“Gold…”

Gold which is considered a safe-haven asset in times of uncertainty and does not pay interest tends to benefit when interest rates drop reducing the opportunity cost of holding the asset.   Gold has climbed to its highest level in nearly eight years on Wednesday as demand was boosted by fears of a resurgence in coronavirus infections and hopes of more stimulus measures to beat the economic slowdown. Spot gold was up 0.1 percent at $1,767.93 per ounce after touching $1,773 its highest level since October 2012 in early Asian trade.  Actions by central banks globally, that increased stimulus measures kept interest rates low, whilst gold prices surged more than 16 percent this year as the latter is seen as a hedge against inflation.  Meanwhile, Switzerland exported 126.6 tonnes of gold valued around $7 billion to the US in May the biggest monthly shipment on record amid high prices in New York, showed customs data on Thursday.  However, shipments to China and India, which are the two largest buyers remained at low levels.  Lockdowns affected the sales of jewellery, bars and coins in markets including countries such as China and India that usually are the engines of the gold market.  Meanwhile investors rushed to buy what they see as a safe asset for uncertain times.  On Thursday, gold held firm after hitting nearly eight-year high in the last session.  Spot gold was up 0.3 percent at $1,765.94 per ounce. 

Business Surveys show Recession is Easing

Eurozone purchasing managers’ indices, seen as a good gauge of economic health, showed a further contraction in June across the bloc, however, the historic drop in April eased again this month. The IHS Markit’s eurozone Flash Composite Purchasing Managers’ Index (PMI) seen as a good gauge of economic health, reached 47.5 from 31.9 in May moving closer to the 50-mark separating growth from contraction.  In April a record low of 13.6 was reached.  Britain’s private sector also dropped less than expected as more businesses reopened.  Meanwhile the corresponding French and German surveys showed a business recession easing in the respective economies.  The German 10-year bond yields rose 2 basis points climbing to -0.45 percent.  Also, French and Dutch 10-year bond yields were higher on the day.   German yields dropped to their lowest level since May 26 following the drop in US Treasury yields amid renewed concerns about the trade relations between the US and China. As optimism about the coming year has returned, the future output index, which had been under 50 for three months recovered to 55.7 from 46.8.  Meanwhile activity in the bloc’s service industry dropped for a fourth month with the slowdown much smaller.  The PMI climbed to 47.3 from 30.5. 

Germany’s Private Sector

Germany’s private sector recession eased further in June however demand was still affected by coronavirus-related disruptions and uncertainty, showed a survey on Tuesday.  This suggested that Europe’s largest economy is set for a slow recovery.  IHS Markit’s flash composite Purchasing Managers’ Index (PMI) that tracks the manufacturing and services sectors, together accounting to more than two-thirds of the economy, improved to 45.8 from 32.3 in May.  The government is expecting the economy to shrink by 6.3 percent this year, which would be the steepest contraction since the end of World War two.  Meanwhile the services sector which since mid-March was the most hit by the lockdown recovered further.   

German Business Morale

German business morale posted its strongest increase in June since records began and Europe’s largest economy should return to growth in the third quarter after the coronavirus pandemic hammered output in the spring, said the Ifo institute.  Ifo said on Wednesday that its June survey of companies showed the business climate index surging to 86.2 from an upwardly revised 79.7 in May, the largest jump since the beginning of the records after reunification in 1990.  The government hopes that the Eur 130 billion stimulus package will help bring the economy back on track later this year.  Meanwhile a robust healthcare system and widespread testing has helped Germany record fewer COVID cases than many other European countries.  

IMF

On Wednesday the International Monetary Fund said that the coronavirus pandemic is causing wider and deeper damage to economic activity than originally anticipated prompting institutions to slash its 2020 global output forecasts further.  It added that it now expects global output to shrink by 4.9 percent compared to a 3 percent predicted in April (with the data used at that time as soon as the lockdowns were taking place).  A recovery in 2021 will be weaker, with global growth forecast at 5.4 percent for the year compared to 5.8 percent in the April forecast.  It further added that a major new outbreak in 2021 could shrink the year’s growth to 0.5 percent.  Despite economies have reopened, the Fund said that the unique characteristics of lockdowns and social distancing had an impact on  both investment and consumption.  The IMF added that advanced economies have been particularly hard-hit with the US and Europe expected to shrink 8 percent and 10.2 percent respectively.  The figures are worse than the April forecast.  Meanwhile, Latin American economies where infections are still rising, saw some of the largest downgrades with Brazil’s economy now expected to shrink 9.1 percent, Mexico 10.5 percent and Argentina 9.9 percent in 2020.  In China, where new infections have been minimal and businesses started to reopen in April, is the only major economy now expected to show positive growth in 2020 at a forecast of 1 percent compared to 1.2 percent in the April forecast.   The IMF said that more policy actions from governments and central banks would be needed in order to support jobs and businesses. 

China and US Trade

The conflicting talk from the Trump administration about the “decoupling” of the US economy from China is leading to a challenge.  Chinese imports of US goods are climbing and investment by American companies into China continued.  Peter Navarro the White House adviser on Monday told Fox News Channel that the US-China trade deal was “over”.  With the news, US stock futures dropped, the dollar climbed, and the volatility indices climbed.  Meanwhile on Monday night Navarro stated he was referring to the lack of trust between the US and China over the coronavirus outbreak.  Likewise, President Donald Trump tweeted that the deal was intact.  Meanwhile, the US-China trade is on the increase after the coronavirus caused major drops just after the trade deal was signed in January.  US exports to China rose to $8.6 billion in April, up from a 10-year monthly trough of $6.8 billion in February, according to a US Census Bureau data.  Imports from China climbed to $31.1 billion from the $19.8 billion in March, which marked the lowest monthly deal in 11 years.  US officials have recently affirmed China’s commitment to meet the terms of the Phase 1 trade deal, that calls for China to boost purchases of US farm and manufactured goods, energy and services by $200 billion over the two years. 

Oil

US crude oil increased by 0.88 percent to $41.09 per barrel while Brent increased 1.97 percent at $43.02 on Monday.  The tighter supply from major producers led to the increase.  Meanwhile on Tuesday oil prices rose after a volatile session that sparked confusion over the status of the US-China trade deal.  Brent crude rose 1.1 percent to $43.57 a barrel after having dropped to a low of $42.21.  US oil climbed 1.2 percent at $41.21 a barrel after touching a low of $39.76.  Supporting oil prices was data showing that the historic downturn in the eurozone economy eased again this month as businesses resumed activity across the region.  On Wednesday oil prices tumbled over 5 percent after US crude storage hit another record and coronavirus cases rebounded in countries such as Germany and increased in heavily populated areas of the US.  New infections in China, Latin America and India made investors nervous and has put pressure on prices.  Brent crude dropped 5.4 percent down $2.32 while US West Texas Intermediate crude settled at $38.01 a barrel losing 5.8 percent.  China, which is the world’s top crude importer is also expected to slow imports in the third quarter after record purchases in recent months. 

Currency Roundup

On Monday sterling rose recovering from a three-week low during the Asian trading helped by a weaker dollar and hopes of a BREXIT trade deal and expectations of better economic data.  However, as British industrial output recorded it biggest quarterly drop on record during the three months to June, gains against the euro dropped.  The dollar weakened and higher risk currencies such as the Australian dollar jumped on Monday as investors were minded on the prospect of an eventual economic recovery from the coronavirus pandemic.  The dollar dropped 0.64 percent against a basket of currencies to 97.06 and the euro gained 0.72 percent versus the dollar to 1.1256, climbing from a recent two-and-a-half week lows.  On Wednesday the pound was little changed against the dollar and the euro having erased its recent gains against the dollar as risk appetite climbed.    Sentiment in the market took a cautious stance as the safe-haven dollar spiked after Bloomberg news reported that the US was considering tariffs on $3.1 billion of exports from Britain, France, Spain and Germany.    Meanwhile, the Euro-sterling edged down from the three-month highs hit on Tuesday after positive European Economic data.  The pound was up around 0.1 percent at 90.19 pence.  Meanwhile British Prime Minister Boris Johnson communicated on Tuesday a significant easing of the coronavirus lockdown in England.  The US Dollar edged higher on Thursday amid factors ranging from rising trade tensions and the fears of second wave of coronavirus infections that increased the demand for safe-haven currencies.  The dollar index advanced by 0.1 percent however remained below the 103 reached in March 2020.  The euro retreated to $1.1242 and the British pound fell to $1.2410.  Hungary’s forint fell 0.5 percent from its opening level to 35.7 per euro on Thursday extending its losses since Tuesday’s surprise interest rate cut by the Hungarian central Bank.   Also, on Thursday sterling gained as traders bought back into the currency, however, worries about a second wave of the coronavirus and negotiations over the Brexit deal kept retrained the rebound.

Market Roundup

On Monday on Wall Street, the Dow Jones Industrial Average increased 0.59 percent, the S&P 500 gained 0.65 whilst the tech-heavy Nasdaq Composite added 1.11 percent to set a record closing high.  Asian stocks were set to climb on Tuesday after oil prices increased and technology firms pushed Wall Street higher.  Investors however are worried about the new coronavirus infections globally, such as that in Latin America, in Brazil while New York City which is the epicentre of the US outbreak, eased restrictions after 100 days of lockdown.  The demand for some safe-haven assets was still there, and spot gold increased $1755.53 (an increase of 0.1 percent).  The MSCI’s gauge of stocks across the globe gained 0.34 percent.  Moody’s credit rating agency warned that the stimulus measures would leave advanced economies with much higher debt than they accumulated during the last financial crisis.  Investors were assessing hopes from the stimulus recovery against new infections that could derail a rebound in business activity.  As the World Health Organisation reported an increase in global coronavirus on Sunday, demand for safe havens including gold and US Treasuries, rose.  Shares of airlines, which is one of the most hit sectors during the coronavirus pandemic tumbled with the S&P 1500 airlines index down 1.2 percent.  The S&P 500 is stuck in a trading range after trillions of dollars in monetary and fiscal support, the reopening of businesses and improving economic data lifted the index about 40 percent from March lows.  It is about 9 percent off its 9th February record high.  Technology stocks contributed to the rebound, with four of the 11 major S&P sectors moving higher.  Meanwhile, European shares closed at a near one-week low on Monday amid signs of a resurgence in coronavirus cases in Germany.  The pan-European STOXX 600 index ended 0.8 percent lower, led by losses in the food and beverage, telecom and oil and gas sectors.  Tuesday saw markets unsettled by surprise comments from White House trade adviser Peter Navarro who stated that the hard-won deal was “over”.  The relationship between the US and China has worsened since the coronavirus pandemic that commenced in China and hit the US.  President Trump and his administration have repeatedly accused Beijing of not being transparent about the outbreak.  Meanwhile, risk appetite got a boost on Tuesday after data showed improving business activity in France and Germany and the White House reassurances about the Phase One US-China trade deal.  Germany’s DAX was down 1.9 percent despite the Ifo institute survey showed the strongest rise ever recorded in the country’s business morale in June. European stocks dropped from a two-week high on Wednesday amid the surge in the number of coronavirus cases globally.  The pan-European STOXX 600 fell 1.5 percent as sectors such as travel and leisure, automakers and banks dropped.    Wall Street’s main indexes opened lower on Wednesday a day after the NASDAQ reached a new peak.  The Dow Jones Industrial Average fell 163.14 or 0.62 percent at the beginning of the session whilst the S&P 500 opened lower by 0.54 percent at 3,114.40.  The NASDAQ Composite fell 37.55 points or 0.37 percent at 10,093.82 just after opening. Thursday saw the Asian stocks posting their biggest drop in eight sessions, whilst bonds climbed.  The MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.7 percent whilst Tokyo Nikkei slumped 1.1 percent and Australia’s tumbled 2.1 percent.  US stocks slipped following Wall Street’s worst day in two weeks, as investors were discouraged by an alarming rise in new cases and the increased level of jobless claims number.  Data showed about 1.48 million Americans signed up for unemployment benefits in the last week.  The figures read slightly below the 1.5 million in the prior week as weak demand forced US employers to lay off workers even as businesses reopened.  On Friday the market showed signs of optimism with European shares opening higher and oil prices rose despite the number of COVID-19 infections reached a record in the US. 

Malta:  Industrial Producer Price Indices – May 2020

During May 2020 the industrial producer price index registered an increase of 0.33 percent in comparison to the same month in the previous year.  On an annual basis when compared to May 2019 the industrial producer price index climbed by 0.33 percent amid an increase of 2.03 percent in consumer goods and 1.27 percent in capital goods.  This was partly offset by a price drop of 1.07 percent in intermediate goods.  The energy sector registered no price change.  On a monthly basis during May 2020, the industrial producer price index went up by 0.08 percent over the previous month.  This was a result of an increase of 0.21 percent intermediate goods, which was slightly offset by a drop of 0.05 percent in capital goods.  No price changes were registered in the consumer goods and energy sectors. 

Malta:  Registered Unemployment – May 2020

In a press release issued by the National Statistics Office, data provided by Jobsplus for May 2020 show that the number of persons registering for work stood at 4,409 increasing by 2,740 when compared to the corresponding month in 2019.  The largest share of males and females on the unemployment register sought occupations as clerical support workers with 20.4 percent and 33.1 percent respectively. 

Antonella Mercieca

Client Relationship Manager

Source:

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

Date:

June 26th, 2020


‘Disclaimer: The information provided on this website is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning investments or investment decisions, or tax or legal advice. Similarly, any views or options expressed on this website are not intended and should not be construed as being investment, tax or legal advice or recommendations. Investment advice should always be based on the circumstances of the person to whom it is directed, which circumstances have not been taken into consideration by the persons expressing the views or opinions appearing on this website. Timberland Finance has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website. You should always take professional investment advice in connection with, or independently research and verify, any information that you find or views or opinions which you read on our website and wish to rely upon, whether for the purpose of making an investment decision or otherwise. Timberland Finance does not accept liability for losses suffered by persons as a result of information, views of opinions appearing on this website. This website is owned and operated by Timberland Invest Ltd.’

Timberland Finance,
Aragon House Business Centre,
Dragonara Road,
St Julian’s, STJ 3140,
Malta