“International Monetary Fund…”

The International Monetary Fund on Tuesday maintained its 6% global growth forecast for 2021.  The outlook for the US and other wealthy economies have been upgraded but cut estimates for a number of developing countries that are struggling with the number of COVID-19 infections.  In its update to its World Economic Outlook the IMF said the divergence is based largely on better access to COVID-19 vaccines and continued fiscal support in advanced economies, while emerging markets face difficulties on both fronts.  The IMF significantly raised its forecasts for the United States which it now expects to grow at 7% in 2021 and 4.9% in 2022 increasing by 0.6% and 1.4% respectively from the forecasts in April.  The projections assume the US Congress will approve President Joe Biden’s of $4 trillion in proposed infrastructure, education and family support spending.  The positive spillovers from the US spending plans and the expected progress in COVID-19 vaccination rates are boosting the IMF’s 2022 global growth forecast to 4.9% up 0.5% from April.  The 2021 growth forecast for India has been cut by the Fund which has struggled with a massive wave of infections this year by three percentage to 9.5%.  Likewise, the forecast for China has been reduced by 0.3% citing a scaling back of public investment and overall fiscal support. Furthermore, the IMF forecast lower prospects for Indonesia, Malaysia, the Philippines, Thailand and Vietnam where recent waves of COVID-19 infections are weighing on activity.  Low-income countries saw a downgrade of 0.4% in their 2021 growth with the Fund citing the slow rollout of vaccines as the main factor impeding their recovery.  The IMF stated that downside risks remain significant internationally, including the potential for new, highly contagious coronavirus variants to lead to new restrictions on movement and reduced economic activity.  The IMF further said that it views inflation pressures as the transitory result of “supply-demand mismatches” as economies reopen, with inflation expected to return to pre-pandemic ranges in most countries in 2022.  

Federal Reserve Meeting

The US economic recovery is still on track despite a rise in coronavirus infections said the Federal Reserve in a meeting on Wednesday.  The FED kept its overnight benchmark interest rate near zero and left its bond-buying program unchanged. Meanwhile, in a news conference following the release of the statement, Fed Chair Jerome said that the US job market still had “some ground to cover” before it would be time to pull back from the economic support the US central bank put in place in the spring of 2020.  He told reporters, “I want to see some strong job numbers” in the coming months before the $120 billion in monthly bond purchases that the FED continues to make.  Powell has downplayed for now the risk that the renewed spread of the coronavirus through its more infectious Delta variant will put the recovery at risk or throw the FED off track as it plans to exit from crisis-era policies.  The FED’s policy statement issued after the end of a two-day policy meeting, reflected that confidence as the central bank continues debating how to wind down its bond purchases. There seem to be progress in that discussion although there is no clear timetable for reducing the bond purchases.  Powell said there was “very little support” for cutting the $40 billion in monthly purchases of mortgage-backed securities “earlier” than the $80 billion in Treasuries and that once the process begins “we will taper them at the same time.” In the statement the Central bank said that “With progress on vaccinations and strong policy support, indicators of economic activity and employment have continued to strengthen.”

German Inflation

The annual consumer price inflation in Germany accelerated by more than expected in July, rising further above the European Central Bank’s target of close to but below 2% said the Federal Statistics Office on Thursday.  Consumer prices, harmonised to make them comparable with inflation data from other European Union countries, rose by 3.1% in July, compared with 2.1% in June.

China’s Industrial Profits

China’s industrial profit growth slowed for the fourth straight month in June as high raw material prices weighed on factories’ margins, pointing to some weakness in the recovery of China’s economy.  Industrial firm’s profits rose 20% year on year in June to 791.8 billion yuan declared the National Bureau of Statistics (NBS) after a 36.4% increase in May.  Whilst the Chinese economy has largely recovered from disruptions caused by the coronavirus pandemic, the country is facing new challenges in recent months such as higher raw material costs and global supply chain crunches.  In the first half of 2021, industrial firm’s profits grew by a hefty 66.9% from a pandemic induced slump in the same period a year earlier.  Profits in January to June increased 45.5% from the same period in 2019, before the beginning of the global pandemic.  China’s factory activity slowed in June amid a resurgence of COVID-19 cases in the export province of Guangdong, with epidemic prevention and control efforts curbing port processing capacity.  According to NBS data metals processing as well as chemicals and pharmaceutical industries drove profit growth in June. 

US Core Capital Goods

New orders for key US made capital goods increased solidly in June despite supply constraints that impacted production at some factories, suggesting business spending on equipment could remain strong beyond the second quarter.  According to the Commerce Department on Tuesday, orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans rose 0.5% last month.  Business investment or equipment has boomed during the COVID-19 pandemic underpinning manufacturing, which accounts for 11.9% of the US economy.  Meanwhile, consumer spending shifted to goods from services, with millions of Americans cooped at home.  Although demand is reverting to services, with just under half of the population fully vaccinated against the coronavirus, spending on goods is likely to remain strong. Households accumulated at least $2.5 trillion in excess savings during the pandemic and inventories are low, which will likely see businesses continuing to invest in equipment to boost output.  Core capital goods orders were lifted last month by machinery and primary metal products, as well as computers and electronic products.  Orders for electrical equipment, appliances and components were unchanged. 

US Economy during the COVID-19 Recession

The US economy contracted at a record average annualised rate of 19.2% from its peak in the fourth quarter of 2019 through the second quarter of 2020 showed government data on Thursday, confirming that COVID-19 recession was the worst ever. The Commerce Department’s Bureau of Economic Analysis said gross domestic product rebounded at a historic average rate of 18.3% between the second and fourth quarter of 2020.  The Massive fiscal stimulus by the FED and the vaccinations against COVID-19 have allowed economic activity to resume, with GDP moving above its pre-pandemic level in the second quarter.  According to the government the economy shrank 3.4% in 2020, instead of 3.5% as previously estimated.  This was still the biggest drop in GDP since 1946. 

US Economy in Second Quarter

On Thursday gross domestic product increased at a 6.5% annualised rate last quarter, said the Commerce Department.  The economy grew at a revised 6.3% rate in the first quarter.  The revisions to growth in other years and quarters were minor.  From 2015 to 2020, GDP increased at an average annual rate of 1.1% unrevised from previously published estimates.  Although the second quarter marks the peak in growth in this cycle, the economic expansion is expected to remain solid for the remainder of the year.  A resurgence in COVID-19 infections, driven by the Delta variant of the coronavirus poses risk to the outlook.  Higher inflation as well as ongoing supply chain disruptions could also slow the economy.

Currency Roundup

Sterling dipped against the dollar on Tuesday as global stock markets sank led by heavy sell-off  in Chinese shares.  Sterling has been particularly sensitive to risk sentiment in recent weeks which lessened risk sentiment and increase the bid for dollars ahead of the US Federal Reserve policy meeting.  Sterling has been particularly sensitive to risk sentiment in recent weeks and has correlated well with the performance of global stock markets.  Meanwhile the receding COVID-19 cases in Britain helped sterling to steady above the $1.37 against the dollar.  Data on Monday showed that the number of COVID-19 cases in Britain had fallen for five consecutive days.   Tuesday saw sterling at $1.3778 and touched the euro lower at 85.44 pence. China’s yuan on Tuesday rebounded from a one-week low hit a day earlier.  Investors, however, were still keeping a close eye on the possible spill-over effects of a mainland stock selloff on currency markets.  The dollar hovered below the recent peaks on Tuesday, as investors turned to this week’s Federal Reserve meeting for clues about the policy outlook.  The greenback has been rising broadly for more than a month as markets have become wary of the FED starting to taper its monetary support. 

Sterling held firm in early London trading on Wednesday close to a 13 day high against the dollar despite a broader tone of risk aversion in the currency markets ahead of the US Federal Reserve meeting.  Caution ahead of the FED meeting later in the session pushed the dollar index higher and mostly saw riskier currencies lose out, with a fall in Chinese equity markets also contributing to the moves.  The dollar stood firm on Wednesday and the Japanese yen, Swiss franc and the euro held onto the previous day’s gains in Asian trading hours with the safe-haven yen trading 109.83 per dollar at $1.1812.  The dollar has enjoyed a month-long rally after a hawkish shift from the FED in June.  Meanwhile, the Chinese yuan pulled away from three-month lows hit on Tuesday, when it saw its biggest daily losses since October.  The bounce of the yuan was modest however, the risk-sensitive Australian and New Zealand dollars were both subdued as sentiment remained fragile. 

The dollar slipped to multi-week lows in Asia trading on Thursday after fresh reassurance that US interest rate hikes are distant and currencies drew support from China’s efforts to smooth the stock market jitters.  The euro edged to a two-week high of $1.1860. Meanwhile the pound hit its highest in over a month against the dollar on Thursday extending gains driven  amid a drop in  coronavirus cases in Britain and as a dovish US Federal Reserve weighed on the greenback. Sterling has gained for five consecutive sessions and on Thursday was 1.4% higher against the dollar on the week.  Sterling moved higher by 0.3% on the day to $1.3843, after hitting its highest since 24^th June against the dollar. 

Market Roundup

Monday saw all three major US stock indexes closing at record highs for a second straight session.  Meanwhile a tick higher in inflation expectations on Monday pushed the US 10-year real yields to a record low of -1.123% which also contributed to the overnight softness in the dollar.  European stocks ease from all-time highs on Monday hurt by a decline in shares of Dutch technology investor Prosus amid regulatory clampdown in China.  Prosus NV which has a 28.9% stake in Tencent, tumbled 8.8% to a more than one-year low after Beijing intensified its regulatory crackdown on the Chinese internet giant.  Automakers dropped on Monday with Porsche dropping 1.9% as it traded without entitlement for dividend, and French car parts maker Faurecia slipped 5.7% despite raising its 2021 net cash flow target. Government bond yields across the euro edged down on Tuesday with German Bund yield holding close to 5 ½ month lows hit in the previous session.  Ten-year bond yields across Europe have tumbled some 20 basis points this month as investors are concerned about the coronavirus Delta variants.   Germany’s benchmark 10 year Bund yield was down 2.5 bps at -0.45% near a 5 ½ month low reached briefly on Monday.  London’s FTSE 100 dropped on Tuesday led by insurance and mining stocks with life insurers and base metal miners being at the top losers down by nearly 1.5%.  Asia’s stocks fell to fresh seven-month troughs on Tuesday led by a third straight session of heavy selling of Chinese interest giants, while bond and currency markets kept to tight ranges ahead of the Federal Reserve policy meeting. The Hong Kong benchmark dropped 2.84% on Tuesday its third day of declines, with the Hang Seng Tech index down 6.46% to its lowest since its inception in July 2020.  It has fallen around 14% in three days and lost 41% from a February peak.  Meanwhile, in onshore markets, Chinese blueships dropped sharply in afternoon trading, dropping 2.93% after closing at their lowest since December on Monday amid regulatory crackdowns in the education and property sectors.  Meanwhile, elsewhere in Asia, investors were more optimistic with Japan’s Nikkei rising 0.49% and Australian shares closing up 0.46%. On investor’s mind were the US corporate earnings and the FED’s monetary policy meeting.   Japanese equities rose on Tuesday tracking overnight gains on Wall Street as investors cheered upbeat corporate earnings however, the benchmark Nikkei 225 failed to close above the 28,000 key psychological level for a second straight session. 

On Wednesday the Dow Jones Industrial Average closed lower by 0.36% to 34,930.93, NASDAQ increased by 0.41% reaching 15018.10 and S&P 500 dropped by 0.02% closing 4400.64.  Meanwhile European markets closed higher with 1.18% at 6,609.31, DAX increased by 0.33% reaching 15570.36 and the FTSE 100 closing higher at 0.29% to 7016.63.  European stocks gained amid encouraging earnings reports from the British bank Barclays and luxury group Kering helping investors look past the worries about China’s regulatory crackdown that kept markets on edge this week. 

Some soothing words from Beijing to calm investors over its regulation push and the  US Federal Reserve meeting helped emerging market stocks to extend the gains on Thursday putting them on course for their best day in 4 ½ months.  Meanwhile European stocks hit record highs on Thursday as strong earnings from commodity majors, Airbus and a number of other companies set an upbeat tone, with fading concerns about China’s regulatory moves. 

Gold

Gold eased on Tuesday as the dollar moved higher, while investors focused on this week’s US Federal Reserve meeting for clues about when the central bank might rein in its easy monetary policies.  Spot gold dropped 0.1% to $1,794.68 per ounce while US gold futures eased 0.3% to $1,793.60.  Stimulus measures tend to support gold which is often considered a hedge against inflation and currency debasement. Meanwhile, the dollar index was up 0.1% making gold more expensive for holders of other currencies. Holdings on the SPDR Gold Trust, the world’s largest gold-backed traded fund fell 0.2% to 1025.64 tonnes on Monday the lowest since 13 May. 

Oil

Meanwhile, product supplies of jet fuel rose last week to 1.65 million barrels per day, the highest since March 2020. Oil rose towards $75 a barrel on Wednesday ahead of an industry report expected to show U.S. crude inventories fell, bringing the focus back to a tight supply. U.S. crude stockpiles dropped last week to their lowest since January 2020, according to data on Wednesday from the U.S. Energy Information Administration. EIA data showed that crude inventories dropped to 435.6 million barrels.   Brent crude LCOc1 rose 41 cents, or 0.6%, to $74.89 a barrel after posting on Tuesday its first decline in six days whilst U.S. West Texas Intermediate (WTI) crude CLc1 advanced 48 cents, or 0.7%, to $72.13.  Oil has risen 45% this year, helped by a recovery in demand and the supply curbs by OPEC+.  OPEC+ agreed to increase supply by 400,000 barrels per day from August, unwinding more of last year’s record supply cut, but this is seen as too low by some analysts given the rebound in demand expected this year. A rising number of coronavirus cases worldwide, despite vaccination programmes, has limited the upside for oil and remains a concern.  Oil settled near $75 a barrel on Wednesday after data showed US crude inventories fell to pre-pandemic levels.  Brent crude ended the session up 0.4% a barrel, after posting on Tuesday its first decline in six days.  US West Texas Intermediate crude settled up 74 cents or 1% higher at $72.39.  According to US Energy Information Administration crude inventories dropped by 4.1 million barrels in the week to 23 July, helped by lower imports and a decline in weekly production. 

Bitcoin

Bitcoin on Tuesday dropped to around $37,000 from a Monday peak of $40,581 after Amazon.com offered a qualified denial of a weekend news report that said it was preparing to accept cryptocurrencies.  Bitcoin reached the $40,000 level on Wednesday as traders were more confident by the recent positive comments about the cryptocurrency by high profile investors.  Bitcoin was last up 1.7% to $40,149 while rival cryptocurrency ether rose 1% to $2,328. 

Malta:  Unemployment Rate – June 2021

In a press release dated 28^th July, 2021, the seasonally adjusted monthly unemployment rate for June 2021 stood at 3.6% at par with the previous month and down by 0.9% from June 2020.   During June 2021, the number of unemployed persons was 9,840 with the unemployed males and the 25 to 74 age group being the major contributors to the overall level of unemployment.  The seasonally adjusted number of unemployed youths amounted to 1,982, whereas those aged between 25 and 74 years stood at 7,857.  In June 2021, the unemployment rate for males was 3.7% up by 0.1% from the previous month while the rate of female stood at 3.4% dropping by 0.1% from the May 2021 estimates.  The unemployment rate for persons aged 15 to 24 years was 7.7% while the rate of those between 25 to 74 years stood at 3.1%. 

‘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.’