“Market Wrap…”

European shares closed at a two-week high on Monday on positive updates on US President Donald Trump’s health and as a debate about US stimulus package lifted investors’ spirits.  The pan-European STOXX 600 index gained 0.8% extending the gains from last week.  Meanwhile stocks such oil and gas, travel and leisure and automakers boosted the main markets.  Oil majors such as Royal Dutch Shell, BP and Total surged with crude prices jumping more than 6 percent.  Telecom stocks increased the most amongst the sectors with Vodafone rising up 4.7% after its lenders approved the merger of India’s Bharti Infratel and Indus Towers in which Vodafone has a stake. Madrid-listed stocks outperformed with 1.2% amid reports of consolidation in the banking sector.   On Tuesday government bond yields across the euro area held firm on dovish comments by the European Central Bank chief that raised expectations for further stimulus.  Meanwhile, ECB President Christine Lagarde said that a second wave of coronavirus pandemic risks are delaying the eurozone’s economic recovery.  Germany’s benchmark 10-year bond yield was steady on the day at around -0.508%, hitting a 13-day high earlier in the session and is up more than 4 basis points from two-months lows hit last week.  European stocks continued with their rally on Tuesday with banks surging more than 3 percent on hopes for a US stimulus package, a Brexit deal and upbeat German data.  Technology and healthcare stocks which were among the top performers this year dropped about 0.9%.  Germany’s DAX jumped 0.6% as data showed orders for German-made goods climbed 4.5% in August, more than expected. Meanwhile, the S&P 500 and the NASDAQ retreated on Tuesday as Federal Reserve Chair Jerome Powell warned that the US economic recovery remained far from complete, with a sell-off of some of the biggest technology companies also weighing on sentiment.  US stock index futures were subdued on Tuesday as investors took profits after a rally that sent the S&P 500 and the Dow to their highest levels in more than two weeks.  Growing political uncertainty in the run up to the election and mixed macroeconomic data have increased volatility in US stocks with the benchmark S&P 500 and the tech-heavy NASDAQ about 5% and 6% below their respective record highs hit more than a month ago.  On Wednesday European stocks edged higher amid upbeat earnings report from Texco and Germany’s Dialog Semiconductor that helped to offset some uncertainties about the US stimulus package.  The pan European STOXX 600 index rose 0.2%.  Asian stocks and US futures also recovered after sharp losses on Wall Street after US President Donald Trump on Tuesday abruptly called off talks with Democratic lawmakers on the coronavirus relief legislation until after the election.  For the same reason Japanese stocks ended little changed on Wednesday with the Nikkei share average at 23,422.82 at the close.  On the Tokyo stock exchange nearly a third of 33 sub-indexes traded lower, with pharmaceuticals, fisheries and forestry and foods led the declines.  European shares mostly dropped on Wednesday and did not join a recovery in global equities following the sell offs on doubts over the US stimulus.  The healthcare sector dropped the most, with telecom, media and real estate stocks also declining. On Thursday US stock index futures climbed for a second straight day ahead of data on weekly jobless claims.   US stocks also ended higher on Thursday on comments by US President Donald Trump increasing hopes of fresh fiscal support, while data emphasised the view that the labour market recovery was struggling to gain momentum.  Two days after calling off negotiations on a comprehensive bill, Trump in an interview with Fox News said talks with Congress have restarted over further COVID-19 relief and that there was a good chance a deal could be reached. 

Currency Roundup

On Tuesday sterling held near $1.30 on signs of progress in Brexit talks and as investors pushed back expectations for when the Bank of England would cut interest rates below zero. European union diplomats said that Brussels was gearing up to negotiate until as late as mid-November.  The dollar held gains against most currencies on Wednesday after the abrupt cancellations by President Donald Trump on economic stimulus that increased the demand for safe-haven assets.  Trump’s decision to postpone the stimulus talk until after the 3 November presidential election increases the downside risks to an already shaky economy. Sterling was quoted at $1.2287 after dropping 0.86% on Tuesday as optimism about Britain’s trade negotiations with the EU failed to shield the currency from the advance in the dollar.  Meanwhile, Federal Reserve Chair Jerome Powell on Tuesday warned that the US economy could slip into a downward spiral if the coronavirus is not effectively controlled.  He called for more economic assistance.  The dollar did not move against the yen which was last quoted at 105.70 JPY.  Trading in other Asian currencies was mostly subdued, with financial markets in China closed for a public holiday.  Sterling reached towards $1.30 on Thursday as prospects for a Brexit deal appeared to improve, with Britain giving it a 66 percent chance of success.  British Prime Minister Boris Johnson and European Council President Charles Michel agreed on Wednesday that there was some progress in talks on a trade deal, though significant differences remained.  The pound traded up 0.3% against the US Dollar and the euro at $1.2960 and 90.74 pence respectively.  The dollar and the safe-haven yen nursed losses on Thursday on revived hopes for US fiscal stimulus that improved investor sentiment.  Investors are expecting Joe Biden if elected to quickly spend money to stimulate growth, whilst President Donald Trump and House Speaker Nancy Pelosi seem open to pursue a stimulus package for the airline industry even though Trump has stopped talks with Democrats over a bigger plan.  This mood has boosted equity markets and the yen dropped to a three-week low of 106.11 whilst the dollar recouped losses against other major currencies.   The euro edged up to $1.1782 whilst the Australian dollar rose 0.3% to $0.7163. 

US Weekly jobless Claims

The number of Americans filing new claims for jobless benefits was lower last week, indicating that the US labour market is making a little headway in getting people back on the job after the disruptions caused by the COVID-19 pandemic.  The Labour Department said on Thursday that initial claims for state unemployment benefits totalled a seasonally adjusted 840,000 for the week ended 3^rd October compared to an upwardly revised 849,000 in the prior week.  Labour market gains from the reopening of businesses are fading.  The report issued on previous Friday for September was the last one before the 3 November presidential election showing the lowest number of jobs created since the labour market started recovering in May.  Nearly half of the 22.2 million people who lost their jobs in the early days of the pandemic remain out of work. 

FED Minutes

US central bankers agreed unanimously in August on a broad new approach to monetary policy, and “most participants supported providing more explicit outcome-based forward guidance for the federal funds rate” to express more the new framework, according to the minutes of the meeting held on the 15-16 September meeting released on Wednesday.  The FED adopted this approach in September with promises to keep interest rates near zero until its 2% inflation target and full employment are reached.  The minutes also showed continued worry over weak inflation globally and a more series concern that the Trump administration and Congress could fail to deliver the fiscal support many central bankers say is needed.  According to the minutes, participants during the Federal Open Market Committee deliberations also “discussed a range of issues associated with providing clarity” about the Fed’s plans, with some officials wanting a stronger promise to push inflation above 2 percent.  Several argued such promises did little to help the economy at this point. 

German Industrial Output

German industrial output dropped down unexpectedly in August, data showed on Wednesday indicating that the country’s economic recovery from the pandemic is less strong than originally hoped for.  Figures released by the Federal Statistics Office showed that industrial output dropped by 0.2% on the month.  According to the economy ministry, industrial output rose by 5.8 % in July and August compared to the previous two months, with car manufacturers reporting an unusually strong increase by 23.8 % over the two months.  The ministry added, “since the easing of lockdown measures in April, there has been an ongoing recovery since May, even if there was a slight decline in August.”  The German economy contracted by a record 9.7 % in the second quarter amid a collapse in household spending, company investments and trade.  Meanwhile, for the third quarter, the Ifo institute expects 6.6% output growth which is expected to slow to 2.8% in the fourth quarter.  

Gold

The World Gold Council (WGC) said on Wednesday, that the world’s central banks sold more gold in August than they bought ending a year and a half-long run of monthly gold accumulation and helped with halting a rapid rise in gold prices. WGC said that central banks that together hold around 35,000 tonnes of gold worth $2 trillion sold 12.3 tonnes more than they bought in August. Gold increased from just over $1,500 at the start of 2019 to a record high of $2,072.50 in early August, before dropping to around $1,900.  European and North American investors have driven the price increase building their stocks on hopes that its value will be maintained during the coronavirus pandemic.  However, demand by many jewellery buyers and central banks has been weak raising fears of the sustainability of the rally.  On Wednesday gold increased nearly 1% bouncing back from early losses and a near 2% in drop in the previous session lifted by renewed fears over an economic recovery and uncertainty around the US presidential election.  Spot gold climbed 1% to $1895.40 per ounce whilst US gold futures were down 0.4% at $1,901.60.   Gold rose on Thursday on hopes of a partial US coronavirus stimulus deal to support the economy.  Spot gold increased 0.2% to $1,891.36 per ounce whilst US gold futures were up 0.3% at $1,896.10.  Global stocks climbed on hopes for the partial stimulus deal as President Donald Trump urged the Congress to pass money for airlines, small businesses and stimulus checks for individuals on Tuesday after abruptly calling off negotiations.  Gold which is considered as a hedge against inflation climbed 24% this year following unprecedented government and central bank stimulus worldwide to boost economies. 

Oil

Oil prices dropped on Wednesday after US President Trump dashed hopes for a fourth stimulus package to boost the coronavirus hit economy.  Prices were also under pressure from a larger than expected increase in crude inventories.  Brent crude futures were down 2.3% to $41.65 a barrel and US West Texas Intermediate crude declined by 2.8% to $39.53.  Crude prices were also hit by American Petroleum Institute data showing US oil stockpiles increasing by 951,000 barrels last week.   Oil prices on Thursday increased as oil workers evacuated rigs in the US Gulf of Mexico ahead of Hurricane Delta.  Fuel demand concerns persisted as the chances of an economic stimulus deal in the United States dropped.  US West Texas Intermediate crude futures climbed 0.3% to $40.08 after falling 1.8% on Wednesday. Whilst Brent crude futures climbed 0.5% to $42.19 a barrel after dropping on Wednesday by 1.6%. 

Malta:  Inbound Tourism – August 2020

In a National Statistics Office press release dated 7^th October 2020 during the month of August a total of 107,908 inbound tourist trips were taken as a holiday while business trip amounted to 2,318. Inbound tourists coming from the United Kingdom were the most popular with a 21.7 percent of the total inbound tourists.  Total tourist expenditure was estimated at EUR 94.6 million, a decrease of 71.3% over the corresponding month in 2019.  Meanwhile, for the first eight months inbound tourist trips amounted to 533,417 a decrease of 71.2 percent over the same period in 2019.  Total tourism expenditure reached EUR 353 million, 76.4% less than recorded during the same period in 2019.    Meanwhile, total expenditure per capital stood at EUR 662, a decrease of 18.3 % when compared to the same period in 2019. 

Malta:  Direct Investment in Malta and Abroad – January-December 2019

In a press release dated 5^th October, 2020 during the year 2019 foreign direct investment (FDI) flows in Malta went up by EUR 3.3 billion.  The main contributors to total FDI flows were financial and insurance activities with a total contribution of 87.5%.  In December 2019, the stock position of FDI amounted to EUR 187.9 billion, an increase of EUR 8.5 billion over the corresponding period in 2018.  Similar to previous years financial and insurance activities accounted for 97.6% of FDI stocks in December 2019.  Meanwhile, during 2019, direct investment flows abroad amounted to a total of EUR 6.4 billion mainly in the form of claims on direct investors.  The stock position of direct investment abroad stood at EUR 59.5 billion in December 2019, down by EUR1 billon over the stock position of 2018.  Financial and insurance activities made up 99.3 percent of the total FDI abroad. 

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