Markets were eagerly waiting in the past week for news about the next level of production cuts. Meanwhile, Tuesday saw oil prices rising slightly as OPEC and its allies cut productions by more than it was agreed in June.  Concerns over oil demand persisted amid a resurgence in the number of COVID-19 cases. On Tuesday Brent crude LCOc1 futures were up 35 cents to $43.07 a barrel whilst U.S. West Texas Intermediate (WTI) crude CLc1 futures rose 34 cents to $40.44 a barrel.  Meanwhile on Wednesday, oil prices climbed by 2 percent amid a sharp drop in US crude inventories.  Also, on Wednesday the Organisation of the Petroleum Exporting Countries and its allies such as Russia (known as OPEC+) agreed to ease record oil supply curbs from August as the global economy slowly recovers from the coronavirus pandemic. OPEC+ have been cutting output since May by 9.7 million barrels per day, or 10 percent of the global supply. From August, cuts will officially taper to 7.7 million bpd until December. 

UK Economy

Figures from the office for National Statistics showed that Gross domestic product in the UK climbed 1.8 percent after a record 20.3 percent slump in April during the tightest lockdowns. As activity in the dominant service sector did not recover as expected in May, Tuesday’s data raised doubts about how much of a recovery Britain will experience after more businesses were allowed to reopen in June and July. The situation brought about by the pandemic has slashed economic output by more than a quarter over March and April, and around 9 million Britons currently have their salary paid through a government programme supporting employers hit by the pandemic, which ends in October. Last week Finance minister Rishi Sunak announced a further 30 billion pounds of funding to support the economy but has accepted that unemployment will rise.

China Posts First Import Growth since Pandemic

China’s imports in June rose for the first time since the coronavirus pandemic impacted the economy this year amid a surge in the demand for commodities on the back of government stimulus. Meanwhile exports also increased, a sign of recovery. Beijing has engaged in aggressive stimulus to support domestic demand even though a resurgence of coronavirus infections raised questions about the strength of a rebound in global economic activity. China’s imports in June climbed 2.7 percent from a year earlier, data from customs showed on Tuesday. Exports also rose unexpectedly up 0.5 percent suggesting global demand is starting to pick up again as economies started to ease the measures that have pushed the world’s economy into its biggest slump in almost 90 years. China’s economy is recovering from a sharp 6.8% contraction in the first quarter. Recovery is still slow amid fragile global demand from the restrictions and the resurgence of coronavirus cases. 

Trump Ends Preferential Status for Hong Kong

On Tuesday President Donald Trump ordered an end to Hong Kong’s special status under U.S. law to punish China for what he called “oppressive actions” against the former British colony, prompting Beijing to warn of retaliatory sanctions. Citing China’s decision to enact a new national security law for Hong Kong, Trump signed an executive order that he said would end the preferential economic treatment for the city. In a news conference Trump said, “No special privileges, no special economic treatment and no export of sensitive technologies”. Furthermore, he signed a bill approved by the US Congress to penalize banks doing business with Chinese officials who implement the new security law. Trump also said, “Today I signed legislation, and an executive order to hold China accountable for its aggressive actions against the people of Hong Kong.” “Hong Kong will now be treated the same as mainland China,”, Trump said. Meanwhile, China’s foreign ministry said on Wednesday that Beijing will impose retaliatory sanctions against US individuals and entities in response to the law targeting banks. 

Market Roundup

Monday saw Italian 10-year government bond yield rise to its highest in over a week as investors took a cautious stance ahead of a European Union summit to be held at the end of the week. Investors are hoping the EU 27 will proceed with the EURO 750 billion COVID-19 recovery fund. Long-dated US Treasury yields also increased as the increase in stocks reflected improving risk sentiment. Markets moved in support of the fund, where most of it is to provide grants to the worst hit states such as Italy, sending the country’s debt rallying in recent weeks. However, some states such as the Netherlands and Austria oppose the grants. On Friday European Council President Charles Michel offered a proposal to make the fund more pleasing. Although the move was welcomed, more work was needed. Netherlands said it would seek guarantees on budget reforms during negotiations this week. Also, on Monday, Wall Street’s main indexes opened higher and the Nasdaq reached a fresh intraday record high as investors embraced signs of progress in COVID-19 vaccine development and an upbeat start to the second-quarter earnings season. Meanwhile, results from big banks were in focus this week. Investors were bracing for what could be the sharpest drop in quarterly earnings for the S&P firms since the financial crisis, according to IBES Refinitiv data. The S&P 500 is about 6% below its own record high hit in February.  Technology.SPLRCT, healthcare .SPXHC and consumer discretionary .SPLRCD rose the most among the 11 major S&P sectors. Also, on Monday, European shares were in positive territory as markets turned to the earnings season, expecting most U.S. companies to beat forecasts as the bar has been set low. On Tuesday Asian stock markets slipped amid Sino-US tensions and a fresh of coronavirus restrictions in California that impacted investor’s optimism. Japan’s Nikkei retreated from a one-month high touched on Monday, dropping 0.9%, while Chinese stocks were down despite better-than-expected trade numbers. Tensions grew between the US and China as the US on Monday rejected China’s disputed claims to offshore resources in most of the South China Sea. Meanwhile, the Trump Administration also plans on scrapping a 2013 auditing agreement that could foreshadow a broader crackdown on U.S.-listed Chinese firms.  Japanese shares ended lower as investors took profits after a sharp gain in the previous session, whilst semiconductor and other high-tech firm’s stocks took a plunge after the drop on the NASDAQ. On Wednesday, US stocks climbed with the S&P 500 approaching its highest level in more than four months on news for a possible COVID-19 vaccine.  Moderna Inc MRNA.O surged 9.2% after a small-scale study showed its experimental COVID-19 vaccine produced high levels of virus-killing antibodies. Meanwhile, travel-related stocks such as Carnival Corp CCL.N, Royal Caribbean Cruises Ltd RCL.N, Marriott International MAR.O and Wynn Resorts WYNN.O rose between 7% and 20%, with the S&P 1500 airlines index .SPCOMAIR was up 10.0%.  The S&P 500 was on track to beat the technology-heavy NASDAQ Composite for a fourth straight session. Emerging Market stocks bounced back on the hopes of a vaccine.  Meanwhile, eurozone bond yields held steady in early trading on Wednesday as the focus remained on Thursday’s European Central Bank’s meeting and the European Union Summit on Friday. 

Currency Roundup

On Monday the British pound was close to its 200-day moving average of $1.27 against the dollar whilst against the euro the pound fell 0.5 percent to 89.98 pence not far from its 55-day moving average of 89.30, failing to break the 90 pence level. Improved risk sentiment and the huge fiscal stimulus by the British government attracted investor’s attention to the pound, rising by nearly 2 percent so far this month. Investors are still minded about Britain’s imminent exit from the European Union. On Tuesday a firm dollar put pressure on the Aussie and kiwi. Wednesday saw risk sentiment upbeat in currency markets amid signals of progress towards a COVID-19 vaccine and a rebound in Wall Street equities on Tuesday that pushed commodity currencies higher and the dollar to a one-month low. Meanwhile sterling fell below $1.25 for the first time in a week and reached a 14-day low against the euro after data showed Britain’s economy was recovering more slowly than forecast. The pound was dragged up by a weaker dollar and an improvement in risk sentiment on Wednesday but traded flat against the euro.  The pound reached $ 1.2610 and remained steady against the EURO at 90.75 pence. 

Malta: International Trade in Goods: May 2020

Provisional figures for registered trade in Malta recorded a trade deficit of €291.5 million during May 2020, compared to a deficit of €237.0 million in the corresponding month of 2019. Meanwhile during the first five months of this year, the trade deficit narrowed by €746.8 million when compared to the corresponding period of 2019, reaching €1,010.4 million.  Imports and exports decreased by €857.0 million and €110.2 million respectively. Lower imports were mainly in machinery and transport equipment (€665.2 million) and mineral fuels, lubricants and related materials (€109.7 million). On the other hand, mineral fuels, lubricants and related materials (€98.0 million) accounted for the main decrease in exports. Imports from the European Union reached €1,126.3 million, or 48.8 per cent of total imports.

Malta: Registered Full Time Employment – December 2019

A press released by the National Statistics Office and data provided by Jobsplus, showed that in December 2019, the supply of labour increased by 6.2 percent reaching 227,345 amid a year-on-year increase in the full-time registered employment and a decline in registered unemployment.  Comparing December 2019 to December 2018, the increase in employment was attributed to administrative, support service activities and construction by 2,368 and 2,137 persons respectively. Meanwhile, registered full-time employment in the private sector increased by 12,249 persons to 176,930 whilst public sector full-time employment increased by 1,086 persons to 48,773. 

Antonella Mercieca

Client Relationship Manager


Reuters, https://nso.gov.mt/


July 16th, 2020

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