“Oil …”


Prospects that supply would outstrip demand for oil for several months resulted in two of the wildest oil trading days in history this week. U.S. West Texas Intermediate crude futures closed at negative $37.63 a barrel on Monday, in the worst sell-off for that contract in history whilst the global benchmark Brent crude was slammed on Tuesday, hitting a two-decade low before rebounding. On Monday oil collapsed as storage filled at the delivery point for the contract in Oklahoma. With nowhere to put the oil, no one wanted to buy into expiring May contracts and keep the actual crude oil. Global oil use dropped due to the coronavirus pandemic that created a supply glut and a shortage of storage capacity. Brent crude futures plunged 25 percent on Tuesday to the lowest in nearly two decades, a day after the US oil was minus $40 per barrel. US crude oil bounced back into positive territory on Tuesday after a historic plunge below zero that moved Asian stock markets to the steepest drop in a month. On Wednesday Brent crude oil rose after slumping below $16 a barrel to its lowest since 1999. Oil climbed on Thursday extending its rebound after major oil-producing nations said they would accelerate planned production cuts to combat the dramatic slump in demand due to pandemic.

Europe’s Economic Activity

The coronavirus has infected more than 2.57 million people globally and killed over 178,000. Economic activity in the euro zone has moved to a halt this month amid the coronavirus that has forced governments to introduce lockdown measures and firms had to shut down their businesses, showed a survey on Tuesday. The IHS Markit’s Flash Composite Purchasing Managers’ Index (PMI) which is seen as a good gauge of economic health, dropped to 13.5 which is the lowest reading since the survey began in mid-1998. As countries began to shut down last month the index staged its biggest one-month fall on record in March moving below the 50 mark that separates growth from contraction to 29.7. IHS Market’s chief business economist said that, “April saw unprecedented damage to the euro zone economy amid virus lockdown measures coupled with slumping global demand and shortages of both staff and inputs.” Whilst demand dried up this month, headcount was reduced at a record pace and firms cut prices at one of the steepest rates since the survey began. Meanwhile, the flash services PMI sank to a new record low of 11.7 from 26.4. A new business index dropped to a record low of 11.6 from 24.0. April is also proving to be a gloomy month for Europe’s factories. The preliminary manufacturing PMI dropped to a survey low of 33.6 from March’s 44.5. An index measuring output, which feeds into the composite PMI, more than halved to 18.4 from 38.5. Demand was barely existent and with many of their factories closed, manufacturers cut staffing levels sharply. The employment sub-index fell to 35.7 from 44.3, its lowest since April 2009, around the start of the euro zone debt crisis.


Measures to limit the spread of the coronavirus pandemic such as shutting businesses took their toll on the British economy, as the country is expected to be in its worst recession in 300 years. Employers have put 1 million staff on temporary leave, finance Rishi Sunak said on Monday, reporting a flood of applications to a government programme subsidising workers’ wages. Government budget forecasters last week said that unemployment could rise as high as 10 percent with an extra 2 million people losing their jobs if the lockdown was only lifted over the next three months. Meanwhile, IHS Markit Flash UK Composite Purchasing Managers’ Index (PMI) fell to a new record low of 12.9 from 36 in March. This shows the huge contraction in the world’s fifth-largest economy and adds doubt about whether the financial help from the government has reached businesses quickly enough.

US: Treasury Supports Airlines

Air carriers have been badly affected by the coronavirus pandemic as the demand for US travel dropped by 95 percent. On Monday the US Treasury Department disbursed $2.9 billion in payroll assistance to 54 smaller passenger carrier and two major passenger airlines, while grant agreements were finalised with six major airlines. The Treasury is giving US passenger airlines $25 billion in funds earmarked for payroll costs. Major airlines have to repay 30 percent of the funds in low-interest loans and grant Treasury warrants equal to 10 percent of the loan amount, while airlines receiving $100 million or less do not need to repay any funds or issue warrants to the government. On Monday Treasury said that grant agreements were finalised with Allegiant Air, American Airlines Goup Inc, Delta Airlines Inc, Southwest Airlines Inc, and United Airlines Holdings Inc. Separately, Treasury said Alaska Airlines, Frontier Airlines, Hawaiian Airlines, JetBlue Airways Corp and SkyWest Airlines had also indicated that they planned to participate. The 12 major airlines represent nearly 95% of U.S. airline capacity. The airlines receiving funds cannot make employees redundant before 30 September or change collective bargaining agreements and must agree to restrictions on buybacks, executive compensation and dividends. The Treasury is still considering how to award $4 billion in payroll assistance to cargo carriers and $3 billion to airport contractors like airplane caterers. According to the International Air Transport Association last week, Global airline losses from the coronavirus pandemic are estimated at $314 billion, 25% more than previously forecast.

US Senate Approves nearly $500 billion in Aid

US Senate on Tuesday approved another $484 billion in relief which had to pass through the House of Representatives on Thursday bringing the total of funds approved by the crisis to nearly $3 trillion. The Republican-led Senate passed the legislation which went for approval at the House where President Donald Trump will quickly sign it into law. The U.S. House of Representatives on Thursday overwhelmingly approved a $484 billion coronavirus relief bill. The aid will provide funds to small businesses, and hospitals struggling with the economic situation from the pandemic.

US Record Jobless Claims

A record of 26 million Americans sought unemployment benefits over the last five weeks, confirming that all the jobs created during the longest employment boom in the US history were wiped out in about a month amid the coronavirus pandemic. According to the Labour department on Thursday, 4.427 million more people applied for unemployment benefits for the first-time last week, down from a revised 5.237 million the week before. The latest data brings the cumulative unemployment benefits claims to more than 26 million since the week ending 21 March, representing about 16 percent of the labour force. The economy created 22 million jobs during the employment boom which started in September 2010 and ended in February of this year.

Market Wrap

On Monday Wall Street fell as energy stocks took a hit from the crash in oil prices and investors bracing a week for earnings reports. The Dow Jones industrial Average and the S&P also dropped at the opening and closed lower for the day. Tuesday saw the MSCI broadest index of Asia Pacific shares outside Japan losing 2 percent, same for the Nikkei 225, Eurostoxx 50 futures, and FTSE futures, while bonds and the dollar rose. Meanwhile, those seeking safe assets pushed down US Treasury yields on Tuesday with the five-year note hitting a new record low as the difficulties to restart the US economy amid the COVID-19 continued. The benchmark 10-year yield was down 8 basis points in morning trading at 0.5456 percent, whilst the five-year note sank at one point hitting 0.301 percent, its lowest ever. Also, the two-year US Treasury yield which moves in line with interest rate expectations was down 1.5 basis points at 0.1873 percent. The US stock index futures were down due to gloomy quarterly earnings reports and the oil prices trend. Meanwhile, the oil crash sent traders looking for safety and investors awaited a key European summit to be held later in the week. The selling pressure on Italian government bonds returned in the past week offsetting the benefits from the ECB bond buying scheme after the EU politicians failed to agree to jointly issued debt. The spread between the Italian and German 10-year yields rose to 246 basis points, also the highest since then. Although there is a wave of new issuances hitting the market as governments increased borrowing, demand remains strong. The 10-year German bond yield dropped 5 basis points to -0.495 percent. The April reading for the German sentiment ZEW survey was far more optimistic than expected, suggesting that business morale had improved since March. The reading was however, ignored by the market. Italian yields dropped on Wednesday but remained at levels seen before the ECB’s emergency bond purchases began in mid-March as risk appetite improved across markets. Meanwhile the Italian government is seeing the country’s ratio of debt to gross domestic surging by 155 percent to 159 percent this year, compared with nearly 135 percent at the end of last year. On Wednesday the gap between the Italian and the German 10-year yield stood at around 260 basis points. On the same day, US stocks opened higher after a two-day selloff as upbeat quarterly earnings reports lifted the negative sentiment from the oil crash. Companies have however warned of more pain in the coming months. The Dow Jones Industrial Average rose 1.82 percent at the open, whilst the S&P opened higher by 1.88 percent. The NASDAQ Composite gained 2.07 percent to 8434.55. The benchmark S&P 500 is still below its 19 percent record high amid the shutdowns and the crushed consumer spending placing many sectors at the risk of collapse. Spanish and Portuguese bonds underperformed on Wednesday as markets looked to absorb a heavy level of supply with more governments selling debt to fund coronavirus stimulus programmes. However, those countries that have been the hardest hit from the coronavirus in Europe have to pay a premium to entice investors to take on more debt than they did before the pandemic started.

Currency Roundup

The pound fell slightly against a strong dollar in early trading on Tuesday, hitting a 12-day low as better than expected UK unemployment data had little impact on economic sentiment. China’s yuan eased to a 2 ½ week low against a buoyant dollar on Tuesday, as investors fled to safety after crude prices turned negative for the first time in history. Furthermore, the strength of the dollar amid safety flows and the health of the North Korean leader Kim Jong Un added more pressure on the Chinese currency. The dollar rose on Tuesday against major currencies as investors searched for haven after the plunge in oil prices the day earlier. Oil-linked currencies such as the Norwegian crown and the Canadian dollar were Tuesday’s worst performing currencies, along with the Swedish crown which is very sensitive to global economic stability. The Norwegian crown fell to a near one-month low of 10.662 against the US Dollar and was last down 2.2 percent on the day. The Canadian dollar fell to a three-week low of $1.4265. The Swedish crown was down 0.5 percent at 10.08 SEK. On Wednesday, the yuan edged off its lowest against the dollar in over two-weeks, as investors expected China to roll out a massive stimulus package soon to cushion the economic slowdown. On Wednesday the dollar fell slightly erasing some of the previous day gains. Safe-haven currencies have however remained in demand even though markets began to stabilise while oil prices recovered from the slump. Against a basket of currencies, the dollar was down 0.2 percent but was still up around 0.4 percent on the week sought by investors amid market turmoil. The Japanese yen maintained its gains from the past week versus the dollar, up around 0.1 percent. The euro remained within its range bound before an EU meeting on Thursday to discuss financial aid in the eurozone, trading at $1.08710 level. On Thursday the pound was flat before the release of the preliminary UK PMI data for April, while strengthened after the release. The dollar continued to climb as it has done in the week, after the US government promised more aid.


On Monday China cut its benchmark lending rate as expected to reduce borrowing costs for companies and help the economy hit by the coronavirus as it contracted for the first time in decades. China’s sate planner on Monday said that it has plenty of room for manoeuvre in its macroeconomic policy to cushion against the impact of the coronavirus.

Malta: Registered Unemployment – March 2020

In March, the number of persons registering for work stood at 2,125, increasing by 19.9 per cent when compared to the corresponding month in 2019. According to Jobsplus for March 2020 indicates a year-on-year increase of 309 persons registering under Part I and an additional 44 persons registering under Part II of the unemployment register. Registered unemployment levels increased across all age groups. The number of persons with a disability who were registering for work increased by 20 when compared to the previous year, reaching 239. The largest share of males and females on the unemployment register sought occupations as clerical support workers, with 20.0 per cent and 39.0 per cent respectively.

Malta: Harmonised Index of Consumer Prices (HICP): March 2020

In March 2020, the annual rate of inflation as measured by the Harmonised Index of Consumer Prices (HICP) was 1.2 per cent (February 2020: 1.1 percent). The largest upward impact on annual inflation was measured in the Food and Non-Alcoholic Beverages Index, while the largest downward impact was recorded in the Furnishings, Household Equipment and Routine Household Maintenance Index.

Antonella Mercieca

Client Relationship Manager


Reuters, https://nso.gov.mt


April 24th, 2020

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