“Oil…”

Oil prices on Monday rose by 2% their highest in over a year, with Brent reaching past $60 a barrel and boosted by supply cuts among key producers and the hopes of further US economic stimulus.  Brent and West Texas Intermediate have increased by more than 60% boosted by supply cuts among key producers and hopes for further US economic stimulus.  Oil prices reached their seventh straight session of gains for both benchmark contracts on Tuesday hitting their highest since late January 2020 as the supply cuts by major producers and optimism over a recovery in fuel demand support the energy markets.  Brent crude futures for April gained 0.7% to $60.7 a barrel while US West Texas Intermediate crude for March was at $58.25 a barrel up 0.5%.  Besides the cuts by OPEC and their allies, top exporter Saudi Arabia is cutting down supply in February and March.   Oil prices dropped on Thursday amid the renewed lockdowns and the emergence of new virus variants that weighed on the prospect of a swift demand recovery.  Brent crude dopped 0.7% to $61.03 a barrel while US West Texas Intermediate crude lost 0.7% to $58.26.  Producer group OPEC said on Thursday that world oil demand in 2021 will rebound more slowly than previously thought.  Meanwhile, the International Energy Agency (IEA) said that global oil supply is still outstripping demand because of COVID-19 lockdown and the spread of the virus variants. In its monthly report OPEC said that demand will rise by 5.79 million barrels per day this year to 96.05 million bpd, reducing its growth forecast by 110,000 bpd from a month ago. In its report OPEC said, “while the global economy is showing signs of a healthy recovery in 2021, oil demand is currently lagging, but is forecast to pick up in the second half of 2021.”.  The IEA said, “the forecasts for economic and oil demand growth are highly dependent on progress in distributing and administering vaccines and the easing of travel restrictions in the world’s major economies”.

UK Economy suffers record Slump

The UK Economy shrank 9.9% in 2020 the biggest annual drop in output since modern records began, however it avoided heading back towards recession at the end of last year.  Official figures on Friday showed gross domestic product (GDP) grew 1% between October and December. In December, the UK economy grew 1.2% after a 2.3% fall in output in November when there was a partial lockdown in place, leaving output 6.3% lower than in February before the start of the pandemic, said the Office for National Statistics.  Meanwhile the Bank of England forecasts the economy will shrink by 4% in the first three months of 2021 due to a new lockdown and disruptions due to Brexit.

Eurozone Growth in 2021

The eurozone economy will rebound less than it was expected amid a second wave of the pandemic that placed the economies in new lockdowns, said the European commission.  It further added that 2022 growth will be stronger than earlier thought.  The Commission forecast that economic growth in 19 countries sharing the euro would be 3.8% this year and the same in 2022, rallying from a 6.8% drop in 2020. With the lockdowns in place the eurozone economy will contract again in the first quarter of 2021 after shrinking in the last three months of 2020.  The Commission added that activity is to pick up moderately in the second quarter and more vigorously in the third, led by private consumption with additional support from global trade as the vaccination campaign accelerates.  Consumer price growth is to accelerate closer to the European Central Bank’s goal of below but close to the 2% over the medium term, said the Commission.  It forecasts inflation for 2021 and 2022 at 1.4% and 1.3% respectively up from 0.3% in 2020. 

Germany

German exports rose in December amid solid trade with China and the US as the economy struggled to grow under the restrictions of the lockdowns.  Seasonally adjusted exports edged up 0.1% on the month after an increase of 2.3% in November said the Federal Statistics Office on Tuesday.  Imports dropped 0.1% after an increase of 5.4% in the previous month.  Whilst the trade surplus expanded to 16.1 billion euros, in 2020 the surplus dropped for a fourth year. The Office added that in December exports to China increased by 11.6% on the year whilst in the US exports climbed by 8.4%.  Meanwhile whilst trade with China and the US was robust, it was weak from Britain. Exports to the UK dropped by 3.3% in December while imports from the UK fell by 11.4%.  Germany’s DIHK Chambers of Industry and Commerce said that Britain’s Departure from the European Union was having a negative impact on German-British business and a trade agreement could only partly compensate for the downturn.

US Inflation

US consumer prices rose moderately in January as higher gasoline prices were weakened by a slump in airline fares due to the pandemic.  The report from the Labour Department on Wednesday showed that the underlying consumer prices were unchanged for a second straight month.  Federal Reserve Chair Jerome Powell said, “as the economy re-opens we may see a burst of spending… there could be some upward pressure on prices there, again though, my expectations would be neither large nor sustained.” The consumer price index rose 0.3% last month after gaining 0.2% in December.  In the 12 months through January the CPI increased 1.4% after climbing 1.3% in December.  Gasoline prices climbed 7.4% in January accounting for most of the increase in the CPI, after rising 5.2% in December.  Meanwhile food prices increased by 0.1% but the cost of food consumed at home dropped 0.1% while food consumed away from home increased 0.3%.  Excluding the volatile food and energy components the CPI was unchanged for a second consecutive month as it was restrained by a 3.2% plunge in the cost of airline tickets.  This offset the increase in the prices of health care, motor vehicle insurance and tobacco. 

US Weekly Jobless Claims Edged Down

The number of Americans filing new applications for unemployment benefits dropped down last week.  Initial claims for state unemployment benefits amounted to a seasonally adjusted 793,000 for the week ended 6 February, compared to 812,000 in the prior week said the Labour Department on Thursday.  Claims however, remained above their 665,000 peak during the 2007-2009 Great Recession.  They are however well below the record 6.867 million reported last March when the pandemic hit the US. 

First Call between the leaders of the US and China

US President Joe Biden and his Chinese counterpart Xi Jinping held their first telephone calls with Biden saying that a free and open Indo-Pacific was a priority, and Xi warning confrontation would be a “disaster” for both nations.  He further added that the two sides should avoid misjudgements according to the Chinese foreign ministry’s account of the call that took place on Thursday morning. Xi kept a hard-line tone regarding Hong Kong, Xinjiang and Taiwan, which Xi told Biden were matters of “sovereignty and territorial integrity” that he hopes the US will approach cautiously. 

Bitcoin

Monday’s increase after Tesla’s announcement was the largest daily increase in more than three years. Bitcoin extended the gains on Tuesday to a record high as Tesla’s investment in the cryptocurrency made investors think it would become mainstream asset class.  Bitcoin climbed to a new peak of $48,216 late in the Asian afternoon on Tuesday.  Meanwhile, shares of companies that provide trading platforms for bitcoin and the technology to mine the cryptocurrency surged in China, South Korea and Australia.    Bitcoin surged to new record high after BNY Mellon said it will offer custodian services for cryptocurrencies. 

Market Wrap

European shares rose on Monday led by cyclical sectors as sentiment was lifted by hopes of a faster recovery and multi-billion dollar deals in the region.

European shares dipped on Tuesday as the recent rally encouraged by hopes of a swifter global economic recovery and vaccine roll-outs showed signs of cooling.  Early trading showed European defensive sectors including food & beverage, personal, household and healthcare amongst top gainers. Germany’s DAX index was down 0.2% as data showed German exports rose in December as robust trade with China and the US helped.  Wall Street’s main indexes were set to slip from record highs on Tuesday following disappointing quarterly earnings reports, while investors closely focused on the progress of the proposed $1.9 trillion stimulus plan.    

European shares ended lower on Wednesday as Wall Street’s retreat from record highs dragged Europe down from an early rise on upbeat earnings reports from firms. Wall Street’s main stock indexes slipped after hitting record highs at the open.  The tech heavy NASDAQ Composite slid 0.4% after achieving some gains. Technology stocks led losses in Europe, posting their worst session in two weeks.  

European shares edged higher on Thursday as investors kept a close eye on the earnings reports from companies for clues on the pace of business recovery.  The STOXX 600 is about 5% below its peak of February 2020 after a rally of about 50% since it crashed in March helped by historic monetary and fiscal stimulus.  European healthcare stocks were up 0.5% while technology stocks added 1% and were among the top sectoral gainers. The banks sector dropped 0.5% as Germany’s Commerzbank tumbled 5.3% after the lender said its loss deepened in the fourth quarter.  Shares in North American Cannabis firms were heading for new highs on Thursday with retail investors inspired by Reddit betting that they could beat the short sellers and benefit from new legislation that is expected under US President Joe Biden.  US Vice President Kamala Harris said in the presidential campaign marijuana would be decriminalised at a federal level in the US under Biden administration. 

Asian shares traded just below a record high on Friday as mixed US economic day caused some investors to show some restraint.  European shares edged lower on Friday as investors waited for more indications on the progress of US stimulus measures. 

Currency Roundup

Sterling hit its highest level against the dollar since April 2018 and traded just below eight-month highs against the euro on Tuesday.  Sterling hit $1.3788 against the dollar in early trading in London, its highest level against the greenback since 30 April 2018.  Against the euro it traded down 0.15% at 87.8 pence.  Analysts have noted that Britain’s COVID-19 vaccine rollout has been swifter in comparison to Europe.  Sterling has also been helped by the Bank of England which at its meeting last week pushed back at market expectations of negative interest rates. 

On Tuesday the dollar struggled at a one week low as traders were disheartened about the prospects for the dollar against the backdrop of a large US fiscal stimulus package.

On Thursday sterling traded 0.14% lower to the dollar at $1.3815 after having hit a high of $1.3865 the previous day. Against the euro it was 0.14% lower at 87.73 pence.  The rally above the $1.38 this week made sterling the best performing G10 currency of 2021, up 1.1% against the dollar and nearly 2% against the euro. The dollar fell during a quiet Asian session on Thursday after softer than expected US inflation data for January and a reiteration of the FED dovish policy stance. 

Malta:  Index of Industrial Production – December 2020

In a press release dated 8th February the National Statistics Office shows that in December 2020, the seasonally adjusted index of industrial production increased by 0.7%.  Production increases were registered across all the main industrial groupings mainly energy, capital goods, consumer goods and intermediate goods.  When compared to December 2019, the working-day adjusted index of industrial production went down by 4.2%.  Decreases were registered in the production of energy, consumer goods and capital goods.  Meanwhile intermediate goods increased. 

Malta:  International Trade in Goods – December 2020

In a press release dated 9 February 2021, the National Statistics Office said provisional figures for registered trade in Malta recorded a trade deficit of EUR 101.5 million during December 2020 compared to a deficit of EUR 37.7 million in the corresponding month of 2019. Both imports and exports registered decreases of EUR 101.8 million and EUR 165.6 million respectively in comparison to the same month of 2019.  Major declines in the value of imports was recorded for mineral fuels, lubricants and related materials.  On the exports side, the main decreases were registered in mineral fuels, lubricants and related materials and food. Meanwhile, during 2020 the trade deficit narrowed by EUR 1,462.3 million when compared to 2019, reaching EUR 2,159.8 million. Both imports and exports decreased by EUR 2,138.4 million and EUR 676.1 million respectively.  Lower imports were recorded in machinery, transport equipment, mineral fuels, lubricants and related materials.  Meanwhile on the exports side, mineral fuels, lubricants, related materials, machinery and transport equipment accounted for the main decreases. 

Antonella Mercieca

Client Relationship Manager

Source:

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

Date:

February 12th, 2021


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