“Giuseppe Conte, Italy’s New Prime Minister…”

Giuseppe Conte was sworn as Italy’s Prime minister on Friday 1st June. The government was formed after three months of political deadlock and an inconclusive election on 4th March. A last minute deal was reached on Thursday averting a fresh vote in summer amid growing market turmoil. The 5-Star and the League have a solid majority in both houses of parliament. Conte made no comment to reporters after his swearing in ceremony in the President’s 16th Century palace in Rome. Italy’s anti-establishment Five Star Movement and the anti-immigrant League form an uneasy coalition catering to different constituencies with different priorities that will make delivering on electoral promises not an easy task. On Tuesday the new prime minister, addressed the Senate and promised to bring radical change to the country, including more generous welfare and a crackdown on immigration. The government backed by the 5-Star Movement, founded nine years ago as a grass-roots protest group and the right-wing League, won the vote by 171-117 in the 320-seat Senate. The coalition has a larger majority in the lower house, which is due to vote on Wednesday. It will then be fully empowered.

Spain

Socialist leader Pedro Sanchez took over as Spain’s prime minister on Friday becoming the country’s seventh head of government since its return to democracy in the late 1970s. Mr Sanchez won the no-confidence motion by 180 votes to 169 with one abstention. The 46 year old’s Socialist party holds just 84 seats in the 350 member assembly making it unclear how long his administration can last. However, his strong pro-European credentials, and the fact that Mariano Rajoy his predecessor also ran a minority government, suggest that the fallout is likely to be limited. Meanwhile, Mariano Rajoy on Tuesday announced he was resigning as leader of the conservative People’s Party after losing power in a no-confidence vote. Rajoy will still function as head of the party until a party congress agrees on his successor.

Angela Merkel

With the European Union Summit soon approaching this month at which Merkel and Macron have promised to present a joint plan to overhaul Europe, Merkel gave an extensive newspaper interview on Sunday touching on reforms of the euro zone as well as defence and asylum policy. She faced mounting criticism in recent weeks for failing to engage with Macron who campaigned to pledge to reform Europe. Pressure on the EU to show a united front has grown following the US President’s decision to withdraw from the Iran nuclear deal and to impose tariffs on European steel and aluminium exports. In the interview, Merkel made a statement that Germany was in favour of a move towards a European Monetary Fund to resolve the issues of sustainability of euro zone sovereign debt. She is also in favour of the step by step introduction of a euro-zone investment budget in the low-double digit billions of euros, saying this could be housed within the EU budget or outside. She further called for common asylum standards, a European border police force and a pan-European migration agency that could evaluate asylum applications. She backed a “flexible system” in which countries that refuse to take on refugees could compensate by making contributions in other areas. Merkel backed Macron’s idea for a European intervention force with a “common strategic military culture” opening the door to a more active German defence role.

G7 Meeting

Prime Minister Justin Trudeau is this week playing host to a summit of G7 leading industrialised nations. The recent moves taken by Donald Trump in his policies of “America first” have created a rift with other countries whose alliance with the United States dates back to the Cold War with the Soviet Union. Trump has infuriated Canada and the European member states of the G7 with the imposition of tariffs on steel and aluminium and by pulling out of a deal that monitors Iran’s nuclear activities. Trudeau wants the meeting of the 8 -9 to focus on economic growth, however he will have to keep the group together at a time when Trump’s trade and diplomatic moves have isolated the United States and risk undermining the relevance of G7. Trudeau and the European Union condemned the steel and aluminium tariffs and discussions will likely be on the high side when on 8th June the leaders hold a traditional discussion about trade.

Markets

World tech stocks hit a record high on Tuesday, for an all-time peak for Apple, a 17 year top for European tech firms and news that Twitter and Netflix were set to join Wall Street’s flagship S&P 500 index. The MSCI global tech index reached a milestone after the FAANGs that is Facebook, Apple, Amazon, Netflix and Google drove the NASDAQ which is heavy with techs to a new closing on Monday. Asia followed suite as BATTS – Baidu, Alibaba, Tencent, Taiwan Semiconductor, and Samsung with Alibaba reaching a new high and Baidu surging 5 percent for its best day in more than a month. The same sentiment was felt in Europe as tech stocks climbed more than 1 percent in a third day of gains that took them to their highest since the dot-com boom of 2001. There was modest moves in other markets which were centred on the nervousness created by global trade tensions. Furthermore, there was some selling of Italian government bonds after their rebound of the last few days as traders awaited the senate to hold a confidence vote on Giuseppe Conte’s appointment as prime minister. Market participants are also keeping an eye on a speech by ECB President Mario Draghi for any indication as to the impact the political developments in southern Europe may have on monetary policy. Meanwhile, other Eurozone government bond yields were 1-2 basis points lower, as markets calmed down. Germany’s 10 year government bond, which is the benchmark for the bloc, saw its yield drop to 0.4 percent, while the 10 year US Treasury note yield stood near the 11-day high of 2.946 percent.

The 12th June Summit

President Donald Trump said that the nuclear arms summit with North Korean leader Kim Jong Un from which the US had withdrawn, is happening as scheduled on the 12th June in Singapore. Trump met with a senior North Korean official Kim Yong Chol, a close aide to the North Korean leader, in the Oval Office. He delivered a letter from Kim Jong Un to Donald Trump at the White House. The President said he expected a number of summits would be needed to settle all outstanding issues. Trump’s aim is to use the meeting to pressure Pyongyang into giving up its nuclear weapons. For North Korea, nuclear ambitions have been a source of tension for decades, and has made advances in missile technology in recent years. Trump has sworn not to allow it to develop nuclear missiles that could hit the United States. Trump wants North Korea to “denuclearize” that is to get rid of its nuclear arms, in return for relief from economic sanctions.

Mexico

Mexico replied to Donald Trump’s metal tariffs by imposing its own duties on American steel on Tuesday while also targeting politically sensitive agricultural products from pork to bourbon. As of Tuesday, Mexico will impose tariffs of 15 percent to 25 percent on US steel products, as said by the Mexican economy ministry published in the government’s official gazette. The list also included a 20 percent tariff on US pork legs and shoulders, apples and potatoes and 20 to 25 percent duties on types of cheeses and bourbon. Mexico also opened a tariff-free quota for pork imports from other countries. Last week Mexico said it would respond to Trump’s tariffs on steel and aluminium with duties on products from congressional districts where Trump’s Republican party is fighting to retain in elections in November. At the time no details of the proposed measures where provided.

Currency

The euro climbed on Monday after political tensions eased in Italy and worries about an escalating trade war between the US and other major economies took a back seat. The dollar has recently revived due to better than expected US job data that underlined the strength of the US economy and the close certainty that the Federal Reserve will increase interest rates as well as increasing expectations of a fourth hike this year. Rallying stock markets also helped investors to shrug off concerns that trade disputes among the world’s largest economies will impact growth. The prospect of a snap election in Italy effected investor’s confidence at the start of last week as some feared the vote could turn into a referendum on the country’s euro membership. As the possibility of a snap election was avoided with the deal reached of a coalition government, the euro drifted up. On Wednesday the euro rose to a ten-day high after European Central Bank officials said an end to the bank’s bond-buying programme by end-2018 was plausible and that inflation was rising to its target. The ECB official’s comments pushed the single currency up 0.4 percent to a ten-day high of $1.17580.

Oil and Industrial Commodities

Oil rebounded on Tuesday on expectations that inventories in the United States may decline, however, increasing US production and concerns that OPEC could raise output continue to weigh on sentiment. The organisation of the Petroleum Exporting Countries (OPEC) is due to meet in Vienna on 22nd June to decide whether the group and non-OPEC producers, including Russia, will raise output to ease concerns of any shortfall in supply arising from Iran and Venezuela. According to a monthly report by the Energy Information Administration, US Crude output rose to 10.47 million barrels per day, which is the highest on record. Industrial metals such as copper, zinc, and aluminium were all 0.6-1.4 percent higher. Gold which considered as a safe-haven was little changed at $1291.54 an ounce after three days of losses.

Malta: Virtual Financial Assets Bill Presented In Parliament

The Virtual Financial Assets Bill was presented in Parliament. The Bill clarifies the manner in which Virtual Financial Assets will be regulated in Malta in particular the issuance of Initial Coin Offerings (ICO). It also makes provisions for other matters ancillary or incidental thereto or connected with it such as licensing requirements, and conditions to be adhered to by entities who issue Virtual Financial Assets.

First Quarter: Malta’s Economy Grows by 4.4%

According to the National Statistics office in Malta, in real terms Gross Domestic Product went up by 4.4 percent. The Gross domestic product for the first quarter of 2018 amounted to EUR2,795.1 million which is an increase of EUR 171 million or 6.5 percent when compared to the corresponding quarter of last year. Meanwhile, Gross Value Added increased by EUR155.4 million when compared to the same quarter last year. This increase was mainly generated by public administration and defence, compulsory social security, education, human health, and social work activities which increased by EUR40.2 million or 9.8 per cent. Arts entertainment and recreation, repair of household goods, and other services increased by EUR 30.2 million or 9.4 percent, while wholesale and retail trade, repair of motor vehicles and motorcycles, transportation and storage, accommodation and food service activities increased by EUR28.2 million. Other activities include, professional, scientific, and technical activities, while administrative and support services increased by EUR 21.1 million.

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