“OPEC Meeting In Vienna…”

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OPEC Meeting In Vienna

In a meeting in Vienna, on Thursday OPEC agreed on a tentative deal to cut oil output but was waiting for a commitment from non-OPEC Russia before deciding on the exact volumes for a production reduction with the aim to stop oil prices from falling, said two sources from the group.  Saudi Energy Minister Khalid al-Falih told reporters as the OPEC meeting concluded without yielding concrete figures that, “We still want Russia to cut as much as possible”.  Possible output cuts by OPEC and its allies range from 0.5-1.5 million bpd.  According to Falih a reduction of 1 million bpd would be acceptable.  Brent oil futures fell as much as 5 percent to below $59 per barrel amid concerns that a deal will not be reached.   Somewhat the price recovered by trading down 3.5 percent.  Russian Energy Minister Alexander Novak said on Thursday that Russia would find it harder to cut oil output in winter than other producers because of the cold weather.  Oil prices have crashed as Saudi Arabia, Russia and the United Arab Emirates raised output since June after Trump called for higher production to offset lower exports from Iran.  Iran is the third largest oil producer.

Trade Truce

On Saturday US President Donald Trump and Chinese President Xi Jinping reached a trade truce at a G20 meeting, halting tariffs and agreeing to fresh talks aimed at reaching an agreement within 90 days.  As a result, Monday saw US Treasury yields rising with the 10 year note benchmark reaching 3.03 percent up from the 3.013 percent on Friday of last week.

“Tariff Man”

On Tuesday President Donald Trump held out the possibility of an extension of the 90 day trade truce with China but warned he would revert to tariffs if the two sides could not resolve their differences.  Initially investors greeted the agreement reached between Trump and President Xi Jinping over the weekend with relief. After Monday’s rally, markets on Tuesday sold off on concerns as to whether there is going to be a real deal at the end of the 90 days.  According to Trump if it is, we will get it done.” “But if not remember, I am a Tariff Man”.   Doubts as to what could be accomplished in the negotiating window added concerns about growth.  As a result the Dow Jones Industrial Average fell more than 3 percent, the S&P 500 lost 3.2 percent and the NASDAQ composite tumbled 3.8 percent.  The president addressed one of the concerns by indicating that he would not oppose to extending the 90-day truce.   Trump and Xi said they would hold off on imposing additional tariffs for 90 days starting 1 December while they tried to resolve their trade disputes that have seen hundreds of billions of dollars worth of goods subject to tariffs. Trump said that China is supposed to start buying agricultural products immediately and cut its 40 percent tariffs on US car imports.  Washington is also expecting China to address immediately structural issues including intellectual property theft and forced technology transfers according to US officials.  Trump has for a long time accused China of unfair trade practices that hurt Americans and the US economy.

Brexit

Theresa May on Tuesday suffered defeats at the start of five days of debate over her plans to leave the EU.  May’s aim is to secure parliament’s approval to her deal and keep close ties with the EU after leaving in March.  There is opposition with Brexit and opponents wanting to prevent or derail her plan.  On the first day of debate, before the main vote on 11 December, her government was found in contempt of parliament and a group of her own Conservative Party lawmakers won a challenge to hand more power to the House of Commons if her deal is voted down.  If lawmakers do not back her deal, May says, they could open the door to either Britain falling out of the EU without measures to soften the transition or to the possibility of Brexit not happening.  The opposition Labour Party said May needed to get a better deal or step aside and let them govern.  If May loses she could call for a second vote on the deal.  Defeat will increase the chances of a no-deal exit which could mean chaos on the British economy and businesses and could lead to pressure on May to resign.  Some lawmakers called on May to change the deal and suggested she could use an EU summit next week to try and win some concessions from officials to try to ease some of their concerns.  Michel Barnier, the EU negotiator said on Thursday the deal was the best Britain will get, while British Finance minister Philip Hammond said it was “simply a delusion” to think the agreement could be renegotiated if it was rejected by parliament.  Meanwhile Theresa May is trying to sell the deal and persuade lawmakers to back her deal.

UK Factories

The effect of Brexit was felt in the UK factories in November as companies stocked up on parts to counter effect any border delays and exports suffered a rare back to back fall, a survey showed on Monday.  The IHS Markit rose 53.1 from 51.1 in October, which was the weakest reading since the Brexit referendum.  Stock building, and new product launches, helped new orders to grow after a rare contraction in October.  Many manufacturers are building up inventories of parts to protect themselves against the risks of customs delays at the border on Brexit in March 2019.  IHS Markit said new export business dropped for a second month in a row in November, the first back-to-back contraction since early 2016.  The main reason for the drop is uncertainty over Brexit.  Meanwhile optimism among manufacturers dropped to a 27 month low.

Italy

Italy’s bond market was steady considering the sell offs in the markets worldwide, on support from positive noise from Rome regarding the 2019 budget.  Italy’s deputy Prime Minister Matteo Salvini said that Italy’s government will make a final assessment on Thursday of the costs of the main measures contained in its 2019 budget.  The European Commission has rejected Italy’s expansionary budget and called on Rome to amend the budget to prevent disciplinary procedure that could lead to fines.  On Wednesday, Italy announced that it would carry out a syndicated exchange transaction where the Italian Treasury will buy back some short-dated Italian and tap a three-year bond, maturing in 2021.

Market Wrap

On Monday miners, autos, tech and oil stocks surged, driving Europe’s main benchmarks up strongly after US and Chinese leaders agreed a temporary truce in a trade war.  Investors cheered the prospect of an end to a trade war which dented growth. Although markets reacted positively to the news, some investors said the outcome had already been anticipated and there remained much for the two to agree upon.  The pan-European STOXX 600 index ended up 1 percent, while Germany’s DAX the most sensitive to China and fears from trade war led the way with a 1.9 percent rise to its highest level since 15 November.   On Tuesday the Dow Jones dropped 3.1 percent, and the NASDAQ sank 3.8 percent.  Meanwhile, US financial shares which are in particular sensitive to bond market swings dropped 4.4 percent.  Concerns over a slow US growth have accelerated the flattening of the yield curve, where longer dated bonds fell faster than shorter dated bonds.  The spread between the 10 year and the 2 year Treasury yield was at its flattest level in more than a decade and heading close to an inversion, where long-rated bonds fall below short rates.  A flattened yield curve is seen as an indicator of a slowing economy, where longer dated yields suggest that the markets see economic weakness ahead.  Meanwhile, on Wednesday Asian shares fell across the board dragged by the downfall in Wall Street as sharp declines in the long-term US Treasury yields and trade concerns have increased concerns among investors.  On Thursday yields of top-rated German Government bonds held near their six-month lows after the arrest of top executive of Chinese tech giant Huawei, renewed concerns over trade wars and dips in the world stock markets. Meanwhile, European stocks opened more than 1 percent lower, tracking the heavy falls in Asia.  The S&P 500 and the Dow Jones Industrial Average slipped back into losses for the year on Thursday, as US stocks extended their slide on fresh concerns over the China-US tensions, lower oil prices and tumbling US bond yields.  On Friday Asian shares could not sustain the slimmest recovery amid speculation that the Federal Reserve might be “one and done” with US rate hikes and with the fall in the oil price.  There were also concerns over the China-US relations after the arrest of smartphone maker Huawei Technologies Co Ltd Chief Financial Officer.  Reuters have been informed that in April US authorities have been investigating Huawei, since at least 2016, for allegedly shipping US-origin products to Iran and other countries in violation of US export and sanctions laws.  The arrest and any potential sanctions on the world’s no 2 smartphone maker could have major repercussions on the global technology supply chain.  US and Asian shares tumbled on the news on the prospects of a collision between the largest two economic powers not only over tariffs but also over technology hegemony.  Meanwhile, on Friday the Labour Department will publish its closely watched monthly employment report against a backdrop of a sell-off on Wall Street and a partial inversion of the yield curve which stoked fears of a recession.

Currencies

On Tuesday sterling hit its 17-month low before recovering after a parliament vote gave UK lawmakers more power over the next Brexit steps if Prime Minister Theresa May ‘s withdrawal deal is voted down.  On Wednesday the dollar came under renewed pressure as an inversion in part of the Treasury yield curve caused concern, about a possible US recession.  Worries pushed the two year yields above those of longer dated, 5 year notes for the first time in more than a decade.  The inverted yield curve sounds as an alarm bell to investors about a looming US economic slowdown.  The recent drop in the dollar comes along against the backdrop of the temporary truce in the US-China trade conflict agreed over the weekend which bolstered investor confidence in riskier currencies.  On Thursday sterling held above a 1 1/2 year low as concerns on how the British parliament would vote next week prompted investors to remain on the side line as they remained cautious.  Sterling was flat at $1.2732 and just a bit short of the June low of $1.2659 hit earlier this week.  Against the euro and the yen the pound was flat at 88.98 pence and 143.72 yen respectively.

Malta:  Registered Unemployed

In October the number of persons registering for work stood at 1,790 decreasing by 22.8 per cent when compared to the corresponding month in 2017.  The largest share of men and women on the unemployment register sought occupations as clerical support workers with 17.9 per cent and 41.3 per cent respectively.  Registrants for work decreased when compared to October 2017, irrespective of how long they had been registering for work.  The largest decrease in registrants was recorded among persons who had been registering for more than one year.

Malta:  Gross Domestic Product Q3/2018

Provisional estimates indicate that the Gross Domestic Product (GDP) for the third quarter of 2018 amounted to EUR 3,252.6 million an increase of EUR 281.0 million or 9.5 percent when compared to the corresponding period last year.  In real terms GDP increased by 7.5 percent.

Malta:  Inbound Tourism October 2018

Total inbound visitors for October were estimated at 270,702 an increase of 10.1 percent when compared to the corresponding month in 2017.  Inbound tourists from EU Member States went up by 9.3 percent to 223,813 when compared to the corresponding month in 2017.  A total of 236,271 inbound tourist trips were carried out for holiday purposes, while a further 18,709 were undertaken for business purposes.

 

Antonella Mercieca

Client Relationship Manager

Source:

Reuters, Bloomberg, nso.org.mt

Date:

December 7th, 2018


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