“Germany’s Ursula Von Der Leyen …”

Germany’s Ursula Von Der Leyen

“Let us work together constructively because the endeavour is a united and strong Europe,” said Ursula Von Der Leyen, who will take up her new role on 1st November, as European Commission president.  The German conservative Ursula von der Leyen secured European parliamentary approval on Tuesday with 383 votes to 327 against David Sassoli, speaker of the assembly, to become the first female European Commission president.  The endorsement given to her by socialist, liberal lawmakers and fellow conservatives, gives her a stronger mandate to tackle issues such as climate change, trade and to maintain democracy in the European Union.  As the head of the EU executive, Von der Leyen will be in charge of trade negotiations, economic and climate policy for 500 million Europeans and antitrust rulings involving powerful tech giants.

Germany

Investor morale has darkened and have cast a shadow over European markets on Tuesday, with the German bond yields coming under pressure.  Germany’s ZEW indicator showed that the mood among investors in Europe’s largest economy deteriorated more than expected in July.  The survey pointed to the unresolved trade war between the US and China and the political tensions with Iran.

United Kingdom Retail Sales

Official data showed that British retail sales rebounded unexpectedly in June, rising 1 percent over the previous month, helped with the recovery.  When compared to June 2018, sales were up by 3.8 percent stronger than forecasts.  The pound rose 0.5 percent to a high of $1.2494 before slipping to $1.2475 on Thursday, helping the currency to move further away from the 27-month low of $1.2382 hit on Wednesday.  Meanwhile against the euro the pound rose as much as 0.5 percent to 89.795 pence after hitting a six-month low of 90.51 pence on Wednesday.

United Kingdom Latest

Investors are waiting for the outcome of the Conservative party leadership contest to replace Prime Minister Theresa May.  Eurosceptic Boris Johnson is the favourite to win against Jeremy Hunt in a vote of Conservative party members.  Who wins will be crowned leader by the end of July.   Meanwhile Britain is scheduled to leave the European Union on 31st October of this year.

Greece Preparing For Another Bond Issue

Greece plans to issue a seven-year bond “in the near future”, said the authorities on Monday, taking the opportunity of low borrowing costs.  This would be the third time the country issues bonds since it emerged from the international bailouts last year. Subsequent to that the yields on Greek bonds dropped to record lows.  The yield of the seven-year bond has fallen to 1.56 percent from about 4 percent at the beginning of the year.  The bond issue announcement came after a snap election that saw conservatives win leftists amid a platform of investments, jobs, tax cuts and security.  Greece currently has a cash buffer of Eur 34 billion from unused loans and money raised from markets.  It can service its debt obligations for more than two years.  This year Greece has issued two bonds, a 5-year bond in January and a 10-year bond in March, raising about 5 billion from the markets out of 7.5 billion aimed for this year.  Greece is planning to use a small part of this buffer to pay off earlier expensive International Monetary Fund loans.

GAFA Tax

France has passed a law to impose a tax on digital giants.  Parliament passed the legislation in defiance of a probe ordered by President Donald Trump that could trigger tariffs.  The new laws aim at removing a taxation gap that has seen some internet heavyweights paying next to nothing in countries where they make huge profits.  The legislation which was named the GAFA tax, stands for Google, Apple, Facebook and Amazon.  The law will levy a 3 percent tax on total annual revenues of the largest tech firms providing services to French consumers.  The move taken by France received an anger response from Trump even before the legislation was passed.  The president ordered an investigation that the French economy minister said was unprecedented in the history of French-US relations.

China’s Q2 GDP Growth

China’s economic growth slowed to 6.2 percent in the second quarter, its weakest pace in at least 27 years, as demand at home and abroad stumbled amid the mounting trade pressure.  Monday’s growth data marked a loss of momentum for the economy from the first quarter’s 6.4 percent adding to expectations that Beijing needs to do more to boost consumption and investment and restore business confidence.   China has already slashed the Reserve Requirement Ratios six times since early 2018 to free up more funds for lending.  Beijing has largely focused on fiscal stimulus to underpin growth this year, announcing massive tax cuts worth nearly 2 trillion yuan and a quota of 2.15 trillion yuan for special bond issuance by local governments aimed at boosting infrastructure construction.

Japan’s Exports

Japan’s exports fell again in June and manufacturers’ confidence crumbled to a three year low this month amid the China-US tariff war, slow China growth and rising trade protectionism.  Weak exports had an impact on Japan’s factory output, with the possibility of undermining capital expenditure.  Ministry of Finance data showed that exports in June dropped 6.7 percent from a year earlier, the seventh straight month of decline.  The factors contributing to this decline were slow sales of tankers, China-bound car parts and steel pipes.  Meanwhile, BOJ officials said they remain ready to ease further if economic conditions worsen, joining the US Federal Reserve in signalling additional monetary stimulus amid the global growth deterioration.  Japan’s economy expanded at an annualised 2.2 percent in the first quarter.  The trade data also showed that by region, Japan’s exports to the United States rose 4.8 percent in the year to June.

US Retail Sales

Data showed that US retail sales increased more than expected in June, adding to the recent evidence that the economy is improving.  The Commerce Department said that retail sales rose 0.4 percent last month as households stepped up purchases of motor vehicles and a variety of other goods.  The benchmark 10-year notes fell reaching a yield of 2.138 percent up from the 2.092 percent late on Monday.  As the US economic picture improves, the US yield curve has steepened in the past week.

The Housing Situation In the US

Homebuilding in the US fell for a second straight month in June and permits dropped to a two-year low.  This suggests that the housing market continued to struggle despite lower mortgage rates.  Building permits also tumbled 6.1 percent to a rate of 1.22 million units in June, the lowest since May 2017.

Oil Prices

Oil prices rose slightly on Monday amid Chinese industrial output but the gains were capped by overall figures that showed the country’s slowest quarterly economic growth in decades.  The positive Chinese data could indicate the early success of the government’s stimulus efforts and potentially more oil demand in China.  China’s crude oil throughput rose to a record of 13.07 million barrels per day in June, up 7.7 percent from a year earlier, following the start-up of two new, large refineries, official data showed on Monday.  Meanwhile, the Paris-based International Energy Agency’s monthly report on Friday said that abundant output and sluggish growth would leave oil markets increasingly over-supplied heading into 2020.  Oil prices turned lower on Tuesday falling more than 3 percent after US President Donald Trump said progress has been made with Iran, signalling tensions could ease in the Mideast.  On Wednesday oil futures fell more than 1 percent extending a more than 3 percent drop in prices in the previous session after US government data showed large build up in refined product stockpiles.

Bitcoin

Bitcoin dropped more than 10 percent over the weekend to a two-week low. Early on Monday Bitcoin fell 11.1% from Friday to $9,855, its lowest since 2nd July.  Financial regulators and politicians worldwide called for close scrutiny of Facebook’s Libra coin on concerns ranging from consumer protection and privacy to systemic risks arising from the global reach through Facebook.   Bitcoin climbed nearly 55 percent in nine days after Facebook disclosed its plans on 18th June for LIBRA, reaching almost an  18-month high of nearly $14,000.  A group of Seven finance chiefs, pour cold water on Facebook’s Libra digital coin, insisting that tough regulatory problems would have to be worked out first.  The main chorus from regulators, central bankers, and governments, is that the digital coin must respect anti-money laundering rules and ensure the security of transactions and user data.  However, there are deeper worries that the powers of big tech companies will increasingly move into areas belonging to governments, like issuing currency.

Currency Roundup

The British pound fell back towards six months lows against the dollar on Monday amid concerns of investors over the loss of momentum in the UK economy, the appointment of a new prime minister and the prospect of an interest rate cut.  On Wednesday the pound fell below $1.24 to a more than two-year low as markets continued to price in the growing risk of Brexit without a transition arrangement in place.   The dollar slipped on Thursday as risk aversion in the broader markets pushed the benchmark US yields to a nine-day low.  The dollar index .DXY versus a basket of six major currencies was down 0.2 percent at 97.081.  The index climbed to a one-week peak of 97.444 the previous day on stronger-than-expected US retail sales and a slump in sterling.  It dropped further as safe-haven Treasury yields fell in the wake of weak US housing market data and concerns amid the trade war between China and the US.  The International Monetary Fund said on Wednesday that the greenback was overvalued by 6 percent to 12 percent, based on near-term economic fundamentals.  The FED is expected to lower interest rates by 25 basis points at its 30-31 July meeting while some are expecting a larger cut by 50 bps.  Meanwhile, sterling was a bit higher at $1.2438 on Thursday after dropping to $1.2382 its lowest since April 2017.  The EUR added to most of the gains and edged up higher to 0.1 percent to $1.1238.  The single currency gains were limited as it was restrained by expectations of easing from the European Central Bank as early as next week.  The Australian dollar advanced after data on Thursday showed the country’s jobless rate remained stable and underemployment declined in June, reducing the prospect of near-term easing by the Reserve Bank of Australia.  The British pound recovered some of the losses on Thursday after stronger than expected retail sales numbers and as the currency was supported from a vote by lawmakers to make it harder for the next prime minister to try to force a no-deal Brexit.

Markets Wrap

On Tuesday core bond yields tumbled to session lows after the survey showed the mood among German investors darkened more than expected in July, raising pressure on the ECB to ease monetary policy as early as next week.  The ZEW institute said in its monthly survey that economic sentiment among investors fell to -24.5 from -21.1 in June.  The fall in German yields dragged the Italian bond yields towards a near three-year low hit in early July and yanked the euro to its lowest in five days.  Meanwhile, British fashion brand Burberry’s shares jumped on Tuesday, lifting other luxury goods markets, while upbeat earnings from big Wall Street banks, drove major European markets to their highest closing levels in a week.  Britain’s FTSE 100 rose 0.6 percent as a weaker pound boosted the London-listed multinationals.  Shares of European banks ( .SX7P) rose 0.7 percent after major US lenders JP Morgan, Goldman Sachs and Wells Fargo reported better than expected quarterly earnings.  European shares were flat on Wednesday on upbeat results from chipmaker ASML that rose 3.4 percent and boosted the tech sector after it reported better than expected quarterly results and kept to its forecast of a solid growth for the rest of the year. On Wednesday US Treasury yields fell after data showed weakness in the US housing market and as concerns about the trade war between the US and China boosted the demand for safe-haven debt.  The euro and government bond yields across the single bloc fell on Thursday, after a report by Bloomberg News that ECB staff are studying a potential change to the bank’s inflation goal of near ‘2 percent’.  The report quoted sources stating that ECB staff were studying the bank’s approach informally including whether a more flexible target might be more appropriate in the post-crisis era.  In the bonds market, the report sparked a further downward move in government borrowing costs in particular Southern Europe, which is viewed as the biggest beneficiary of further ECB easing.  Spanish, Italian and Portuguese 10-year bond yields were down 5-8 basis points on the day.  The yield on Germany’s 10-year government bond fell 3bps to minus 0.32 percent going back to record low levels hit earlier this month.   Meanwhile, US stocks opened lower on Thursday as shares of Netflix tumbled.  The Dow Jones Industrial Average fell 27.87 points (0.10 percent) at the open to 27,191.98, the S&P 500 opened lower by 5.55 points (0.19 percent) at 2978.87 and the NASDAQ Composite dropped 33.44 points (0.41 percent) to 8151.76 at the opening bell.  US Treasury yields rose on Thursday after a Philadelphia manufacturing index rebounded strongly in July, adding to recent data showing an improving US economy.  The Philadelphia Fed said that its index of business conditions rose to the highest level in a year.  Yields have risen from more than 2 ½ year lows reached earlier this month and the yield curve steepened as jobs, inflation and retail sales data show that the US economy is improving.

Malta – Harmonised Index Of Consumer Prices: June 2019

In June 2019, the annual rate of inflation as measured by the Harmonised Index of Consumer Prices (HICP) was 1.8 percent, up from 1.7 percent in May 2019.  The largest upward impact on annual inflation was measured in the Food and Non-Alcoholic Beverages Index, while the largest downward impact was recorded in the Education Index.  The HICP measures monthly price changes in the cost of purchasing a representative basket of consumer goods and services.

Inbound Tourism: May 2019

Total inbound visitors for May were estimated at 265,701 an increase of 1.3 percent when compared to the corresponding month in 2018.  A total of 233,139 inbound tourist trips were carried out for holiday purposes, while a further 18,204 were carried out for business purpose.  The number of tourists from Non-EU countries went up by 21.5 per cent when compared to the corresponding month in 2018.  Total tourist expenditure was estimated at EUR 203.5 million, an increase of 3.3 percent over the corresponding month in 2018.  Meanwhile, inbound tourist trips for the first five months of 2019 amounted to 929,979, an increase of 2.8 percent over the same period in 2018.  Total tourist expenditure was estimated at EUR 648.1 million, 3.2 percent higher than that recorded for 2018.

Sea Transport Between Malta And Gozo:  Q2/2019

During the second quarter of 2019, sea transport between Malta and Gozo registered increases compared to the corresponding quarter of 2018.  The total number of passengers travelling between Malta and Gozo amounted to 1,575,472 passengers, during the second quarter of this year, up by 2.6 percent when compared to the corresponding quarter in 2018.  The highest number of passengers was recorded in June amounting to 534,433.

Antonella Mercieca

Client Relationship Manager

Source:

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

Date:

July 19th, 2019


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