“The German Economy…”

Source: Reuters

Germany’s Gross domestic product grew by a record 8.5% in the third quarter as Europe’s largest economy is partly recovering from an unprecedented plunge caused by the first wave of the COVID-19 pandemic in spring, said the statistics office on Tuesday.  The rebound happened as a result of higher household spending and soaring exports according to the office.  The reading marked an upward revision to an earlier flash estimate of 8.2% growth and followed a 9.8% plunge in the second quarter.  Whilst the outlook remains cloudy by a second wave of coronavirus infections and a partial lockdown to control the spread, restaurants, hotels and entertainment venues have been closed since 2 November however, schools and shops remain open.    

Brexit

London and Brussels this week continued their negotiations to agree a deal on their future trading relationship. However, the period for Britain’s post Brexit transition is drawing very near ending in fewer than six weeks.   If there is no agreement in place Britain will revert to trading with the EU on World Trade Organisation rules, an outcome to which both sides believe would disrupt their economies.   On Wednesday the head of the EU executive, the Commission reported “genuine progress” on Wednesday however he said the risk of Britain leaving the bloc without a deal on 31 December remained. 

UK Retail Sales

Retail sales in the UK have dropped by the most since June during this month’s lockdown.  According to a survey on Tuesday, the decline was less than most economists feared as online sales made up for some of the shortfall.  The Confederation of British (CBI) said that its monthly retail sales balance dropped to -25 in November from -23 in October.  This was the lowest reading since June, when Britain was last in a nationwide lockdown.  Meanwhile the outlook for December was more positive with a reading of -2.  The CBI’s quarterly reading of business conditions in the retail sector dropped to -19 from +7, its lowest since May. 

US Manufacturing and Services Activity

US business activity expanded at the fastest rate in more than five years in November amid the fastest pickup in manufacturing since September 2014 showed a survey on Monday that indicate the economy keeps making progress.  IHS Markit’s manufacturing index climbed to 56.7 from 53.4 in October.  A reading above 50 indicates expansion.  The services index climbed to 57.7, the highest since April 2015, from 56.9 a month earlier. Markit’s composite index, a blend of the manufacturing and services readings, increased to 57.9 from 56.3 in October.  It was almost the highest since April 2015.  Markit further added that its subindex for employment also rose at a record pace as well. Potentially welcoming news in a US job market that still features more than 10 million people without work who had been employed before the COVID-19 pandemic started in the first quarter.    

Market Wrap

Global equities were boosted on Monday on the news by AstraZeneca that said its COVID-19 vaccine, developed along with the University of Oxford could be around 90% effective. The pan European STOXX 600 index dropped 0.2% after having gained as much as 0.6% in morning trading.  Meanwhile British domestic stocks were affected by hopes of a swifter economic recovery after the British government said it was working with Scotland, Wales and Northern Ireland to cease the COVID-19 restrictions over Christmas.  

European shares held near eight-month highs on Tuesday amid a possible easing of lockdowns in France that added to the brighter sentiment arising from the developments related to the vaccines.  The pan-European Stoxx 600 index even reached 0.7% supported by strong gains in the travel, oil and gas stocks.   Meanwhile, global market sentiment was also supported by a boost after US President elect Joe Biden was given the go ahead to start his White House transition.  France’s CAC 40 climbed 1.1% after the country on Monday reported its lowest daily number of COVID-19 infections since 28 September. Germany’s DAX climbed 0.9% as Deutsche Boerse revealed that the bluechip index will expand to 40 from the current 30 companies with tougher membership criteria.   British domestic stocks climbed 0.8% after England said it will introduce a new system allowing the use of testing to shorten quarantine requirements for incoming passengers.  The news lifted the shares of airline, travel, and tourism companies that suffered amid the strict quarantine rules that deterred people from travelling. 

European shares eased slightly while staying near nine-month highs on Wednesday amid the relaxation of the coronavirus restrictions and the growing hopes that news that the vaccine would soon be available kept sentiment going.  The pan-European STOXX 600 index inched lower by 0.1% as gains in the utility and telecom sectors outweighed the losses in automobile stocks. Banking stocks climbed 1.6% after a report suggested that the ECB could signal a lift on a dividend ban next year.  Germany and the four nations of the United Kingdom unveiled plans to allow gatherings with limitations for Christmas, while France will start easing its lockdown this weekend after a sharp drop in new infections and hospitalizations.  The FTSE 100 index rose 0.4% while the CAC 40 index climbed 0.4% in early trade. 

European shares were little changed on Thursday as an extension of coronavirus restrictions in Germany and a grim forecast for the United Kingdom brought the focus back to the economic impact from the COVID-19 pandemic.  The pan-European STOXX 600 index was flat at 0920 GMT with gains in tech and healthcare stocks offset by declines in the autos and energy sectors. 

Currency Roundup

Sterling rallied on Monday touching briefly a 2 ½ month high amid more positive news about a potential COVID-19 vaccine that led investors to buy riskier currencies.  Furthermore, investors bet that Britain and the European Union would secure a better deal.  Meanwhile, British Prime Minister Boris Johnson said that he hoped all Britons at high risk from COVID would be vaccinated against the disease by Easter.  The November flash purchasing managers index came in better than expected on Monday adding to the optimism although the number remained below 50, representing contraction.  Whilst in early trading sterling was stronger, it gave back some of those gains after data showed that British retail sales have dropped by the most since June during the month of lockdown. 

Demand for riskier assets on Tuesday kept  sterling close to the two-month high it reached the day before as investors hoped that this week’s Brexit negotiations will result in a deal.  The Australian dollar climbed to a two and a half month high and the euro gained on Tuesday as US President Donald Trump accepted the transition to Joe Biden’s Presidency that could include former Federal Reserve Chair Janet Yellen as Treasury secretary.  Against a basket of other major currencies, the dollar weakened 0.4% to 92.13 just above Monday’s 92.013 the lowest in nearly three months.  The euro gained 0.4% to $1.1894. 

The dollar nursed losses on Wednesday as the progress in developing a novel vaccine and the expectations of a fiscal boost from a new US government led investors to shift funds from the greenback to riskier assets.  The US dollar is expected to continue to fall as progress on the vaccine and the expected appointment of Federal Reserve Chair Janet Yellen as the next US Treasury secretary were two uncertainties to investors.  On Wednesday the dollar stood at $1.1904 against the euro close to a two-week low.  Meanwhile the British pound bought $1.3349 close to its highest in more than two months.  Against the yen, the dollar held steady at 104.46. 

Sterling held near a three-month high on Thursday as the US dollar weakness offset some of the uncertainty about the outcome of the Brexit talks. 

Oil

On Tuesday oil climbed to $47 a barrel amid hopes of a quicker recovery in economic growth and oil demand next year.  AstraZeneca on Monday said that its COVID-19 shot was 70% effective in trials and could be up to 90% effective.  This is the third vaccine for the fight against the pandemic.  Brent crude reached a high of $46.72 and its highest since 6th March while US West Texas Intermediate crude gained 0.7% to $43.38.  This is Brent’s highest since a Saudi Arabia-Russia price war as demand started to drop due to the pandemic in March sending prices to crash. On Monday both prices settled 2% higher after climbing 5% last week.   Supporting oil prices and the wider financial markets on Monday was Donald Trump’s move to allow officials to proceed with a transition to Joe Biden as president.  On Wednesday energy stocks continued to surge as crude prices extended the rally on hopes of a quick recovery in fuel demand.   

Malta:  Registered Unemployment – October 2020

In a press release dated 20 November 2020 by the National Statistics office, data provided by Jobsplus for October 2020 indicate a year-on-year increase of 1,448 when compared to the corresponding month in 2019, with the number registering for work standing at 3,114. The largest share of males and females on the unemployment register sought occupations as clerical support workers with 20.7% and 36.9% respectively.   

Malta:  Retail Price Index – October 2020

In October 2020, the annual rate of inflation as measured by the Retail Price Index (RPI) was 0.35% up from 0.18% in September 2020.  The largest upward impact on annual inflation was measured in the Food Index while the largest downward impact was recorded in the Transport and Communication Index.

Antonella Mercieca

Client Relationship Manager

Source:

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

Date:

November 27th, 2020


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