSE 100 rose slightly on Wednesday led by healthcare and consumer staple stocks as investors took a breather to assess risks from the rising COVID-19 infections worldwide and concerns about easing global economic growth. 

European shares headed lower on Thursday after data showed faltering German consumer morale as COVID-19 cases surge, while worries about the monetary policy outlook further impacted the mood.  Investors are on edge awaiting the US Federal Reserve annual symposium on Friday as Jerome Powell’s speech is likely to offer hints on plans regarding the tapering of its stimulus programme.   

Gold

Gold prices on Monday rose after the US Dollar retreated from multi-month highs, while investor concerns that the Delta coronavirus variant could impact the pace of global economic recovery also lifted the appeal of gold as a safe-haven asset.  Spot gold rose 0.2% to $1.785 per ounce while US gold futures were up 0.2% at $1,786.50. Gold prices dropped on Thursday as the Dollar moved higher ahead of the US FED Reserve Chair Jerome Powell’s speech later in the week.  Spot gold dropped 0.3% to $1,784.82 per ounce while US gold futures dropped 0.3% to $1,785. 

Oil

Oil prices climbed by 3% on Monday, recovering from seven-days of losses with support from a weaker Dollar, although concerns about the surging cases of the Delta coronavirus variant led to cautious trading.  Brent crude climbed $2.15 or 3.2% to $67.33 a barrel after dipping to $64.6 earlier in the session, its lowest level since 21st May.  US West Texas Intermediate crude for October delivery rose $2.01 or 3.1% to $64.15 a barrel, recovering from the low of $61.74 on 21^st May.  Both benchmarks hit their biggest drop in more than nine months last week.  The slide in the U.S. Dollar provided some support, making crude less expensive for holders of other currencies. The US Department of Energy said Monday it would sell up to 20 million barrels of crude from the emergency oil reserve to comply with legislation passed in recent years, where delivery of the oil is to take place between 1^st October and 15 December.  Oil prices rose on Tuesday after the US drug regulator granted full approval to the Pfizer Inc/BioNtech SE COVID-19 vaccine, raising investor’s hope that higher fuel demand would follow a potential increase in the US coronavirus vaccination rates.  Brent crude oil futures were up 0.7% to $69.21 a barrel while US West Texas Intermediate (WTI) had gained 0.5% to $65.98.  On Wednesday, the Energy Information Administration said that crude inventories last week dropped for a third week while fuel demand increased to its highest since March 2020.  Crude inventories dropped by 3 million barrels in the week to 20^th August.  Oil fell on Thursday for the first session this week amid renewed concerns about demand arising from the COVID-19 infections and as Mexico restored some oil production.  Brent crude was down 1% at $71.54 a barrel having risen 1.7% on Wednesday. 

Bitcoin

The Bitcoin’s price surged past $50,000 on Monday for the first time since May, continuing its rebound from a months-long slump.  The world’s largest cryptocurrency rose to $50,341 as investors bet that the prospect of more US stimulus spending would lead to further gains, and to more mainstream financial services.  Bitcoin has climbed 81% since hitting a yearly low of $27,700 in January.  Meanwhile the price of Ether rose 2.8% to $3,3337.  Ether has risen 91% since dropping to below $1,740 last month.  The recovery of the cryptocurrency came along as more established financial services companies offer their customers access to virtual coins.  For example, PayPal Holdings Inc said on Monday it would allow customers in the UK to buy, sell and hold bitcoin and other cryptocurrencies starting this week.

Malta:  Retail Price Index (RPI) – July 2021

In July 2021 the annual rate of inflation as measured by the RPI was 1.81% up from 1.47% in June 2021.  The largest upward impact on annual inflation was measured in the Food Index at 0.63%. The RPI measures the monthly price changes in the cost of purchasing a representative basket of consumer goods and services and is closely linked to the COLA (Cost of Living Adjustment) increases and period rent payment adjustments. 

Malta:  Registered Unemployment, July 2021

In a press release dated 26^th August 2021, data provided by JobsPlus for July 2021 the number of persons registering for work stood at 1,542, decreasing by 2,439 when compared to the corresponding month in 2020.  The largest share of males and females on the unemployment register sought occupations as clerical support workers with 22.8% and 42.5% respectively.

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