“Market Wrap…”

European stocks dropped more than 2% on Monday amid a global sell-off in equities, with investors worrying about the impact of tighter pandemic curbs on the economy as cases of the Omicron COVID-19 variant surged.  The pan-European STOXX 600 was down 2.2% falling to its lowest in more than two weeks.  Travel, oil and auto stocks led the decline with losses of more than 3%.  The Netherlands imposed a lockdown on Sunday, while the prospect of tighter COVID-19 measures is not excluded in other European countries in view of the spread of Omicron.  Meanwhile, futures that track the S&P 500 dropped 1.8% after US Senator Joe Manchin, a moderate Democrat who is key to President Joe Biden’s hopes of passing a $1.75 trillion domestic investment bill said on Sunday that he would not support the package. The US stock index futures tumbled more than 1% on Monday, dragged by concerns about the impact of tighter restrictions on the global economy, as Omicron spreads pointed to a lower Wall Street open. The latter closed lower, as the Dow Jones Industrial Average dropped by 1.23% to 34,932.16, the NASDAQ closed lower by 1.10% to close 15,627.64 and S&P 500 closed 4,568.02 lower by 1.14%.  European markets also closed lower as the CAC 40 closed downwards by 0.816% to 6,870.10 and the DAX closed lower by 1.88% to reach 15,239.67.  The FTSE 100 closed lower by 0.99% to 7,198.03.  

On a different note, Germany’s 10-year Bund yield dropped to its lowest level in almost two weeks on Monday, whilst the demand for safe-haven assets increased amid surging Omicron.  Yields on German 10-year bonds, which is considered as one of the safest assets in the world, dropped to -0.402% the lowest level since 8 December.  Meanwhile, other benchmark yields in the single currency bloc, were slightly lower on the day, while the US 10-year Treasury yield was down 3 basis points in London at 1.36%. 

Asian shares advanced on Tuesday after Wall Street’s drop and as Chinese markets cheered Beijing’s move to help troubled property firms.  Japanese equities closed sharply higher on Tuesday with tech heavyweights recovering from a two-day decline.  Omicron coronavirus variant remained a worry for investors.  European markets appeared set to a higher open with the pan-region Euro Stoxx 50 futures up 1.1%, German DAX futures rose 0.93% while the London’s FTSE futures added 1.02%.  In the US markets edged higher with the Dow Jones Industrial Average closed higher by 1.6% to 35,492.7, the NASDAQ closed higher by 2.29% to close at 15,986.28 and the S&P 500 closed higher by 1.78% to close at 4,649.23.  Meanwhile, European markets closed higher with the CAC 40 closing higher by 1.381% to close at 6,964.99, the DAX reached 15,447.44 lower by 1.363% and the FTSE 100 closed lower by 1.38% to close at 7297.41. 

Wednesday saw the Dow Jones Industrial Average closing higher by 0.74% to close at 35,753.89, the S&P 500 closed higher by 1.02% to close at 4,696.56 and the NASDAQ 100 closed higher by 1.21% at 16,180.14.  Meanwhile in Europe, CAC 40 closed higher by 1.24% to close at 7,051.67, the DAX closed at 15,593.47 higher by 0.95%, whilst the FTSE 100 closed higher by 0.61% to close at 7,341.66.  Markets continued to rebound from three days of losses on fears of the Omicron COVID-variant.   

On Thursday global shares extended the recent rally while safe-haven bonds and currencies eased as markets welcomed signs that the Omicron variant of COVID-19 might be less severe than was feared. The STOXX Index of Europe’s 600 largest shares rose 0.3% following earlier gains in Asia. 

Currency Roundup

The dollar traded near its highest point in 17 months against major peers on Monday after FED officials indicated that the first pandemic-era interest rate rise could come as early as March.  Meanwhile the euro dropped with sterling after the Netherlands went into lockdown on Sunday and the UK’s health minister declined to rule out further restrictions before Christmas amid the rapid spread of the Omicron coronavirus variant.  Dollar touched its highest levels since 15 December against the Euro, sterling and the Australian dollar, however it slipped against the yen, whilst remaining near the middle of the trading range of the past three weeks.   The dollar softened a little on Tuesday on improving market sentiment for risky assets and currencies, extending its overnight losses after a blow to Democratic spending plans in Washington.  The dollar index which measures the currency against six major peers, dropped to as low as 96.45.  The euro inched higher to $1.1282 and the safe-haven yen lost some ground to 113.7 per dollar, both moves keeping with Tuesday’s gains in Asian equities, US share futures and oil.  The dollar is still strong, having approached 16-month highs at 96.914 last week, after the US Federal Reserve opened the door to as many as three interest rate increases in 2022.  On Wednesday sterling steadied against the dollar and climbed higher against the euro despite official data showed a slower growth of the British economy than previously expected.  Against the euro, sterling was up 0.1% to 84.95 per euro. 

German Consumer Morale

German consumer morale is expected to deteriorate further at the beginning of the year amid the Omicron coronavirus variant that darkened the economy’s outlook, showed a survey on Tuesday. The GfK institute said its consumer sentiment index, based a survey of around 2,000 Germans, dropped to -6.8 points heading into January from a revised -1.8 points a month earlier.  The January reading was the lowest since June.  Germany banned unvaccinated people from entering non-essential establishments at the beginning of the month in an attempt to control rising cases amid the spread of the Omicron variant.  The consumer climate indicator forecasts the development of real private consumption in the following month.  An indicator reading above zero indicates a year-on year growth in private consumption.  A value below zero indicates a drop compared to the same period a year ago.  According to GfK, a one point change in the indicator corresponds to a year-on-year change of 0.1% in private consumption. 

UK Retail Sales Growth

British retail sales growth dropped sharply in the first half of December on concerns about the Omicron variant that kept shoppers at home, according to a survey.   The Confederation of British Industry’s gauge of sales volumes which asks retailers how sales compare with a year ago- slumped to +8 in December from +39 its lowest reading since non-essential shops were in lockdown in March.

UK Economy

The UK economy grew more slowly than previously thought in the July to September period, before the Omicron variant of the coronavirus posed further threat of recovery later in the year, showed official data on Wednesday.  Gross domestic product in the UK increased by 1.1% in the third quarter.  That was slower than the economy’s 5.4% bounce back in the second quarter when many coronavirus restrictions were lifted, said the Office for National Statistics.  The level of GDP was 1.5% below where it was at the end of 2019, revised up from the previous estimate of 2.1% below its pre-pandemic level. 

Oil

Oil prices slumped by $2 on Monday amid the surging Omicron cases in Europe and the US that could hit the demand for fuel.  Brent crude dropped by 2.7% to $71.51 a barrel while US West Texas Intermediate crude futures were down by 3.1% to close at $68.66.  Meanwhile, US energy companies this week added oil and natural gas rigs for a second week in a row. China’s crude oil imports from Saudi Arabia in November dropped 13% from a year earlier, however Saudia Arabia kept its ranking as the top supplier to China.  Data from the General Administration of Customs showed on Monday that inflows of Saudi Arabian oil to China reached 7.4 million tonnes last month or 1.8 million barrels per day (bpd).  This compares with 1.67 million bpd in October and 2.06 million bpd in November last year.  The increase in the month-on-month imports were in line with July’s OPEC+ decision to increase output by 400,000 bpd a month until at least April 2022. Oil prices rebounded on Tuesday after a sharp drop in the previous session as investors’ appetite for risk improved, however they remained cautious amid the rapid spread of the virus. Moderna Inc on Monday said that a booster dose of its COVID-19 vaccine appeared to be protective against the fast-spreading Omicron variant in laboratory testing, providing some hope to investors.  Brent crude was up 1.2% at $72.36 and US West Texas Intermediate crude climbed 1.4% to $69.56 a barrel.

Gold

Gold prices firmed on Tuesday amid a dip in the Dollar and risks that impacted global economic growth from a surge in the Omicron variant cases that raised the appeal of the bullion as a safe haven.  Spot gold was up by 0.4% at $1,795.70 per ounce and US gold futures gained 0.2%  to $1,797.90.  Gold is often considered a hedge against inflation but interest rate hikes may curb inflationary pressures while also reducing the appeal on non-yielding gold.  Gold prices were stuck in a narrow trading range on Wednesday.  Business investment dropped by 2.5% in the third quarter from the previous three months and was nearly 12% below its pre-pandemic level.  Britain balance of payments deficit widened to 24.4 billion pounds as goods exports fell, goods imports grew and foreign companies received more income from their investments in the UK. 

Malta:  Retail Price Index

In a press release dated 20 December, 2021, it was stated that in November, 2021 the annual rate of inflation as measured by the RPI was 2.38%, up from the 2.31% in October, 2021.  The largest upward impact on annual inflation was measured in the Food Index (+0.97%).

Malta:  Inbound Tourism – October 2021

A press release dated 20 December, 2021 shows that in October a total of 163,573 inbound tourists visited Malta for holiday purposes, whilst 9,199 tourists for business purposes.  Total tourist expenditure exceeded EUR 156.6 million with the average expenditure per night was estimated at EUR 114.6.  Meanwhile, inbound tourists for the first time in ten months of 2021 amounted to 765,215, an increase of 21.3% over the same period in 2020.  Total tourism expenditure was estimated at EUR 823.3 million, an increase of 68.7% when compared to the same period in 2020.  Total expenditure per capital stood at EUR 945, increasing from EUR 680 in the same period in 2020 as a result of longer length of stays. 

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