“The Mexican And US Talks …”

The Mexican And US Talks

Mexico wants to persuade the Trump administration that US funding provided under a joint security scheme known as the Merida Initiative would be better spent on the developing of the Mexican southern border region than on military outlays.  The South and Guatemala have long been prone to migration and the Mexican government hopes of fostering development in the area.  Mexico still rejects a US demand to keep Central American asylum seekers on its side of the border and not let them seek refuge in the United States, sources from the government said, speaking on condition of anonymity.  Frustrated on the lack of progress US President Donald Trump told Mexico last week to take a tougher line on containing illegal immigration or from Monday face 5 percent tariffs on all exports to the United States, rising to as much as 25 percent later in the year.  In Wednesday’s talks it was expected that Mexican Foreign Minister Marcelo Ebrard will try to show the White House that Mexico is taking steps to stem the flow of people, detaining double the number each day than it was a year ago.  On Wednesday Mexican officials met with their US counterparts for negotiations in Washington aimed at averting US tariffs on Mexican goods next week, however, there was no immediate signs of rapprochement.  On Thursday sentiment soured over the US-Mexico talks on tariffs and immigration, fuelling broader concerns about global trade hostilities and raising appetite for safe-haven currencies.

Global Recession Fears

Factory activity contracted across Asia and Europe last month as the trade war between the US and China increased concerns of a global economic downturn and has put pressure on policymakers to roll out more stimulus.  Other factors that had a faster toll on manufacturing activity in the eurozone besides the US-China trade war, are slumping automotive demand, Brexit and wider geopolitical uncertainty.  IHS Markit’s May final manufacturing Purchasing Manager’s Index for the eurozone was 47.7 below April’s level and only just above a six-year low in March.

China

After an official gauge on Friday showed contraction in China, Asia’s Caixin/IHS Markit Manufacturing PMI showed modest expansion, offering investors some near-term relief.  Meanwhile a private survey of China’s manufacturing sector published on Monday suggested a modest expansion in activity as export orders bounced from a contraction.  According to Trump in a post on twitter, “many firms are leaving China for other countries, including the US, or order to avoid paying the tariffs.” Meanwhile, US President Donald Trump threatened to hit China with tariffs on “at least” another $300 billion worth of Chinese goods but said that he thought both China and Mexico wanted to make deals in their trade disputes with the United States.  While on Thursday Trump said that the talks with China were ongoing, no face to face meetings have been held since 10 May, the day when he sharply increased tariffs on a $200 billion list of Chinese goods to 25 percent resulting in Beijing retaliating.

US – ADP National Employment Report

The ADP National Employment Report on Wednesday further bolstered the possibility of a rate cut as US private employers hired at the slowest pace in more than nine years in May.  Many analysts blamed the heightened global trade tensions for such weakness.  The data comes ahead of more comprehensive nonfarm payrolls data from the Labour department which is due on Friday.

Brazil Manufacturing PMI

Growth in Brazilian manufacturing activity slowed in May to its weakest pace in ten months, according to data on Monday, with the IHS Market Brazil manufacturing purchasing managers index falling to 50.2 from 51.5 in April.  A reading above 50 marks an expansion in the sector while a reading below signifies contraction.

Antitrust Prob of Tech Giants

Technology companies face a backlash across the world over concerns that competitors, lawmakers and consumer goods have too much power and are harming users and business rivals. The US government is gearing up to investigate whether Amazon, Apple, Facebook and Google misuse their massive market power setting up what be could an unprecedented probe of some of the world’s largest companies.  The Federal trade Commission (FTC) and the Department of Justice which enforce antitrust laws in the United States have divided oversight over the four companies.  Amazon and Facebook are under the watch of the FTC, whilst Apple and Google are under the Justice Department.  Shares of Facebook Inc fell 7.5 percent on Monday while Google’s owner Alphabet Inc dropped more than 6 percent.  Meanwhile, Amazon shares fell 4.6 percent and Apple Inc dipped 1 percent.

Denmark’s Election

Denmark appeared set to become the third Nordic country in a year to form a leftist government as voters on Wednesday’s parliamentary election rebelled against austerity measures.  Danes looked to oust Prime Minister Lars Lokke Rasmussen in the election paving the way for an attempt by Social Democrative leader Mette Frederiksen 41 to become Denmark’s youngest-ever prime minister.    Following two decades of liberal economic reforms in Denmark, the vote marked a comeback for a Social Democratic Party, which was the main architect behind the cradle to grave welfare state, when it was the traditional party of power throughout the 20th century.  The Nordic model has been the gold standard for welfare for many left-leaning politicians.  The ageing populations have prompted Nordic governments to chip away at the cradle-to-grave welfare state.  Frederisksen said in a speech at the final election result that “this has been a welfare election, and voters’ verdict has been completely clear.  From now on, we make welfare the top priority in Denmark.”

EU Preparing Disciplinary Procedures Over Italy’s Debt

The European Commission on Wednesday concluded that Italy is in breach of EU fiscal rules because of its debt situation justifying the preparation for disciplinary procedures.  This paves the way for the actual opening of the proceedings next month, but Brussels insisted that the process could be blocked if Rome made sufficient fiscal commitments.  According to EU commissioner for the euro Valdis Dombrovskis noted that other steps would need to be taken before the formal beginning of the process.  European member states will have to back the Commission’s assessment that a procedure is warranted in the next two weeks.  Italian sovereign bond prices and bank stocks fell after the Commission issued its opinion on Wednesday.  Meanwhile Italian banks were down nearly 1.8 percent to a day low following the news, while the 10-year government bonds rose five basis points to hit 2.575 percent.

Markets Wrap

Global stock markets shed over $2 trillion in value in May as the US-China trade conflict escalated on fears of a trade-related economic slowdown intensifying on Friday after the US threatened Mexico with tariffs.  On Monday the NASDAQ entered correction territory as Amazon and Alphabet’s Google were the first to face an antitrust probe from US regulators.  Meanwhile, auto stocks outperformed, climbing about half a percent on better than expected sales from the US market.    Meanwhile, a stampede to safety sent the benchmark government bond yields tumbling on Monday.  German government bond yields fell to a new all-time low and those on two-year US Treasuries were flirting with their biggest two-day fall since October 2008.  European shares fell half a percent on Tuesday on the first signs of a US antitrust action against Google and other major technology companies drove down peers in Europe following the losses experienced on Wall Street and Asian markets overnight.  Europe’s Stoxx 600 was down 0.5 percent whilst the technology sector lost 2 percent.    On Wednesday European stock markets climbed for a third day amid signs of a more accommodative US Federal Reserve, with technology stocks leading the way higher.  Wall Street’s major indexes also rose on Wednesday as investors bet on the FED interest rate cut, after weak private sector jobs data, and on hopes that the US and Mexico would reach an agreement to avoid US tariffs on Mexican goods.   The gains extended the rally on Tuesday when Fed Chairman Jerome Powell indicated the central bank may have to react the US trade wars, boosting rate cut hopes.   In response, the two-year Treasury yields struck their lowest since December 2017.   The Dow ended on Wednesday up 0.82 percent, while the S&P 500 gained 0.82 percent and the Nasdaq 0.64 percent.   European shares rose on Thursday on expectations that the European Central Bank will provide stimulus to the European economy.  Meanwhile the shares of Fiat Chrysler Automobiles slipped 1.6 percent weighing on the Milan bluechip index, after the Italian carmaker abandoned its $35 billion offer for Renault SA.  Renault shares dropped by about 8 percent.  Meanwhile sentiment soured early in Asia after a meeting between the US and Mexican officials ended with few signs of progress.  Mexican markets experienced another blow when ratings agency Fitch downgraded the country’s credit rating to BBB while Moody’s changed its stable.  This saw the dollar jumping to 0.9 percent against the Mexican peso.

Currencies

The Swiss franc rallied to its highest levels in nearly two years against the Euro on Monday as US President Donald Trump not only increased tariffs on Chinese imports, but also threatened to raise tariffs on Mexican imports and removed preferential trade treatment for India.  Investors flocked from risky assets such as equities to low-yielding currencies such as the yen and the franc.  The Japanese Yen consolidated Friday’s biggest one-day jump in over two years at 108.40 yen per dollar.    The franc has reached levels where the Swiss National Bank had traditionally intervened to keep the currency weak.  Against the Euro the swiss franc rallied to more than half a percent to 1.1120 francs per euro, to its highest level since July 2017.  The gains reached on Monday come on top of a strong increase in May when the franc gained more than 2 percent versus the euro, its biggest monthly rise in eight months as trade tensions fuelled a global sell-off in risky assets. The common currency ticked up to $1.1195 having been stuck in one of its tight ranges against the dollar for weeks as investors waited to see how generous the European Central Bank will be with a new tranche of cheap bank funding this week. On Wednesday sterling rose to a seven-day high, helped by weakness in the dollar and a slightly better-than-expected reading of a closely watched survey on Britain’s services sector.   On Thursday in the currency markets, the safe-haven yen was again in demand and nudged the dollar down 0.3 percent to 108.14.  Meanwhile the dollar fared better against a basket of currencies to trade at 97.244 having bounced from a seven-week low overnight.  The euro eased back to $1.1228 after briefly reaching $1.1306 on Wednesday.

Oil

Oil prices have fallen sharply on concerns about slowing demand but gained on Tuesday after a global stock market rally.  Oil prices, however continued sliding on Wednesday after an unexpected gain in US inventories.  The oil market has been weighed down by concerns abut the slowing growth due to the US-China trade war and by President’s Trump threats last week to place tariffs on Mexican imports.  When the Energy Information Administration (EIA) reported the largest build in crude oil and oil product inventories since 1990, oil dived overnight.

Gold

A run to safety sent gold to a 10-week peak on Monday.  Meanwhile the expectations of rate cuts helped to lift gold higher.

Malta:  Index Of Industrial Production – April 2019

In April 2019, the seasonally adjusted index of industrial production decreased by 0.6 percent over the previous month. Whilst decreases were registered in the production of consumer goods, increases were registered in production of energy (1.5%), capital goods (0.6%) and intermediate goods (0.3%).   Meanwhile when compared to April 2018, the wording-day adjusted index of industrial production decreased by 1.8 percent, a decrease of 13.4 percent was registered in the production of consumer goods, increases were registered in the production of energy (29.6 percent), intermediate goods (1 percent) and capital goods (0.1 percent).

Malta: Inbound Tourism April 2019

Total inbound visitors for April were estimated at 24,4372 an increase of 4.2 per cent when compared to the corresponding month in 2018.  Whilst a total of 216,636 inbound tourist trips were carried out for holiday purposes, 14,833 were business related trips.  Inbound tourists from EU Member States amounted to 210,579, an increase of 1.8 percent when compared to the same month in 2018.  Total tourist expenditure was estimated at EUR 172.2 million an increase of 7.7 percent over the corresponding month in 2018.

Antonella Mercieca

Client Relationship Manager

Source:

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

Date:

June 6th, 2019


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