“Market Update…”

Market Update

Equity investors were encouraged as the death toll from the virus slowed in major European countries including France, Italy and New York.  The S&P 500 was on track to recoup about $1 trillion in market value on Monday after New York, the biggest US hot spot for coronavirus reported a fall in daily cases.  All three main stock indexes jumped more than 4 percent with gains led by utilities, real estate and consumer staples considered safe in times of volatility.  Meanwhile banking stocks soared 7.3 percent and was set for the best day as Bank of America, Citigroup JP Morgan all advanced between 5 percent and 8 percent.  Whilst the Wall Street’s fear gauge fell to its lowest in two weeks, analysts cautioned against calling a bottom in equity markets.  Boeing said on Sunday that it was extending the suspension of production operations and it would stop paying about 30,000 workers this week.  Its shares rose 5.8 percent but are still down nearly 60 percent this year.   The profits for the S&P 500 firms are expected to drop as demand across sectors including airlines, luxury goods and industrials fall.  European shares rallied for a second straight day on Tuesday as investors focused on signs that the pandemic may be easing. The pan-European STOXX 600 index rose 2.7 percent early morning hitting its highest in almost a month.  Spanish .IBEX stocks climbed 2.2 percent as deaths from coronavirus slowed for a fourth day on Monday, prompting the government to contemplate a gradual easing of a nationwide lockdown.  The benchmark STOXX 600 index has now gained more than 22 percent since hitting an eight-year low in March, but remains more than 24 percent below its February record high.  On Tuesday, German government bond yields rose with eurozone finance ministers due to meet later in the day to discuss a joint response to help member countries deal with the economic impact of the pandemic.   Also on Tuesday Wall Street rose on early signs of the coronavirus plateauing in some US hot spots.  The New York governor said social distancing measures to curtail the spread of the coronavirus were working. Also, health officials said that the pandemic may kill fewer Americans than recent projections.   Building on a 7 percent jump on Monday, the S&P was set for its biggest two-day gain in nearly two weeks. Gains were led by the energy, materials and financials sectors. On Wednesday Italian government bond yields rose sharply after the European Union finance ministers failed to agree a rescue package to help European economies from the pandemic.  Meanwhile European shares dipped on Wednesday, following from a two-day rally as the number of coronavirus deaths rose again in Spain while France was the fourth country to report death toll of more than 10,000.  London’s FTSE 100 fell 1.2 percent as the death toll in the country crossed 6,100 while Germany’s DAX lost 0.8 percent after rallying more than 8 percent in the last two days.  US stocks jumped on Wednesday on hopes that the coronavirus outbreak in the US is close to its peak as President Donald Trump said Americans might be getting to the top of the “curve”.  Stocks were also lifted as the healthcare sector gained ground on the wake of Bernie Sanders’ decision to suspend his presidential campaign.  The Dow Jones Industrial Average and the S&P 500 advanced 3.4 percent each, while the NASDAQ Composite gained 2.6 percent.  European shares climbed posting a third straight day of gains on Wednesday tracking a rally on Wall Street. Sentiment has however remained fragile.  Meanwhile Tokyo shares ended lower on Thursday, despite a big rally on Wall Street the previous session as investors remained cautious on corporate Japan’s earnings.  The Nikkei eased 0.04 percent to 19345.77.  European stock markets gained for a fourth straight day on hopes that the pandemic was close to a peak as investors focused their attention on a meeting of European Union finance ministers to discuss an economic rescue package.  The pan-European STOXX 600 index was up 1.2 percent early morning with battered stocks of travel, leisure, autos and miners leading the gains.  The benchmark index has rebounded more than 5 percent this week.  On Thursday, yields across the core euro zone bond markets rose with those in the peripheral markets advancing higher, as investors waited to see the outcome of the European finance ministers meeting.

Currency Roundup

The dollar fell against the yen on Tuesday as the underlying concerns about the economic impact from the pandemic kept investment sentiment on edge.  The pound clawed back some recent losses against the dollar, however, the interest for the sterling remains fragile after British Prime Minister Boris Johnson’s health worsened with the Coronavirus.  Meanwhile, the yen welcomed the massive stimulus from Prime Minister Shinzo Abe almost $1 trillion to offset the impact from the pandemic.  The dollar dropped 0.43 percent to 108.76 yen on Tuesday whilst against the euro the dollar eased to $1.0837.  The dollar came in on a positive note in Asian trade after governors of New York and New Jersey pointed to tentative signs that the outbreaks in their states was starting to plateau.  The pound rose 0.38 percent to $1.2394 on Tuesday,   following a 0.3 percent decline on Monday.  Meanwhile against the euro sterling held steady at 88.21 pence.  The Chinese yuan rose to a 1 ½ week high against the dollar amid expectations of more support measures from the government and more signs that the outbreak in China is receding.   Sterling edged lower against the dollar on Wednesday as the demand for US Dollars rose broadly amid the growing concerns in markets that the pandemic is far from over. Earlier in the week the pound saw reactions to the news around the condition of British Prime Minister Boris Johnson as he tested positive for coronavirus, was admitted to hospital and was moved to intensive care.  His condition was reported to be in stable condition.  Also on Wednesday, the yuan retreated from its three week high as some of the optimism about a possible slowing of the coronavirus led investors to revert back to the safe-haven dollar.  Currencies in Hungary, Poland and the Czech Republic rose 0.1% to 0.7% before the euro zone finance ministers meeting on Thursday.

Coronavirus Update

More than 1.38 million people have reported as infected by the coronavirus across the world with 81,451 having died according to Reuters.  New York State, which is the United State’s epicentre of the pandemic reported its sharpest single day jump in fatalities and Spain’s daily death tolls rose for the first time in five days.  The outbreak has prompted many nations to go on lockdown and took unprecedented fiscal and monetary stimulus to help economies. A cause for concern were the number of new coronavirus in China on Sunday, while Singapore which had won international praise for handling the virus over the last few months, had to close schools and most of the workplaces after an increase in infections.  According to Prime Minister Giuseppe Conte on BBC, Italy may start gradually lifting some restrictions by the end of April provided the spread of the disease continues to slow.  Italy has been hardly hit by the Coronavirus.   “We need to pick sectors that can restart their activity. If scientists confirm it, we might begin to relax some measures already by the end of this month,” Conte told the British broadcaster. Conte warned, however, that Italy could not lower its guard and restrictions would only be eased gradually. On Wednesday there were 542 deaths in Italy lower than the 604 the day before taking the death toll to 17,669.

German’s Industry Output

German industry output rose by 0.3 percent in February, beating expectations.  The figures reflect the period before the coronavirus significantly spread in Germany and the Economy warned of an impending collapse.  Figures released by the Statistics Office on Tuesday showed a 1.8 percent increase in the production of German consumer goods but a 0.3 percent decline in capital goods.  The Economy Minister said that the coronavirus outbreak had brought to an “abrupt stop”  a recovery in the industrial economy that had just started after a 2 year-long weak phase.  He further added that “Industry production will see a major collapse from March and for the second quarter.” The Ifo institute said that industrial output in Germany would probably tumble in the coming three months.  It added that its index for production expectations had seen its biggest fall since the survey was first conducted in 1991.  The index dropped to -20.8 points in March from 2.  Meanwhile, data released on Monday showed that orders for German-made goods dropped 1.4 percent in February and there was a drop in from abroad.  The economy minister on Monday said that it expected major falls in orders for March and April and sharp drops in production in the first and second quarters.  On Monday the BDI industry association said that it saw the economy contracting by 3-6 percent this year if economic activity was disrupted for a maximum of six weeks.

In Europe

European Union finance ministers are set to resume talks on a half-a-trillion euro economic support package on Thursday after failing to reach an agreement earlier this week.

US Jobless Claims

U.S. jobless claims is due later on Thursday and is expected to show near-record-level unemployment in the world’s largest economy.

FED Minutes

Minutes of the Fed’s emergency meetings in March showed how policymakers were trying to stay ahead of the rapidly spreading coronavirus pandemic focusing on the necessary decisions that could shape the global economy for the next decade. There was little disagreement over the policy choices, showed the minutes and little argument over the near-term fallout in terms of rising U.S. unemployment, collapsing consumer confidence, and the devastating blow to business. But policymakers at the 3^rd March meeting showed widespread uncertainty about what was to come. A few weeks before they were seeing unemployment at historic lows, and stocks were at historic highs.  With the spread of the pandemic financial markets dropped.  Policymakers offered “several alternative scenarios” for the economy, the minutes said, suggesting the world’s most powerful central bank was struggling alongside everyone else to glean whether the U.S. economy’s sudden stop would soon give way to a fast, “V-shaped” rebound, or cause more chronic, long-term damage.  Policymakers agreed to slash interest rates back to zero, broadened access to U.S. dollars for foreign central banks, and restart the massive asset purchases. The Fed’s policy-setting committee then agreed unanimously to cut the central bank’s overnight benchmark lending rate by half a percentage point to a range of 1.00% to 1.25%. At a videoconference convened on the morning of Sunday, March 15, policymakers noted “that the measures — such as social distancing — taken in response to the pandemic, while needed to contain the outbreak, would nevertheless take a toll on U.S. economic activity in the near term.” After the lengthy debate on how long the disruption would last policymakers agreed to cut interest rates a full point back to near zero and restart buying bonds.

S&P Cuts Australia’s Sovereign Outlook

Australia is among a handful of countries in the world that receives the best ranking from all three major rating agencies.  However, in view of the pandemic, Australia is dealing with severe economic and fiscal shock.  On Wednesday Global ratings agency S&P lowered its outlook on Australia’s AAA rating to negative from stable in anticipation of a material weakening in the government’s debt position amid the large stimulus package.  S&P is predicting the A$2 trillion economy could plunge in a recession for the first time in 30 years.    In its statement, S&P said this would cause, “ substantial deterioration of the government’s fiscal headroom at the ‘AAA’ rating”.  The government has pledged A$ 320 billion in fiscal spending, or 16.4% of annual economic output, to backstop the economy and prevent a crisis as the pandemic closed companies and leaves many without employment.  Australian long-dated bonds sold off after the S&P outlook downgrade with the 10-year yields jumping to 0.967 percent from 0.909 percent at Tuesday’s close.

Japan

On Tuesday, Japanese Prime Minister Shinzo Abe declared a state of emergency to fight the outbreak and rolled out a near $1 trillion stimulus package to soften the economic blow.  Meanwhile, the service sector sentiment index for Japan plunged in March according to a Cabinet Office survey on Wednesday amid the coronavirus outbreak that resulted in travel bans and measures of social distancing that dropped consumption.  Japan’s coincident indicator index rose in February.  The index of coincident economic indicators consists of a range of data including factory output, employment and retail sales data which according to the Cabinet office rose by a preliminary 0.6 point in February from the previous month.

Oil

Oil prices dropped on Monday after Russia and Saudi Arabia delayed a meeting to Thursday with Brent crude was up by 80 cents (2.4 percent) at $33.85 a barrel after falling more than 3 percent whilst West Texas Intermediate (WTI) crude was up by 83 cents or 3.2 percent at $26.91 a barrel after having dropped nearly 8 percent in the previous session.   Global demand for oil has dropped by 30 percent or about 30 million barrels per day as Saudi Arabia and Russia flooded the markets with extra supply after a meeting fell apart.  Whilst antitrust laws prohibit US oil producers from taking steps to push oil prices, curbing output is legal if state regulators or the federal government set lower production levels, said antitrust experts.

Gold

On Wednesday Gold edged higher amid the rising coronavirus death toll that negatively impacted investors’ risk sentiment.  Spot gold was up 0.1 percent at $1649.66 per ounce after climbing up to its highest since 10^th March on Tuesday at $1671.40.

Malta:  Index Of Industrial Production

In February 2020, the seasonally adjusted index of industrial production decreased by 2.6 per cent over January 2020.  Decreases of 13.4 per cent and 3.6 per cent were registered in the production of energy and capital goods respectively whilst increases were recorded in the production of consumer goods (0.5 per cent) and intermediate goods (0.3 per cent).  Meanwhile when compared to February 2019, the working-day adjusted index of industrial production increased by 10.1 percent.  Production increases were registered in all the main industrial groupings, namely consumer goods (15.2 per cent), energy (13.1 per cent), capital goods (6.1 per cent) and intermediate goods (2.9 per cent).

Malta:  Inbound Tourism February 2020

Total inbound tourists for February were estimated at 145,821, an increase of 16.5 per cent when compared to the corresponding month in 2019.  During the month under review, a total of 124,198 inbound tourist trips were undertaken for holiday purposes, while a further 15,074 were made for business purposes. Inbound tourists coming from the United Kingdom and Italy remained the most popular, with a joint share of 33.9 per cent of the total inbound tourists. Total tourist expenditure was estimated at €86.8 million, an increase of 22.0 per cent over the corresponding month in 2019.  Meanwhile, inbound tourist trips for the first two months of 2020 amounted to 295,059, an increase of 16.7 per cent over the same period in 2019. Total tourism expenditure was estimated at €181.0 million, 16.1 per cent higher than that recorded in 2019. Total expenditure per capita stood at €613, a decrease of 0.5 per cent when compared to 2019.

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