“Trade Talks And Trump At The New York Economic Club …”

Trade Talks And Trump At The New York Economic Club

President Donald Trump said on Saturday that the US-China trade talks were moving along “very nicely” but more slowly than he would have liked.  He also said that there had been incorrect reporting about the US willingness to lift tariffs.  The US and Chinese officials last week said that the two countries had agreed to roll back the tariffs already in place in a “phase one” trade deal.  President Donald Trump said that the United States is close to signing a “phase one” trade deal with China and added in a speech to the Economic Club of New York that he will only accept a deal if it is good for this country and US workers.  Meanwhile, the US President on Tuesday renewed his criticism of the EU’s trade policies stating that it has terrible barriers that are unfair to US producers.  “European Union: very,very difficult,” he told the New York Economic Club.  “The barriers they have up are terrible, terrible.  In many ways, worse than China.”  The deadline will probably be extended however, investors remain nervous.  Meanwhile automakers around the world are awaiting a decision from U.S. President Donald Trump on whether he will impose up to 25% tariffs on U.S. car and auto part imports after a 180-day review period elapsed this week.

Moody’s Cuts Global Sovereign Rating Outlook for 2020

Rating Agency Moody cut its global sovereign outlook for 2020 to ‘negative’ from ‘stable’  on Monday saying that disruptive and unpredictable world politics would slow growth and increase the risk of economic or financial shocks.  Moody’s has issued downgrade warnings on Britain, South Africa, India and Mexico, Turkey and Hong Kong and said there were three main drivers behind the move.  Unpredictable politics and trade wars such as that of the US and China weaken open and commodity-exporting economies.  The hostile environment is also likely to damage global and national institutions which together with lower growth, raise the probability of crises.  In a report on the 142 countries and their $63.2 trillion in Sovereign debt, Moody’s said, “In an unpredictable environment, growth and credit risks are tilted to the downside.”  It further added, “unpredictable politics create an unpredictable economic and financial environment.” Besides the US-China trade war, other tensions that have negatively affected growth have also risen in the Gulf, between Japan and Korea, India and Pakistan, the US and the EU and Britain. The impact of trade tariffs on trade volumes is not always severe but the knock-on impact on investment and capital flow is likely to damage both near and medium-term growth prospects across all regions.   Moody’s now expect growth in the G20 group of top world economies to be around 2.6 percent next year after a 3 percent in 2018.

China Factory Prices And Inflation

China’s producer prices fell the most in more than three years in October, as the manufacturing sector weakened amid declining demand and the effect from the US-China trade war.  The producer price index (PPI) which is seen as a key indicator of corporate profitability fell 1.6 percent in October from a year earlier, marking the steepest decline since July 2016 according to National Bureau of Statistics Data on Saturday.  In contrast China’s consumer prices rose at their fastest pace in almost eight years, driven mainly by a surge in pork prices.  Core inflation, however, that excludes food and energy prices pressures remain robust.  According to the stat’s bureau pork prices more than doubled year-on-year in October, accounting for over 60 percent of the CPI increase.  Core CPI for October remained benign at 1.5 percent.  For the full year of 2019, China is aiming for a CPI target of around 3 percent.  It increased 2.6 percent in the January to October period.  October’s consumer price index (CPI) rose 3.8 percent year-in-year, the most since January 2012.  The factory deflation was accentuated by falling raw material prices, including the oil and gas extraction and ferrous metal smelting industries.  It is aligned with other indicators that show shrinking manufacturing activity in October.  The official Purchasing Managers’ Index (PMI) indicated contraction for the sixth straight month.


A positive move for Prime Minister Boris Johnson was when Nigel Farage’s Brexit Party pulled out of 317 Conservative-held seats in a bid to prevent opponents of Brexit controlling the next parliament.  This move dramatically increases the chances that Johnson will stay prime minister and implement his deal to take Britain out of the EU.  Farage said Trump would be “very, very pleased” to hear of the move, amid Johnson’s promise to go for a Canada-style trade deal with the EU.

UK Economy

The British economy grew at its slowest annual pace in nearly a decade during the three months to September as the global slowdown and worries over Brexit hit manufacturing and business investment, official figures showed on Monday.  While the economy avoided a recession the rebound in quarterly growth was smaller than expected.  Output fell in August and September. According to the Office for National Statistics, annual gross domestic product growth fell to 1 percent in the third quarter from 1.3 percent in the April-June period.  This is weaker than the eurozone which grew by 1.1 percent.   The quarterly growth rate recovered to 0.3 percent after contracting 0.2 percent in the three months to June.

British Cut Back On Shopping In October

British consumers have cut back on their shopping in October, according to official data which added to signs of weak overall economic growth. The office for National Statistics said on Thursday that in the three months to October, sales rose at the weakest pace in a year-and-a-half.  Monthly retail sales volumes unexpectedly fell down by 0.1 percent and when compared with October 2018, sales were up by 3.1 percent.  Looking at the three months to October, the ONS said retail sales rose by 0.2 percent compared with the previous three-month period, the weakest increase since the three months to April 2018.  Until recently consumers seem to have largely taken Brexit in their stride helped by weaker inflation and stronger growth in wages.  This helped at a time when companies have been cutting back on investment because of uncertainty about Brexit.  The political situation which has been dragging is making consumers more cautious.

German Investor Sentiment

German investor’s mood improved more than expected in November, according to a ZEW survey on Tuesday.  The research group indicated a more favourable outlook for Europe’s biggest economy after the recent developments in the trade war.  In its monthly survey ZEW said that economic sentiment among investors jumped to -2.1 from -22.8 in October. Meanwhile a separate gauge that measures investor assessments of the economy’s current conditions edged up to -24.7 from -25.3 in the previous month.  The German economy shrank by 0.1 percent in the second quarter, when household spending and state consumption were not enough to offset the sluggish exports.

German And French Economy

The German economy narrowly escaped an expected slip into recession in the third quarter as consumers, state spending and construction marked an 0.1 percent quarterly expansion.  On an annual basis, German gross domestic product expanded 0.5 percent from July through September after an 0.3 percent expansion in the previous three months, showed the seasonally adjusted figures from the Federal Statistics Office on Thursday.  Manufacturers are struggling with weaker foreign demand amid the trade war between the US and China and the business uncertainty from Brexit.  The automobile sector, a backbone of the German economy is also having trouble to adjust to stricter regulation following emission cheating scandals and a shift from combustion engines to electric cars.  Germany’s statistics office said that private households increased their spending from July through September while state spending and construction also supported overall growth.  The Office added that exports edged up on the quarter while imports remained broadly flat suggesting that the net trade could have been a positive impulse on the economy as well. Meanwhile, France has implemented a package to counter the “yellow vest” protests of the last year, with a package worth Euros 10 billion made up of tax breaks for low-income workers and pensioners this year, followed by a 5 billion euro cut income tax next year.  The European Commission expects the French economy to grow this year by 1.3 percent while in Germany an 0.4 percent expansion is expected.   Eurostat said on Thursday that the combined economy of the 19 countries sharing the euro grew 0.2 percent in the third quarter from the second quarter, giving a 1.2 percent year-on-year expansion.


The Socialists and far-left Unidas Podemos reached a preliminary coalition deal to form a government following a weekend where general election took place, delivering a highly fragmented parliament.  The fast preliminary agreement between two parties that recently refused to work together would require further steps, including bringing in smaller parties and agreeing cabinet positions.

ECB President Luis De Guindos

ECB Vice President Luis De Guindos said on Thursday that Europe faced only a “very low” risk of recession, but called on all eurozone governments not only those with fiscal surpluses to help survive the bloc’s economy.  He said that Europe’s growth remained “below potential” adding that the ECB needed to keep close “attention” to the situation.  He further said that the authorities needed to confront the risk of “Japanification” a prolonged period of low growth and low inflation, if measures were not taken to stimulate the economy. Guindos said that the ECB and other central banks around the world will need to expand their “toolkit” that is doing more than conventional monetary policy entails.  The ECB is currently working on reviewing its policy framework.  De Guindos said that low bank profitability was presently a main financial stability risk in the eurozone.  He acknowledged that it was a negative side-effect of the ECB’s sub-zero interest rates but stressed that “structural” problems like overcapacity in the banking system were more to blame than ECB policy.  He welcomed the German finance Minister’s recent support for a Europe-wide banking union.


On Monday concerns about slower economic growth and oil demand from the fallout of the trade war between the US and China sent prices lower.  US data showed that crude inventories at Cushing, the delivery point for WTI, fell about 1.2 million barrels in the week to 8th November said traders citing market intelligence firm Genscape.  Cushing inventories had grown for five weeks in a row through 1st November, according to government data.  On Tuesday oil rose further above $62 a barrel supported by hopes that US President Donald Trump may signal progress on trade talks with China and lower inventories at a US oil hub.  On Wednesday oil prices fell as prospects for a trade deal between the US and China faded, weighing on the outlook for the global economy and energy demand.  Meanwhile, according to the International Energy Agency, growth in global oil demand is expected to slow from 2025 as fuel efficiency improves and the use of electric vehicles increases, however consumption is unlikely to peak in the next two decades.

Currency Roundup

The dollar slide and global equity markets fell after the remarks by US President Donald Trump over the weekend, suggested that an end to the trade war with China was still not in sight. The US dollar which often acts as a safe-haven asset when political and economic uncertainty reins, was lower against the yen and the Swiss franc, the other safe-haven currencies.    The pound rallied as much as 1 percent to the dollar on Monday after Brexit Party leader Nigel Farage said that to better tackle anti-Brexit forces he was standing down candidates in seats won by the Conservatives in 2017. The US currency was firmer ahead of a key speech by US President Donald Trump later in the session.  Against the euro, sterling was a bit firmer on the day at around 85.76 pence but a tenth of a percent weaker than the six-month peak of 85.62 pence it hit on Monday.   On Tuesday the sterling inched down from a six-month high against the euro and was a bit softer against the dollar as the boost from the Brexit Party’s decision not to contest the previously conservative-held seats in Britain’s upcoming election faded.  On Wednesday the Swiss franc rallied to a one-month high against the euro as appetite for risky assets faltered due to the intensifying unrest in Hong Kong.  The pound was slightly weaker against the US dollar on Wednesday and stable against the euro, as weak economic data which should hurt sterling, is more than offset by the supportive developments in Britain.

Markets Wrap

A sell-off in southern European bond markets has gathered pace and pushed the yields higher.  Meanwhile the inconclusive election in Spain added to the uncertainty among debt investors.  European shares dropped on Monday as fresh round of protests in Hong Kong, worrying data from China and Moody’s warning on Britain’s sovereign debt made for a gloomy start to the week.  The London’s FTSE 100 led the declines among the major regional indices with a 0.6 percent fall.  Ratings firm Moody’s warned last Friday that it might cut its rating on Britain’s sovereign debt again, stating that neither of the main political parties in next month’s election was likely to tackle high borrowing levels which Brexit had made even harder to fix.      The US Treasury markets were closed for the Veterans Day holiday.  European shares climbed back to a four-year high on Tuesday as positive German investor sentiment data and upbeat earnings lifted the mood.  Spanish stocks however, lagged after socialist and far-left parties joined forces to form a coalition.  Whilst expectations for phase one of a trade deal this month supported stocks and riskier assets recently, European shares fell on Wednesday from four-year highs after US President Donald Trump threatened to “substantially” increase tariffs if China failed to agree a trade deal.  He also hit out at European Union trade policies.  A pan-European equity index opened half a percent lower coming-off from the four-year highs reached on Tuesday, when optimism before Trump’s speech and the better than expected economic indicators from Germany lifted stocks.

Malta:  International Trade In Goods:  September 2019

Provisional data for registered international trade recorded a trade deficit of EUR 331.3 million during September 2019 (September 2018:  EUR 172.3 million).  Both imports and exports experienced increases of EUR 172.4 million and EUR 13.3 million respectively.  The increase in the value of imports was primarily due to machinery and transport equipment, mineral fuels, lubricants and related materials and chemicals.  On the exports side chemicals accounted for the main increase.  Meanwhile for the first nine months of the year, the trade deficit widened by EUR 848.4 million when compared to the corresponding period of 2018, reaching EUR 3140.5 million.  Both imports and exports increased by EUR 959.4 million and EUR 110.9 million respectively.  Higher imports were recorded mainly in machinery and transport equipment.  The main increases in exports were registered in miscellaneous manufactured articles, chemicals, and machinery and transport equipment, partly outweighed by a decrease in mineral fuels, lubricants and related materials.  For the same period, imports from the EU reached EUR 3,856.7 million or 67.6 percent of total imports.  There was a decrease of EUR 378.3 million in imports from Euro area countries when compared to the same period in 2018.  Meanwhile, the main increases and decreases in imports were registered from the United Kingdom and Italy respectively.  The main increase in exports was directed to Spain whereas Libya registered the highest decrease.

Malta:  Outbound Tourism

During the third quarter of 2019, outbound tourist trips towards the EU and non-EU countries increased by 1.8 and 25.4 percent respectively, when compared to the same quarter in 2018.  Italy and the UK remained the most popular destinations.  Total estimated outlay by outbound tourists between July and September increased by 4.6 percent over the same quarter of 2018 and stood at Eur 201.5 million.    Between January to September 2019, total outbound tourist trips between January and September 2019 amounted to 513,2017 representing an increase of 6.2 percent over 2018.  Total estimated outlay by resident tourists stood at EUR 446.1 million representing 7.6 percent higher than recorded for the same period in 2018.



Antonella Mercieca

Client Relationship Manager


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


November 15th, 2019

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