“OPEC Talks…”

OPEC and its allies led by Russia postponed talks on output policy for 2021 to Thursday as key players disagreed on how much oil they should pump amid weak demand due to the coronavirus pandemic.  The group were considering easing existing production cuts by 2 million barrels per day from January, however demand is still under pressure amid the pandemic.  According to sources OPEC+ has been considering extending the existing cuts of 7.7 million bpd, about 8% of global demand, in the first months of 2021.  This was backed by Saudi Arabia.  Furthermore, the United Arab Emirates which is an OPEC member was also indicating the willingness to support a rollover only if members improved compliance with cuts.  Global benchmark Brent crude on Monday settled down 1.2% at $47.59 a barrel.  OPEC and Russia resumed talks on Thursday to define the policies for 2021 after the initial round of discussions this week failed.  OPEC and Russia agreed to slightly ease their deep oil output cuts from January by 500,000 barrels per day however failed to find a compromise on a broader and longer-term policy for the rest of next year.  The increase means that OPEC and Russia, a group known as OPEC+ would move to cutting production by 7.2million bpd or 7% of global demand from January compared with current cuts of 7.7 million bpd.  The cut is aimed to tackle weak oil demand due to the second coronavirus wave.  Global benchmark Brent crude prices rose 1% to their highest since early March on Thursday on the news. 

Eurozone Factory

Eurozone factory growth cooled last month amid the imposed restrictions that impacted demand according to a survey that showed that Germany remained the driving force behind the bloc’s manufacturing recovery.  IHS Markit’s final Manufacturing Purchasing Managers’ Index fell to 53.8 in November from October’s 54.8.  Anything above 50 indicates growth.  

UK Factory PMI

British factories recorded their fastest growth in almost three years last month as they increased their stock of raw materials and rushed to complete work before the new post Brexit rules come into force on 1 January. The IHS Markit/CIPS Purchasing Managers’ Index increased to 55.6 in November from 53.7 in October its highest since December 2017.  November saw the biggest increase in purchases of raw materials since March 2019, the biggest rise in export orders since January 2018, and the sharpest boost to optimism since 2014.   The most recent official data showed that factory output in September was almost 8% lower than a year earlier. 

UK Services Activity

Activity in Britain’s services sector dropped less than expected in November as the latest lockdown in the UK had a smaller impact on the firms than the measures introduced earlier in the year.  Businesses were more optimistic about the outlook for 2021. The IHS Markit/CIPS UK Services Purchasing Managers’ Index of business activity (PMI) fell to 47.6 in November from 51.4 in October.  This was the first time since June that it fell below the 50 level that divides growth from contraction.  Meanwhile, the composite PMI which includes manufacturers who enjoyed stronger growth, dropped to 49 from 52.1.  Whilst the UK economy suffered a record 25% drop in output during the first lockdown in March and April, the Bank of England’s forecast this month is that output would fall just 2% in the final three months of 2020.  

Brexit

The UK and Britain on Monday warned each other that time was running out to reach a Brexit deal as differences still exist on state aid, enforcement and fishing.  The UK leaves the EU on 31 December when a transition period of informal membership ends following its formal departure last January.  A deal is trying to be reached to govern nearly $1 trillion in annual trade.  Over the weekend the talks in London were “quite difficult” and “massive divergences” remained on elements of fisheries, economic fair play, and the settling of disputes, according to an EU source. Combined with fish and shellfish processing, the sector makes up 0.1% of Britain’s GDP.  According to Johnson’s spokesman there had been some progress but “there still remains divergence on issues (such as) fisheries and the level playing field”.  A trade deal would not only safeguard trade but also strengthen the peace in British-ruled Northern Ireland. 

US Housing and Manufacturing Data

Contracts to buy US previously owned homes dropped for a second straight month in October amid a critical shortage of properties that pushed up prices.  The housing market remained supported by record low mortgage rates.  Compared to a year ago, pending homes sales jumped 20.2% in October.  The monthly decline in contracts indicates a slowdown in sales of existing home sales after they accelerated in October to their highest level since November 2005. Meanwhile, other data on Monday showed activity at factories in the Midwest and Texas slowed last month possibly due to the nationwide resurgence in new COVID-19 infections that curbed new orders and disrupted production.  The reports support expectations of a sharp slowdown in economic growth in the fourth quarter due to the coronavirus pandemic and the cutback in fiscal stimulus. 

US Private Payrolls

US private payrolls increased less than expected in November, most likely effected by the resurgence in coronavirus cases and business restrictions.  The slowdown in private hiring as shown by the ADP National Employment Report on Wednesday has put pressure on Congress to agree on further stimulus.  Private payrolls rose by 307,000 jobs last month after increasing 404,000 in October. The leisure and hospitality sector that were the hardest hit by the pandemic added 95,000 jobs.  Small businesses with 1 to 19 employees added 60,000 jobs, accounting for most of the increase in the leisure and hospitality payrolls.  

US Weekly Jobless Claims

The number of Americans filing first time claims for jobless benefits fell last week, however remained very high amid widespread business restrictions to control the number of new COVID-19 infections and the lack of additional fiscal stimulus.   Initial claims for state unemployment benefits totalled a seasonally adjusted 712,000 for the week ended 28 November compared with 787,000 in the prior week, said the Labour Department on Thursday.  The Government Accountability Office said that state backlogs in processing applications had led to people submitting claims for multiple weeks of retroactive benefits during single reporting periods, inflating the claims data.  Although there were some problems with the data the recent increase in new applications for benefits mirrored weakening in other labour market indicators demonstrating the impact of the COVID-19 resurgence and the depleted fiscal stimulus.  On Wednesday Republicans and Democrats in Congress remained unable to reach agreement on a fresh stimulus package.

Australia’s Economy

Australia’s economy rebounded sharply in the third quarter from a recession caused by the COVID-19 pandemic as consumer spending climbed whilst the country’s top central banker indicated that monetary policy will stay accommodative for a while. Data showed that the A$2 trillion ($1.5 trillion) economy expanded by a bigger than expected 3.3% in the September quarter after a 7% contraction in June.  The rebound was a result of household spending, that rose 7.9% after being driven by massive fiscal and monetary stimulus since March. 

Asian Factories

Asian factories recovered further in November from the COVID-19 crisis, showed a survey on Tuesday, thanks to a boom in China’s economy which has enabled the region to withstand the coronavirus pandemic better than any of its peers. 

China’s November Factory Activity

China’s factory activity accelerated at the fastest pace in a decade in November, showed a private sector survey.  This indicates that the economy is rebounding to pre-pandemic levels.  China’s Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) rose to 54.9 from October’s 53.6 marking the highest level since November 2010.  The gauge remained well above the 50 level that separates growth from contraction for the seventh consecutive month.  The performance in Asia comes as many countries in the region have had greater success in containing the virus than their US and European peers.  According to International Monetary Fund’s estimate in October, China’s economy is seen increasing 1.9% this year, while the US economy is expected to contract 4.3% while that of eurozone economies by 8.3%.  

Japan’s Factory Activity

Japan’s factory activity moved closer to stabilisation in November amid slower declines in output and new orders.  Japan posted the fastest growth on record in the third quarter, rebounding from its biggest post-war slump thanks to stronger consumption and exports. The final au Jibun Bank Japan Manufacturing Purchasing Mangers’ Index climbed to 49 in November from the previous month’s 48.7.  The headline index remained below the 50 threshold that separates contraction from expansion for a record 19^th straight month, with orders and production declining again although at slower rates.  The PMI survey showed employment conditions contracted at a more modest pace than in the previous month however manufacturers cited weak client demand amid the coronavirus pandemic. 

Market Wrap

On Tuesday world shares edged up to just below record peaks after robust China data boosted expectations of a recovery from the Coronavirus pandemic as drug makers seek fast approval for their vaccines.  The MSCI world equity index that tracks shares in 49 countries reached 0.4%. In Europe the pan-regional STOXX 600 benchmark was up 0.7% in early deals, while US stock index futures also pointed to a strong start on Wall Street as investors focused on November’s manufacturing surveys from Europe and the US.  Japan’s Nikkei rose 1.3% while Australia’s S&P/ASX 200 gained 1.1% after Australia’s central bank said the country’s economy would need fiscal and monetary support “for some time”.  After its best month in over three decades, London’s blue-chip index rallied 1.5% to lead gains among regional peers, trying to make up for last session’s losses.  European shares made a positive start to the month following record-breaking gains in November, over the optimism about the coronavirus vaccine.  After a dip the day before the pan-European STOXX 600 index was back up 0.8%.  The index ended the month of November with gains of nearly 14%. 

On Wednesday Britain became the first western country to approve a COVID-19 vaccine, ahead of the US and Europe after its regulator cleared a shot developed by Pfizer for emergency use in record time.  China has already given emergency approval for three experimental vaccines and has inoculated about 1 million people since July.  Russia too has been vaccinating frontline workers after approving its Sputnik V shot in August before it had completed its late stage testing on safety and efficacy. European shares dropped on Wednesday as investors took the gains following a rally of about 14% last month.  The FTSE 100 has been moving closer to pre-pandemic levels having recovered 60% from the low levels in March.  Biontech’s Frankurt listed shares jumped 7.5% whilst Germany’s benchmark DAX index fell 0.5%.  The pan-European STOXX 600 index was down 0.3% with auto stocks leading the decline as Volkswagon dropped 2.1% amid uncertainty about top management.  Stimulus developments were on the radar as the New York Times reported that Joe Biden said his priority was getting a generous coronavirus aid package through Congress even before he takes office in January.  According to the report Biden also added that he will not immediately remove the Phase 1 trade agreement with China reached by President Donald Trump. 

On Thursday European shares opened lower as data across Europe underscored the economic damage still caused by the pandemic. The pan-European STOXX 600 index was little changed. Meanwhile markets were keeping an eye on talks between Britain and the European Union on a trade deal, with less than a month to go before the UK’s full departure from the EU.   London’s FTSE 100 remained close to Wednesday’s closing levels, when it ended over 1% higher after the UK was the first to approve the vaccine for roll-out next week. 

Currency Roundup

The dollar was under pressure after closing out its worst month since July with a little bounce.  In a speech on Monday, Fed chair Jerome Powell said a slowing recovery and a surging pandemic meant the US was entering a “challenging” few months with the potential deployment of a vaccine still facing hurdles.  Meanwhile, sterling hit a three-month high as traders relied on hopes for a Brexit trade deal before year end.  IT also edged up versus the euro as market participants remined optimistic that a Brexit deal could be reached this week despite a lack of progress in negotiations.  The pound also pushed up above $1.34 by a weaker dollar. 

The yuan extended gains to a more than one-week high against the dollar on Wednesday after the central bank set a much stronger official guidance rate to reflect a weak greenback.  The dollar stayed near a 2 ½ year low as investors focused on developments in talks about further fiscal stimulus from the US.  The Euro was steady after an overnight jump to their 2 ½ year highs as the dollar weakened on renewed hopes for a coronavirus vaccine and US fiscal stimulus. Also weighing on the dollar was weaker than expected US manufacturing activity data and speculation that the FED will act to support the economy before vaccines becomes available.   The declines in the dollar overnight prompted the People’s Bank of China (PBOC) to lift its midpoint rate by the most in nearly a month to 6.5611 per dollar.  This fixing was also the strongest since 19 November.  China’s currency started its appreciation trend in June, booking six straight months of gains.  It has risen nearly 9% to the dollar since late May.  Asian shares on Wednesday climbed after a strong lead from Wall Street. Investors meanwhile took profits. 

The dollar slid to a 2 ½ year low against a basket of major currencies on Thursday as investors expect that more economic stimulus from Washington and the vaccinations would support riskier assets.  Investors are expecting lawmakers to reach a deal eventually with the two parties facing an 11 December deadline to pass a $1.4 trillion budget or risk a shutdown of the government.  Sterling held on to $1.34 on Thursday amid the broad dollar weakness.

Malta:  Unemployment Rate- October 2020

The seasonally adjusted monthly unemployment rate for October 2020 reached 3.9%, the same as the previous month, whilst up by 0.3% when compared to October 2019.  Furthermore, the unemployment rate for males was 3.8% while for females it stood at 4.2%.  The unemployment rate during October 2020 for persons aged 15 to 24 years was 10.1% while the rate for those between 25 and 74 years stood at 3.2%. 

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