“OPEC And The Demand For Oil…”

OPEC And The Demand For Oil

On Wednesday OPEC cut its forecast for global growth in oil demand this year amid the coronavirus outbreak and said its output fell sharply in January as producers implemented a new supply-limiting pact.  Furthermore, in a report, OPEC said the demand for 2020 for its crude will average 29.3 million barrels per day that is 200,000 bpd less than previously thought. OPEC is considering whether to curb output further to offset slower demand.  After the release of the report, oil rose near a $56 a barrel.   According to the International Energy Agency, on Thursday, oil demand is set to fall this quarter for the first time since the financial crisis in 2009, due to the coronavirus in China. Oil prices fell on Thursday amid the drop-in demand forecasts for this year after the OPEC and IEA reports.  The demand for oil in China which is the world’s second-largest crude consumer, has dropped because of travel restrictions to and from the country and quarantines.

UK

Preliminary data for fourth-quarter gross domestic product showed the economy grew 1.1 percent year on year, the same as in the previous quarter.  Investors are concerned that British Prime Minister Boris Johnson is taking a hard line in the talks which are to be concluded by the end of the year to safeguard a break in trading relations.  Meanwhile some signs of strain have emerged between the UK and the EU on Tuesday.  Sajid Javid, the British finance minister said that Britain wanted a stable relationship with the European for “decades to come” in financial services, only to receive an instant denial from Brussels.  On Thursday a closely watched survey showed house prices rose at their fastest pace in nearly three years.

Federal Reserve Chair Jerome Powell

Federal Reserve Chair Jerome Powell told Congress on Tuesday that the US economy is in a good place even if he referred to the potential threat from the coronavirus in China and concerns about the long-term health of the economy.  Powell said to the US House of Representatives Financial Services Committee, that with risks like trade policy uncertainty receding and global growth stabilising, “we find the US economy in a very good place, performing well.”  The US economic expansion of 11 years is the longest on record.  He also added that the new coronavirus will impact China and its close neighbours and trading partners and there will “very likely be some effects on the US” however, it is still too early to know.

Trump’s New Budget Proposal

The $4.8 trillion budget plan for the coming fiscal year by Donald Trump drew a prompt rejection on Monday from congressional Democrats, who said it betrayed his promise to protect popular health and safety-net programs.  The White House presented the budget a blueprint for the president’s policy priorities, which includes funding to build a wall on the US border with Mexico however cuts billions of dollars from safety net programs under the banner of welfare reform.  With the aim of reducing debt and deficits, Trump once again proposed steep cuts to housing, environmental, transportation and other programs that have been rejected by lawmakers in the past years.  Democrats said that Trump’s proposal goes against the promise in last week’s State of the Union speech to “always protect” the popular Social pension plan and the Medicare health plan for seniors.

US Weekly Jobless Claims

Initial claims for state unemployment benefits rose 2,000 to a seasonally adjusted 205,000 for the week ended 8th February, said the Labour Department on Sunday.   The number increased less than expected last week, indicating that labour market strength continued.  This could be the country’s longest economic expansion on track.  Last week the government reported that the economy created 225,000 jobs in January after adding 147,000 positions in December, hitting a two-year low. Labour market strength is helping to sustain consumer spending and support the economy which is at its 11th year of expansion.

Greek’s 10-year Bond Yield Below 1 percent For First Time

Having been bailed out three times in the last three decades, Greece reached a milestone, as its 10-year government bond yield fell below 1 percent for the first time on Wednesday, dropping to as much as 0.985 percent.  Greek debt has been one of the eurozone bond market’s top performers this year backed by an improving economy and credit ratings upgrades.  The ten-year yield is down nearly 40 basis points so far.  Last month Fitch upgraded Greece’s credit rating to ‘BB’ rating from ‘BB-‘ stating GDP growth and budget discipline prudence implied that government debt which is currently the highest in the eurozone at 181 percent of GDP was remaining at sustainable levels.  August saw Greece removing the capital controls it had enforced in 2015 which was a big move signalling that the country’s return to economic stability and this year it sold its first 15-year bond since the financial crisis.  Investors have raised their interest in the Greek debt and other Southern European debt, as investors rushed to buy any positive-yield bonds

Currency Roundup

Sterling inched away from the 2 ½ month lows hit against the dollar at the start of the week as it gained on Tuesday amid economic growth data.    On Wednesday sterling was a bit firmer holding its ground against other major currencies in the absence of any major economic data and news related to trade talks with the European Union.  Meanwhile, against the euro, sterling touched its highest level in just over a week at 84.14 pence but held a very narrow range.  Thursday saw the Australian dollar which is a liquid proxy for China’s economic health because of Australia’s export exposure, retraced its recent rally and traded 0.2 percent softer at $0.6725.  The euro fell to a four-and-a-half year low against the Swiss franc on Thursday, and the yen strengthened, as investors went for safe havens after China’s Hubei province, the epicentre of the coronavirus outbreak reported a sharp rise in the number of new cases.  In London traders were looking to take positions in riskier currencies as the jump in new cases of the virus was a result of a new approach in diagnosis which is aimed at bringing forward the detection timeline and lowering the overall mortality rate.  After weakening to a three-and-a-half week low a day earlier, the yen gained 0.3 percent against the dollar and climbed to a four-month high versus the euro.  Meanwhile, the euro dipped to 1.0622 francs below its 2016 trough of 1.062 and its lowest level since August 2015. The gain of the franc comes along when its correlation with risky assets has broken down in recent weeks and market watchers are saying the Swiss currency could see more gains if the euro deteriorates further.  Against the euro, sterling rose to a two-month high of 83.80 pence mostly due to a weaker euro, later reversing some of the gains which traded down 0.1 percent to 84 pence.

Market Update

European shares inched lower on Monday as concerns over the economic impact of the virus weighed on sentiment and markets came off a rally from last week.  Furthermore, deal talks and a rally in defensive sectors supported European shares.   The continued demand for safe-haven assets from investors who are nervous about the economic damage caused by the virus drove yields lower on Monday inverting one measure of the yield curve. The spread between yields of three-month and 10-year Treasuries was at minus 1.21 basis points in the afternoon trade, having inverted earlier in the day.  The spread was below zero for several days last week.  Meanwhile, Irish stocks were hit by a strong showing for the left-wing Sinn Fein in national election.  On Tuesday European shares hit a record high as the number of new coronavirus cases slowed in China. The country’s factories resumed work slowly, easing some of the concerns of the impact on the global economy.  Travel and leisure stocks were the best performing European sector, rising about 1.4 percent, however, worries about travel disruptions caused by the virus had led to a heavy sell-off in the sector over the past few weeks.  Tuesday saw government bond yields across the euro area rising in response to gains by world stock markets, but did not go far off from the recent lows, a sign of underlying caution amongst investors.  Eurozone bond yields rose on Wednesday as the spread of the coronavirus that has shocked world markets showed no signs of slowing down.  On Wednesday China reported its lowest number of new coronavirus cases since late January, giving weight to a prediction from a senior medical adviser that the outbreak could be over by April.  This boosted riskier assets such as stocks globally.  Many 10-year bond yields in the eurozone were up three basis points in early trade, with Germany’s benchmark rising to -.36 percent, its highest since last Thursday.   On Thursday Asian stock markets wobbled while more safe-haven investments such gold, the yen and bonds climbed as the number of deaths and new cases from the virus increased.  Whilst the 10-year US Treasuries fell about 3 basis points to 1.607 percent, the yen then strengthened past the 110 per dollar and the rally in Asian currencies against the dollar stopped.  Also, European government bond yields fell on Thursday as investors flocked back to safe-haven debt markets.

Malta:  Registered Employment August 2019

In August 2019, registered full time employment increased by 5.2 percent while part-time employment as a primary job increased by 2 percent when compared to the corresponding month in 2018.  Data from Jobplus show that over a period of one year, the labour supply (excluding part-timers) in August increased by 5.1 percent reaching 221,755. The main reason for the increase is a year-on-year increase in full-time registered employment and a decline in registered unemployment.  Comparing August 2019 with August 2018, the highest increase in employment was brought about by construction and administrative support service activities with 1,813 and 1,661 persons respectively.

 

Antonella Mercieca

Client Relationship Manager

Source:

Reuters, https://nso.gov.mt

Date:

February 14th, 2020


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