“New Sanctions On Iran…”

New Sanctions On Iran

The United States has imposed new sanctions on Iran after Donald Trump signed an executive order with the sanctions targeting Iran’s US dollar purchases, metal trading, coal, industrial software and its auto sector. They also ban the import of Persian rugs and pistachio nuts into America.   The central bank of Iran has removed most currency controls introduced to stop the plunge in the rial that has weakened to 100,000 to the dollar on the black market this month.  Many European Countries, China and India oppose the sanctions but the US government said it wants as many countries as possible to stop buying Iranian oil.

Sanctions On Russia By Mid-August

Washington said it will impose more sanctions on Moscow by end-August following the nerve-attack which took place in the UK on a former Russian agent and his daughter.  The sanctions will cover sensitive national-security controlled goods.  Moscow has denied involvement and called the sanctions draconian.  On Thursday, with the news about sanctions, the average yield spread of Russian sovereign bonds over US Treasuries jumped to their highest since late June.  The ruble extended its steepest slide in almost two years.  The largest ETFs tracking Russian stocks saw trading volumes soar after the measures were announced.

US Job Growth

US Job growth slowed more than expected in July as employment in the transportation and utilities sectors fell.  A drop in the unemployment rate suggested that the labour market was tightening.  Nonfarm payrolls increased by 157,000 jobs last month according to the Labour Department.  The economy created 59,000 more jobs in May and June than previously reported and needs to generate about 120,000 jobs per month to keep up with the growth in the working-age population.  The unemployment rate fell to 3.9 percent in July, even as more people entered in their job prospects.  The jobless rate had risen in June from an 18 year low of 3.8 percent in May.  The slowdown in hiring last month is likely not the result of trade tensions but rather because of a shortage of workers.  The shortage of workers is steadily pushing up wages.

Japan

Household spending in Japan slid in June, however real wages rose at their fastest pace in more than 21 years amid higher summer bonuses, an indication that the benefits of a prolonged economic recovery are broadening.  Household income marked the fastest gain in three years on increase in temporary workers’ pay.  This is positive for Japanese policymakers who are struggling to accelerate inflation to the 2 percent target.  On Tuesday government data showed that household spending fell 1.2 percent in June from a year earlier marking the fifth month of decline.  Households’ inflation adjusted income rose 4.4 percent in June, the biggest increase since July 2015, as a tightening job market pushed up temporary workers’ pay according to data.  Furthermore, separate data showed that workers’ real wages rose 2.8 percent in June from a year earlier, accelerating from a 1.3 percent  increase in May and marking the fastest growth since January 1997.  Factory ouput fell 2.1 percent in June, marking the second straight month of decline.

Currencies

After the US jobs data was released on Friday, the dollar held firm against a basket of its peers on Monday.   US job data reinforced investor’s expectations that the Federal Reserve will gradually raise interest rates this year.  Meanwhile, investor attention has shifted to the yuan after the People’s Bank of China on Friday made it more expensive to bet against the currency.  This helped the currency to rebound from a near 15-month low against the greenback.  The pound on Monday sank to an 11 month  low on comments about Brexit  rising fears among currency investors that Britain could leave the European Union without securing a trade agreement.  There is less than eight months to go until Britain quits the EU and the government still has  yet to agree on a divorce deal with Brussels.  Investors are concerned despite that there are signs the economy is improving in some way and the Bank of England increased interest rates last week for the second time in only a decade. Last Friday, Bank of England Governor Mark Carney said the chances of a no-deal Brexit had become “uncomfortably high”.   Thursday saw the sterling extending further losses, and nearing a one year low against the dollar as investors became more nervous about Brexit without an agreement on the future relationship with the bloc.  The currency traded as low as $1.2842 which is the weakest since 25^th August 2017 and set for its biggest weekly loss since May.  Against the euro, the pound strengthened, gaining 89.975 pence up from 10-month lows touched on Wednesday.  The recent rout started after UK trade minister Liam Fox warned over the weekend that there was  a 60 percent chance of a no deal Brexit.

Turkish Lira

The Turkish lira fell to a new record low, sinking as much as 6.3 percent to 5.3837 against the dollar before paring the losses.  The main reason behind the recent selloff are the increasing tensions with the US over Turkey’s continued detention of a pastor.  The currency fell 28 percent this year amid the largest current account deficit in emerging markets.  In response to the plunge, the central bank responded by changing its rules to help commercial lenders free up their foreign exchange reserves. The lira continued to fall to a new record low of 5.449 to the dollar as investors are concerned about the outlook of the economy and the worsening relations with the US.  The situation has deteriorated so much that bankers and traders are talking about the prospect of an International Monetary Fund rescue.

Oil

On Monday oil rose after Saudi crude production unexpectedly fell in July and US drilling appeared to slow.  The price is, however still almost 10 percent below its 2018 high.  Russia, the United States and Saudi Arabia are now all producing 10 million to 11 million bpd of crude  with three countries now meeting around a third of global oil demand.  Meanwhile, US energy companies last week cut oil rigs for a second time in the past three weeks as the rate of growth has slowed over the past couple of months.   On Tuesday, oil prices continued to rise with the reimposed sanctions against Iran which is a major crude exporter and which is expected to tighten global supply.  On Wednesday oil prices slid about 3 percent as a trade dispute between the United States and China escalated further and also after Chinese import data showed a slowdown in energy demand.  US West Texas Intermediate crude futures fell $2.23 to settle at $66.94 a barrel a 3.22 percent loss, while Brent curde futures fell $2.37 to settle at $72.28 a barrel a 3.17 percent loss.  China is slapping additional tariffs of 25 percent on $16 billion worth of US imports from fuel and steel products to autos and medical equipment.

PepsiCo

PepsiCo Inc said on Monday that Indra Nooyi would step down as its longtime chief executive office handing over the company to Ramon Laguarta, who has vast international experience spanning several continents.   Laguarta will be PepsiCo sixth CEO in its 53 year history.  PepsiCo’s international operations rely less on beverages and more on snacks, an area where Nooyi is largely credited with re-shaping and expanding, as consumers shifted away from sodas and focused on healthy foods.  Nooyi will remain chairman of the board until early 2019.

HSBC

Banks were amongst the biggest losers in the Stoxx Europe 600 Index.  HSBC holdings plc posted a small increase in first-half pretax profit as rising expenses from investments in a new growth strategy and a $765 million provision against the sale of US mortgage securities ate into higher revenues.  The bank is shifting into a growth mode strategy after years of shrinking its global empire and restructuring the business.  Reported pre-tax profit amounted to $10.7 billion in the six months up to June which is up 4.6 percent for the same period last year.  There is a three year plan to invest $15 billion-$17 billion in areas such as technology and in China.

Fitch Retains Malta’s A+ Rating

Fitch ratings has affirmed Malta’s long-term foreign-currency issuer default rating (IDR) at ‘A+’ with a stable outlook.  It said that the country’s ratings reflected its high income per head compared with the ‘A’ median robust economic growth and a large net external creditor position, together with Eurozone membership.  Fitch said that Malta’s ratings were constrained by the small and highly open nature of its economy, which made it vulnerable to external shocks and its high although declining level of contingent liabilities and outsized banking sector relative to GDP.  Domestic banks’ assets accounted for 225.7% of GDP in December 2017 and Malta’s large international banking sector was not exposed to the domestic economy.  Fitch forecast that Malta will maintain a fiscal surplus of 1% of GDP in 2018 after outperforming its fiscal target in 2017 with a surplus of 3.9 percent of GDP due to large tax revenues and proceeds from the IIP program (Inidividual Investor Programme) and lower than expected capital expenditure.  Real GDP growth was set to remain robust at 5.6 percent in 2018 supported by a strong growth in public and private consumption and recovery in investment.  Unemployment declined further to 3.9% in June from 4.6% in December 2017 and compensation per employee rose 1.8% in 2017 supporting private demand.  Property prices rose 5.3% y-o-y in 2017 and advertised prices rose 11.8% boosted by strong housing demand, and low interest rates, a booming tourism sector and exemption of stamp duty for first-time buyers.

Malta: Index of Industrial Production – June 2018

In June 2018, seasonally adjusted industrial production increased by 0.3 per cent over the previous month.  When compared to June 2017, the index of industrial production adjusted for working days increased by 1.1 percent.  Increases were registered in the production of consumer goods (3.6 percent) and capital goods (0.9 percent), while the production of energy and intermediate goods went down by 1.8 percent and 1.7 percent respectively.

Malta:  International Trade – June 2018

Preliminary figures show that Malta registered a trade deficit of EUR312.1 million in June 2018, compared to a trade deficit of EUR 128.8 million in the corresponding month of 2017.  Imports increased by EUR 123.9 million while exports show a decrease of EUR 59.4 million.  The increase in the value of imports was primarily due to machinery and transport equipment while mineral fuels, lubricants and related materials accounted for the main decrease in exports.

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