“Oil…”

On Monday oil prices dropped more than 1% amid fears that Chinese crude oil consumption is slowing and that OPEC may increase global supply following the meeting on Thursday.  Brent crude settled at $63.69 a barrel dropping 1.1% and US West Intermediate crude settled at $60.64 a barrel losing 1.4%. On Tuesday oil majors Royal Dutch Shell, BP and Total dropped between1.3% and 2.4% as crude prices dropped amid worries about slowing demand in China. Whilst the oil and gas sector dropped 1.5% miners declined 0.4%.  Meanwhile on Thursday ministers from OPEC members and their allies started a meeting to discuss the future of an oil output cut on Thursday.  Oil prices rose more than $1 per barrel after Saudi Energy Minister Prince Abdulaziz bin Salman urged caution and vigilance at the beginning of a meeting of OPEC ministers and their allies about the future of supply cuts.  Brent crude futures were up $1.11, or 1.7%, at $65.18 a barrel by 1347 GMT while U.S. West Texas Intermediate (WTI) crude rose $1.07, or 1.8% to $62.35. OPEC and its allies agreed to extend oil cuts by one month into April, offering small exemptions to Russia and Kazakhstan, after deciding that the demand recovery from the coronavirus pandemic was still fragile despite a recent oil price rally.     OPEC’s leader Saudi Arabia said it would extend its voluntary oil output cut of 1 million barrels per day (bpd), and would decide in coming months when to gradually phase it out. The news oil prices climbed back towards their highest levels in more than a year with Brent trading up 5% above $67 a barrel as the market had expected OPEC+ to release more barrels.

German Unemployment

German unemployment climbed in February for the first time since last June, data showed on Tuesday.  The Labour office said the number of people out of work rose by 9,000 in seasonally adjusted terms to 2.752 million.  The Labour office chief Detlef Scheele said in a statement that “Kurzarbeit (shortened working hours) continues to secure employment on a large scale and prevent unemployment.” He added that “individual sectors are feeling the effects of the lockdown”.  The labour agency said some 2.39 million employees were shortened working hours in December under the government’s Kuzarbeit scheme designed to avoid mass layoffs during downturns by offering companies subsidies to keep workers on the payroll. 

German Exports

German exports to the UK fell by 30% on the year in January as the impact of Brexit turned Germany away from the UK, increasing the impact to the business from the coronavirus pandemic, showed official figures on Tuesday.  The German Federal Statistics Office said in a statement whilst commenting on the preliminary figures, “Since 2016- the year of the Brexit referendum- German exports to the UK have steadily declined.” The Statistics Office attributed the January slump to “the effects of Brexit after the year 2020, which was marked by the Corona pandemic.”  The impact of the COVID-19 meant that the UK economy was smaller in January of this year than the year before.  The International Monetary Fund estimates that the UK and eurozone economies will not return to their pre-pandemic levels until next year.  The Office further said that, in 2020 German exports to the UK fell by 15.5% compared to 2019, recording the biggest year-on-year decline since the financial and economic crisis in 2009, when they fell by 17%.

World food price index rises in February for ninth month running: FAO

World food prices rose for a ninth consecutive month in February, hitting their highest level since July 2014, led by increases in sugar and vegetable oils, the United Nations food agency said on Thursday. The Food and Agriculture Organization’s (FAO) food price index, which measures monthly changes for a basket of cereals, oilseeds, dairy products, meat and sugar, averaged 116.0 points last month versus a slightly revised 113.2 in January. The January figure was previously given as 113.3. The FAO also said in a statement that worldwide cereal harvests remained on course to hit an annual record in 2020, adding that early indications pointed to a further increase in production this year.

U.S. Weekly Jobless Claims

The number of Americans filing new claims for unemployment benefits increased last week, likely due to the brutal winter storms in the South in mid-February.  The labour market outlook is however improving amid declining new COVID-19 cases.  Initial claims for state unemployment benefits totalled a seasonally adjusted 745,000 for the week ended 27 February compared to 736,000 in the prior week, said the Labour Department on Thursday.  The labour market has lagged the acceleration in overall economic activity, which has been driven by nearly $900 billion in additional pandemic relief provided by the government in late December. Consumer spending rebounded strongly in January as daily coronavirus cases and hospitalizations dropped sharply.  Weekly jobless claims have dropped from a record 6.867 million in March 2020 when the pandemic hit the US nearly a year ago.  However, they remain above their 665,000 peak achieved during the 2007-09 Great Recession.    In a well-functioning labour market claims are normally in the 200,000 to 250,000 range. 

Big Economies agree to Boost IMF Funding

G20 major economies have agreed to raise International Monetary Fund reserves with a new allocation of the fund’s own special drawing rights (SDRs) currency, the IMF’s head said on Tuesday, in a potential boost for lending to poor countries.  Finance officials from the Group of 20 major economies on Friday expressed broad support to boost the IMF’s emergency reserves after US officials dropped the previous administration’s opposition.  Italy which heads the G20 this year is pushing for a $500 billion issuance of SDRs, a move backed by many other G20 members as a way to provide liquidity to poor countries hit hard by the COVID-19 pandemic without increasing their debt levels.  G20 leaders are expected to agree to extend the scheme, which currently runs until end of June, though a decision is expected to be taken in April. 

The Flow to Emerging Market Stocks and Bonds

Emerging market stocks and bonds saw foreign net inflows of about $31.2 billion in February, though rising US rates triggered a slowdown during last week.  The $31.2 billion was the lowest monthly figure since August and compares with $52.5 billion net inflows in January.  According to the IIF, non-resident portfolio inflows to emerging market equities hit $8.4 billion last month and debt instruments attracted $22.8 billion.  Of the flow to equities $7.8 billion went to Chinese stocks.  On the debt side flows to China totalled $9.3 billion, the lowest in 10 months. 

Market Wrap

European stocks bounced on Monday after sharp losses last week as a selloff in bond markets eased, amid optimism over COVID-19 vaccination programme and US stimulus package.  The German DAX rose 1.3% while France CAC 40 and the UK FTSE 100 gained 1.5% each.  Miners were the top sectoral gainers, rising 2.2% while travel, leisure and retail stocks jumped over 2%.  US stocks rallied on Monday with the S&P 500 posting its best day in nearly nine months, as bond markets calmed after a month of selloff. 

European stocks benchmark dropped on Tuesday after recording its strongest session in four months a day earlier as heavy weight mining and energy stocks retreated amid weaker commodity prices.  Gains in shares of consumer companies such as Nestle, Unilever and Reckitt Benckiser helped limit loses in Europe.  Eurozone bond yields edged up on Tuesday with Southern European bonds led by Italy underperformed on reports that Italy’s government might soon seek parliamentary approval for further stimulus spending.  After major benchmarks on Monday marked their best daily performance since June 2020 euro area bonds calmed on Tuesday.  Germany’s 10 year yield, the benchmark for the region was flat at -0.34%.  Southern European bonds came under renewed pressure with Italian bonds underperforming.  The 10 year yield rose 2 basis points to 0.69%. 

Meanwhile global equity markets were little changed on Tuesday and Wall Street opened slightly lower as investors paused to gauge whether a bond yield jump had run its course.  Investors are also monitoring progress on the next US fiscal stimulus.  The Dow Jones Industrial Average fell 0.29% to 31,443.62, the S&P 500 lost 0.55% to 3,880.37 and the NASDAQ Composite dropped 0.92% to 13,463.28. 

Whilst for three days European stocks rallied, on Thursday renewed jump in US bond yields hit risk appetite, with heavy weight miners and technology stocks lead the retreat. 

Currency Roundup

The dollar was up for a fourth consecutive day on Tuesday after the spike in bond yields.  Riskier currencies rose as bond markets calmed and stocks recovered.  The dollar index fell 0.158% while the euro went up by 0.17% to $1.2068.  On Thursday sterling held above $1.39 against the dollar and gained versus the euro after British finance minister Rishi Sunak revealed an expansive annual budget to help support the economy.  Sterling is the best performing G10 currency this year, with investors expecting the UK’s speedy vaccination programme to help recovery of the economy from its worst annual contraction in 300 years.  Sterling edged 0.2% lower against the dollar to $1.3921 in early London trading, whilst against the euro, it gained 0.1% to 86.41 pence.

Malta:  Unemployment Rate January 2021

The seasonally adjusted monthly unemployment rate for January 2021 reached 4.4% the same as the previous month.  The unemployment rate for males was 4.4% while that for females was 4.5%. 

Malta:  Gross Domestic Product 2020

In a press release dated 1^st March 2021 the National Statistics Office showed that Provisional estimates indicate that the Gross Domestic Product (GDP) for 2020 amounted to EUR 12,823.8 million, registering a decrease of EUR 768.4 million or 5.7% when compared to 2019. 

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