“German Exports…”

German exports rebounded less than expected in May amid lower demand despite the lifting of lockdown measures that were introduced to contain the spread of the coronavirus, showed data published on Thursday.  The Federal Statistics Office said, that seasonally adjusted exports surged by 9 percent on the month after dropping by 24 percent in April, remaining almost 27 percent lower than their pre-crisis level in February.  Imports rose by 3.5 percent after a slump of 16.6 percent in the previous month, suggesting that consumption in Europe’s largest economy remained weak.  The trade surplus increased to Euros 7.6 billion.  Furthermore, the Statistics Office said that exports to China were 12.3 percent lower than in May last year, while exports to the United States were down 36.5 percent year-on-year in May.  The German government wants to support the economy by boosting consumption through lower rates of Value-added tax for the second half of the year and a one-off stipend for parents. 

The EU sees Deeper Recession

The eurozone economy will drop in deeper into recession this year and rebound less steeply in 2021 than previously thought, showed the European Commission forecast on Tuesday, with France, Italy and Spain struggling the most amid the Coronavirus pandemic.  The downward assessment about Europe’s economy came along amid concerns that the recovery in the US may pause as the number of infected cases increased and led to some places to reverse plans to reopen.  The EU executive said that the 19-nation single currency area would contract by a record 8.7 percent this year before growing by 6.1 percent in 2021.  In early May, the Commission had forecast a 2020 downturn of 7.7 percent and a rebound of 6.3 percent in 2021.  The Commission said it had revised its forecasts because the lifting of COVID-19 lockdown measures in euro zone countries was proceeding less swiftly than it had initially predicted. The EU executive significantly cut its earlier forecasts for France, Italy and Spain, all hit hard by the pandemic, and now expects downturns in excess of 10% this year in each. In Germany, where widespread testing was carried out, the Commission moderated its estimates both of 2020’s downturn to -6.3% from -6.5% forecast in May and next year’s rebound.

Euro zone agrees 750 million euros of debt relief measures for Greece

On Tuesday the Eurozone agreed new debt relief measures for Greece worth about 750 million euros as part of the country’s post-bailout programme.  The money is coming from the profits made by European central banks on Greek government bonds and the reduction to zero of the step-up interest margin on certain eurozone loans to Athens this year, said the European Stability Mechanism (ESM), the bloc’s rescue fund. 

Germany’s Industrial Production

Germany’s industrial production rebounded in May, rising by 7.8 percent on the month after falling by a revised 17.5 percent in April, said the Statistics office on Tuesday.  The recovery was more modest than the 10 percent increase that economists had been forecasting.   The recovery was led by a 27.6 percent increase in the production of capital goods whilst growth was more modest in other areas.  Some indicators have shown that the exporting powerhouse has put the worst of the impact from the coronavirus lockdown behind it.  Industrial goods increased by 10.4 percent in May.  Despite the recovery, production is still below the levels seen before the coronavirus crisis started.  The government expects the economy to shrink by 6.3% this year, its worst recession since World War Two.

UK’s measures to Boost the Economy

British Finance Minister Rishi Sunak promised an additional 30 billion pounds on Wednesday to help the economy hit by the coronavirus, announcing bonuses to get furloughed staff back to work, cutting value-added tax for the hospitality sector, and temporarily scrapping a property tax on the purchases of homes costing up to GBP 500,000. The pound extended its gains by 0.3 percent against a broadly weaker dollar to $1.2644 and against the euro the pound climbed 0.1 percent to 89.68  Britain’s economy shrank by 25% over March and April and recovery for its worst-hit sector jobs remains a long way off.  Meanwhile, the UK and the EU kicked off negotiations on Tuesday in a new round of talks to discuss their future trading relationship.  Angela Merkel said that she will continue to push to seal an agreement by the end of the year, but the EU should prepare for the possibility of a no-deal. 

US Weekly Jobless Claims

Initial claims for state unemployment benefits totalled a seasonally adjusted 1.314 million for the week ended 4 July, down from 1.413 million in the prior week, said the Labour Department on Thursday.  Claims peaked at a historic 6.867 million in late March and have gradually dropped, even though they remain roughly double their highest point reached during the 2007-2009 Great Recession.  The weakening in demand and the resurge of COVID-19 cases are keeping new US applications for unemployment benefits extraordinarily high, suggesting a fragile labour market despite record job growth in June.   Since operations have resumed, there has been a record spike in coronavirus infections in densely populated states such as Florida, Texas and California.  This has paused or scaled back reopening.  


Oil futures ended steady on Monday as positive data supported the prices, while a spike in coronavirus cases in the US that curbed fuel demand put pressure on prices.  Oil prices dropped on Tuesday as concerns surged on new virus cases believed to hamper the recovery of fuel demand. Brent crude futures fell by 24 cents, or 0.56%, to $42.86, whilst U.S. West Texas Intermediate (WTI) crude futures fell 30 cents, or 0.74%, to $40.33 a barrel.  The US crude market is facing some uncertainties from a court decision on Monday ordering the shutdown of the Dakota Access pipeline, the biggest artery transporting crude oil from North Dakota’s Bakken shale basin to the Midwest and Gulf Coast regions, due to environmental concerns.  Oil prices dipped on Wednesday amid industry data that showed a building up in US crude stockpiles that added to the concerns about oversupply.  Meanwhile, the surge in coronavirus cases in the US and other areas raised doubts over a pick-up in the demand for fuel.  Brent crude futures fell 11 cents to $42.97 (0.3%) a barrel while US West Texas Intermediate crude futures fell 11 cents (0.3%) to $40.51 a barrel. The US Energy Information Administration (EIA) said on Tuesday that US crude oil production is expected to fall by 600,000 barrels per day in 2020, which is a smaller decline than the 670,000 bpd it had previously projected.  The US is the biggest oil producer. 

Market Wrap

US Treasury yields ticked lower on Tuesday amid the rising number of coronavirus cases that raised concerns about reopening plans.  The benchmark 10-year yield was down 1.5 basis points in the morning trading to 0.6693 percent.  Meanwhile Wall Street indexes opened lower on Tuesday after the S&P’s longest stretch of gains this year.  The Dow Jones Industrial average dropped 0.44 percent at the open to 26,172.01, the S&P 500 opened lower by 0.42 percent at 3,166.44, while the NASDAQ Composite dropped 0.2 percent to 10,412.16.  Overnight US stocks fell halting a five-day rally by the S&P 500 index benchmark, driven by better-than-expected economic data. European Shares fell on Tuesday for the same reason as the increase in coronavirus cases and the forecasts of a deeper-than-feared recession in the Eurozone that dimmed optimism of a rebound.  The pan-European STOXX 600 index slipped 0.6 percent dropping back from a near one-month high.  The banking sector which had increased 4 percent in the previous session tracking a global rally dropped by 1.4 percent, while real estate, technology and telecoms shares each dropped between 1 percent and 1.8 percent.    Asian stocks were hesitant on Wednesday due to an increase in the coronavirus cases in some areas globally that undermined the prospects of a quick recovery.  Chinese shares also flickered between green and red through most of the day and climbed 0.9 percent.  Australian shares ended 1.5 percent lower amid renewed fears about the coronavirus pandemic after a rise in cases in the country’s second biggest city.  On Friday Asian shares and US stock futures fell on record-breaking of new coronavirus cases in several US states. Shares in China also dropped 0.72 percent from a five-year high, the first decline in more than a week, as state media discouraged retail investors from chasing the market higher. Worries about the Sino-US tensions also came into play.   Meanwhile European shares extended their losses to a fourth straight session on worries over the economic recovery as coronavirus cases continue to increase globally.

Currency Round Up

On Tuesday risk currencies such as the Australian dollar took a breather from the recent gains as investors hit a pause on the China-led equity market rally amid the new coronavirus increases.  Riskier currencies such as the commodity-driven Aussie, Norwegian crown, the New Zealand dollar and the Swedish crown have rallied strongly since April alongside increased risk appetite in global markets. Euro reached just below a two-week high touched on Monday at $1.1275 and the pound held steady at $1.2491. A key measure of the market’s long-term inflation expectations in the euro area has risen from record lows hit in March and is close to its highest levels in around 4 months. Sterling held near a three-week high against the dollar and gained against the euro on Tuesday as investors waited for more details about the plans of the government to support the British economy.  Despite the pound’s gains some investors remained cautious about the currency’s outlook. Positioning data showed that hedge funds increased their bearish bets on the British pound, as the UK and the EU try to reach a trade agreement in the Brexit negotiations. On Wednesday the dollar held onto gains, since its demand as a safe-haven demand increased due to a resurgence of coronavirus cases in the US and the return of lockdowns in some areas.  Risk sentiment was also affected negatively as Federal Reserve Officials expressed concerns that rising coronavirus cases could harm economic growth just as stimulus measures start to expire. Against the dollar the yen dropped, halting a two-day rally, after the Chinese Central Bank’s daily midpoint for the currency was set at a weaker level than expected.  Against the euro the dollar reached $1.1278 whilst the sterling changed hands at $1.2554 and was quoted at 89.86 pence per euro.  The pound traded near a three-week high as traders awaited Rishi Sunak (British Finance Minister) to announce later, on Wednesday about his next move to prevent jobs cuts from further damaging the economy.  Sterling rose on Thursday against the dollar as investors showed a delayed response to the finance minister Rishi Sunak’s announcement of his plans to boost the economy.  However, Brexit risks continue to weigh on the economy. 


On Tuesday the US coronavirus crossed a milestone of over 3 million confirmed cases as more states record new infections.  California reported more than 10,000 coronavirus cases on Tuesday, which is a record increase for a single day.  Meanwhile the state of Victoria in Australia also experienced a rise which led to lockdown measures being re-imposed in Melbourne.  

Malta:  Index of Industrial Production – May 2020

In May 2020, the seasonally adjusted index of industrial production increased by 2.9 percent over the previous month. Production of consumer goods and capital goods increased by 7.5 per cent and 2.3 per cent respectively.  Meanwhile decreases were registered in the production of intermediate goods and energy with 2.4 percent and 0.1 per cent.   In comparison with May 2019, the working-day adjusted index of industrial production decreased by 4.5 percent.  Decreases in production were registered in all main industrial groups except consumer goods.  Production of capital goods, intermediate goods and energy decreased by 15 per cent, 8.7 percent and 0.5 percent respectively.

Malta:  Property Price Index Q2/2019 – Q1/2020

During the first quarter of this year, the Property Price Index (PPI) stood at 125.14, an increase of 5.6 per cent when compared to the corresponding quarter of 2019.  Provisional figures indicate that the main driver of the increase was the Maisonettes price index, however, the Apartments price index also increased.  In the first quarter of 2019, the PPI registered a rise of 6.5 per cent when compared to the same quarter of the previous year. 

Antonella Mercieca

Client Relationship Manager


Reuters, https://nso.gov.mt/


July 10th, 2020

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