“German Parties sign ‘new start’ Coalition…”

On Tuesday Germany’s Social Democrats (SPD), Greens and Free Democrats (FDP) signed a coalition deal that sets out how to accelerate a green transition and modernise the economy.  The alliance, the first such grouping at a national level, brings to an end 16 years of conservative-led government under Angela Merkel.  Meanwhile, Social Democrat Olaf Scholz became Germany’s chancellor on Wednesday. Scholz 63, who over the past four years served as vice chancellor and finance minister in collation with Merkel won a majority of 395 votes from lawmakers in the lower house of parliament, said Bundestag president Baerbel Bas. 

Household Consumption in Europe

The main driver behind the eurozone economic growth in the third quarter was household consumption, declared the European Union’s statistics office on Tuesday, with a further positive contribution from trade.  Eurostat confirmed the eurozone economy expanded 2.2% quarter-on-quarter in the July-September period for a 3.9% year-on-year rise as the economy continued to recover from a deep recession hit by the COVID-19 pandemic in 2020.  Household consumption contributed 2.1% to the quarterly growth number with net trade adding another 0.3%.  However, government spending added only 0.1% to the final result and despite the first payouts from the EU’s recovery fund and digital investment, gross fixed capital formation fell sharply. 

German Industrial Orders

Weaker demand from abroad resulted in a much bigger than expected drop in German industrial orders, including cars, in October, data showed on Monday.  This has further darkened the growth outlook for manufacturers in Germany.  Scarce microchips and other electronic components has caused massive supply bottlenecks and production problems in Germany’s automobile industry and other crucial sectors of the economy.  Orders for goods ‘Made in Germany’ dropped 6.9% on the month from a revised increase of 1.8% in September and a plunge of 8.8% in August, showed figures from the Federal Statistics office.  Data also showed that excluding distorting factors from bookings such as those from planes and industrial orders were still down 1.8%.  The drop was driven by a decline in foreign orders of more than 13% on the month, with demand from countries outside the eurozone such as China particularly weak.  Meanwhile, orders from domestic clients rose 3.4%.  The weak orders data suggests that manufacturing could hamper overall economic growth in the coming months.   

Bitcoin

Bitcoin dropped by almost 5% on Monday after dropping by over a fifth of its value at one point in the weekend.  Bitcoin saw it’s price and the amount invested in the bitcoin futures back to where it stood in early October, before a price surge that sent the bitcoin to an all time high of $69,000 on 10 November.   Since that record high, bitcoin has plunged 32%.  According to traders the drop in the bitcoin over the weekend was related to a move away from riskier assets in traditional markets over worries about the Omicron variant.

Oil

Oil prices rose by more than $1 a barrel on Monday after top exporter Saudi Arabia raised prices for its crude sold to Asia and the US by up to 80 cents from the previous month, and as an indirect US-Iran talks on reviving a nuclear deal seems to have hit a deadlock. The decision to raise prices was taken irrespective of the decision last week by the OPEC+ to continue increasing monthly supply by 400,000 barrels per day in January.  Brent crude futures for February gained $1.61 or 2.3% to $71.49 a barrel while US West Texas Intermediate crude for January were at $67.89 a barrel.  Oil prices settled lower on Thursday amid fears about the economic outlook in the world’s biggest oil importer after ratings downgrades to two Chinese property developers and after some governments took measures to fight the Omicron variant.  Brent crude futures settled down 1.9% to $74.42 a barrel, whilst US West Texas Intermediate crude futures were down 2% after hitting a peak of $73.34.     

US Trade Deficit

The US Trade deficit narrowed sharply in October as exports soared to a record high, possibly setting up trade to contribute to economic growth this quarter for the first time in more than a year.  The Commerce Department said on Tuesday that the trade gap plunged 17.6% to $67.1 billion.  This was the biggest percentage decline since April 2015.  Exports accelerated 8.1% to an all time high of $223.6 billion led by goods exports, which soared 11.1% to $158.7 billion, also a record high.  Exports of industrial supplies and materials increased by $6.4 billion, with shipments of crude oil advancing $1.2 billion.  Capital goods exports increased $3.1 billion, boosted by other industrial machines and civilian aircraft.  Food exports rose by $2.1 billion.

US Weekly Jobless Claims

The number of Americans filing new claims for unemployment benefits dropped to the lowest level in more than 52 years last week as labor market conditions continued to tighten amid an acute shortage of workers. The claims report, the most timely data on the economy’s health, followed on the heels of news last week that the jobless rate fell to a 21-month low of 4.2% in November. Data on Wednesday showed there were 11 million job openings at the end of October and Americans quit jobs at near-record rates.

Market Wrap

Markets in the US recovered from the declines suffered in the previous week with the Dow Jones Industrial Average closing higher by 1.87% to close 35,227.03, The NASDAQ 100 closed higher by 0.85% to reach 15,846.16 and the S&P 500 closed higher by 1.17% to close at 4,591.67.  Economy linked banks and energy stocks increased after sharp declines the previous week, while technology stocks struggled to keep pace.  Blue-chip stocks such as Goldman Sachs and Boeing Co also rose more than 1% powering the Dow Jones industrial Average higher.  All of the 11 major S&P 500 sectors were trading higher, with financials, industrials, energy and materials adding more than 1% each.  Tesla Inc dropped by 3.1% weighing down on the NASDAQ index after Reuters reported that the US SEC has opened a probe into the electric car maker over whistleblower claims on solar panel defects.

Asian shares went through a recovery on Tuesday as worries eased about the impact of the Omicron variant while Chinese markets were supported by the central bank easing monetary policy.  MSCI’s broadest index of Asia-Pacific shares outside Japan climbed by 1.3% and was on the way to its biggest jump in two months after dropping on Monday to the lowest level in one year.  Meanwhile, China’s CS1300 index gained 0.6% and Hong Kong’s Hang Seng Index advanced by 1.7% as the central bank freed up $188 billion in liquidity through a policy easing.  European stocks rose on Tuesday to their highest in more than a week amid a strong rebound in technology shares as worries about the Omicron coronavirus variant receded and there were gains in the mining sector after China eased its monetary policy.  Technology stocks climbed 3.9% after hitting seven-week lows on Monday amid a wider selloff in high-growth names.  The Stoxx 600 is now hovering around 5% below its record high from mid-November, while the Euro Stoxx volatility index, Europe’s fear gauge dropped to 25.6.  At the peak of the selloff in markets it hit 33.1.  Mining stocks climbed 3.7% after China’s central bank cut the amount of cash banks must hold in reserve, lifting metal prices.  Meanwhile, amongst the smallest gainers are defensive sectors such as utilities, telecoms, food and beverages.

Euro zone bond yields bounced off recent lows as reassuring news on the likely severity of the Omicron coronavirus variant helped lift sentiment in markets around the world.   Though the emergence of the new variant has caused alarm worldwide and pushed yields lower across major government bond markets, health officials in South Africa and the United States said cases have not been severe.

The NASDAQ rallied more than 2% on Tuesday as technology firms bounced back amid easing concerns about Omicron variant, while Intel jumped after plans to take its self-driving car unit public. Ten of the 11 major S&P sectors advanced in early trading with the information technology sector which houses companies like Visa Inc, Mastercard Inc, Salesforce.com and Apple gaining 2.5%. 

Global stocks and Treasury yields edged higher on Wednesday as investors were less concerned about the Omicron coronavirus variant.  Stocks closed lower across Europe with the CAC 40 reduced by 0.72% to close at 7,014.57, while the DAX reached 15,687.09 to close lower by 8.02%.  The FTSE also closed lower by 0.04%.   Meanwhile, the three main US indices closed higher with Dow Jones Industrial Average closing higher by 0.10% to 35,754.75, the NASDAQ reached 16,394.34 with 0.42% higher and the S&P 500 closed higher by 0.31% to close at 4,701.21.

On Thursday the Dow Jones closed flat at 35,754.69, NASAQ 100 closed lower by 1.49% at 16,149.57 whilst the S&P 500 closed lower by 0.72% to reach 4,667.45 as traders awaited the release of inflation data due on Friday.   Meanwhile, European stocks closed lower with the CAC 40 closed at 7,008.23 lower by 0.09%, the DAX closed lower by 0.305% to reach 15,639.26 and the FTSE 100 closed lower by 0.22% to close at 7,321.26. 

Currency Roundup

Sterling

Sterling was slightly higher on Tuesday amid sentiment in the market about the Bank of England raising interest rates in February 2022 after keeping them unchanged this month.  BOE Deputy Governor Ben Broadbent raised some hopes for an interest rate hike when he said on Monday that inflation in Britain might “comfortably exceed” 5% in April next year and that the country’s tight labour market risked becoming a more constant source of inflation.  Sterling strengthened 0.1% versus the dollar to $1.327.  Against the euro the pound was 0.1% higher at 85.21 pence after touching an almost one week low at 85.1 pence.  Britain’s health minister said on Monday there was now community transmission of the Omicron variant of the coronavirus across regions of England but it was too early to tell if this would “knock us off our road to recovery”.  Sterling stabilised on Thursday on news about the vaccine, it was little changed at $1.3207 after touching new 2021 lows the previous day versus the dollar, as British Prime Minister Boris Johnson imposed tougher COVID-19 restrictions in England, ordering people to work from home, wear masks in public places and use vaccine passes. 

Dollar

The Dollar on Tuesday was supported against other safe-haven currencies such as the Japanese yen, hanging on to a jump made with US yields, as investors hoped that early signs that the Omicron variant may be mild will be proved correct. The dollar stabilised on Thursday in line with the euro and sterling over news about the vaccine.  The Dollar against a basket of currencies edged 0.15% higher to 96.082 just a bit away from the 16-month high of 96.938 touched in November as investors awaited for a key FED Reserve policy meeting due next week.  The dollar was firm on Friday as traders bet on high US inflation figures that could set the course of interest rates rises next year. 

Euro

Pressure on the euro on Tuesday resumed amid bets that US rates will rise far before those in Europe.  The euro nursed the modest losses reached on Monday.  Thursday saw the euro stabilised amid hopes that some COVID-19 vaccines might be able to neutralise the new coronavirus variant Omicron.  The fears about Omicron variant dropped as BioNTech and Pfizer said three shots of their COVID-19 vaccine neutralised it in a lab test.  The euro was lower by 0.2 at $1.1319 still close to one week high touched in the previous day. 

Malta:  Index of Industrial Production – October 2021

A press release dated 9 December, 2021, shows that in October 2021, the seasonally adjusted index of industrial production increased by 1.8% over September 2021.  Increases were registered in the production of energy (6.5%) and intermediate goods (0.9%).  The production of consumer goods and capital goods decreased by 1% and 0.7% respectively.  Meanwhile, in October, 2021 the total production generated by the local manufacturing, energy, mining and quarrying industries dropped by 4.5% from October 2020.  The largest decrease was registered in the production of consumer goods (14.6%), followed by the production of intermediate goods (0.1%).  The production of energy and capital goods rose by 9.7% and 3% respectively.

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