“Trade Talks Between Trump And EU’s Jean-Claude Juncker”

Trade Talks Between Trump And EU’s Jean-Claude Juncker

US President Donald Trump agreed on Wednesday to refrain from imposing car tariffs while the two sides started negotiations to cut other trade barriers. This helps in the easing of a trade war.  After a meeting at the White House Trump and Juncker said that talks could also seek to “resolve” US tariffs on steel and aluminium.  The breakthrough seems to have come from the trade dispute between the United States and China.  China did not approve the US chipmaker Qualcomm Inc’s takeover of NXP semiconductors, likely shutting down the $44 billion deal.  Qualcomm needed Beijing’s okay because China accounts for nearly two-thirds of its revenue.  The deadline on Thursday passed without a word from China’s regulator and Qualcomm said on Wednesday it was dropping the bid.   Trump said that Europe agreed to increase the purchases of US liquefied natural gas and lower trade barriers to American soybeans.  This would help US farmers and the energy sector.  European governments and EU officials described the Trump-Juncker agreement as a major success.  The news resulted in a rally on Wall Street and US stocks climbed with the S&P 500 index rising the most in nearly two months to close the day within 1 percent of an all-time high.  Meanwhile the dollar fell, led by a surge in the euro due to the pressures by the deteriorating trade relations.

Eurozone Business Growth

Eurozone business growth slowed more than expected this month due to fears over the trade wars with the US and weaker global expansion according to a survey on Tuesday.    The IHS Markit’s Eurozone Composite Flash Purchasing Manager’s Index (PMI) which is seen as a good guide to economic health fell to 54.3 in July from 54.9 which is less than expected by a Reuter’s poll with a median of 54.8.  However, a figure of more than 50 indicates growth.  As stated by IHS Markit, if the latest PMIs are maintained they point to third quarter economic growth 0.4 percent   in the Eurozone.  In its last meeting the ECB guided markets to steady rates “through the summer” of 2019, when it also announced the stimulus scheme.  In July the private sector in Germany grew faster than expected, whilst French business growth eased more than predicted.

Currencies

On Tuesday the pound edged up above $1.31 as the dollar fell.  The gains from the pound were capped by concerns over Brexit and doubts about the economy.  Last week economic data and deepening political uncertainty over the government’s position on Brexit sent the pound to 10-month lows.   In view of the unclear sense of direction, sterling remains exposed to the movement in other currencies.  The pound also fell to a three week low against the yen on Monday after the Japanese yen received a boost from reports that the central bank was considering scaling back its stimulus.  Meanwhile, the pound rallied against the Dollar after President Trump criticised the Federal Reserve’s policy on raising interest rates and accused the European Union and China about manipulating their currencies.  The pound is set in for more volatility if the possibility of the UK exiting the EU without a trade deal occurs.

Yields

EU government debt has benefitted from a flight to safety on concerns around how trade tensions could impact global growth. On Tuesday Eurozone government debt yields hit their five week highs as the potential of fiscal stimulus from China and strong corporate earnings from the United States increased risk sentiment.  Yields have also been pushed higher by reports over the weekend that the central bank of Japan was debating over whether to scale back its monetary stimulus.

Global Markets

On Tuesday global markets hit their highest due to the stellar results from Google parent Alphabet Inc. and China’s promised fiscal action to support the world’s second-largest economy.   The prices of metals surged amid the stimulus signals in Beijing.  China’s offshore yuan hit a one-year low and Beijing’s government bond yields jumped after the cabinet said it would pursue with a more vigorous fiscal policy.  In the US the corporate earnings season is in full swing.  According to Thomson Reuters to date 83 percent of the 110 S&P 500 companies that have posted results have beaten profit estimates.

Oil

Top oil exporter Saudi Arabia said on Thursday that it will “temporarily halt” all oil shipments through the strategic Red Sea shipping lane of Bab al-Mandeb after an attack on two big oil tankers by Yemen’s Iran-aligned Houthi movement.   Brent crude oil prices moved higher on Thursday extending the gains into a third day after the news and about data that showed US inventories fell to a 3 ½ year low .  Prices were supported by official data that showed US crude oil last week tumbled more than expected to their lowest level since 2015.

Japan

Japan’s manufacturing sector has slowed down in July as the demand for exports weakened.  The Nikkei Japan Purchasing Managers Index for manufacturers for July showed a preliminary reading of 51.6 (June: 53), the lowest since November 2016.  Output came in at 52.4 down from 53.6 and the index for stocks of finished goods fell.  A reading above 50 indicates that the sector is expanding while one below 50 signals a contraction.  While the economy remains solid, other signs point to slowing growth.  Meanwhile, some sources said that the Bank of Japan will next week consider changes to its massive stimulus programme to make it more sustainable, such as allowing greater swings in interest rates and widening its stock-buying selection.  These would be the first since 2016.

Iran’s Plans

Iran will react with equal countermeasures if the US tries to block its oil exports, the foreign minister said on Tuesday.  Also the Islamic Republic’s armed forces chief said that US treats would draw an “unimaginable and regrettable” reaction.  US officials are stepping up diplomatic efforts to pressure countries to stop importing Iranian oil.  The relations between Tehran and Washington have worsened in recent days.  Armed Forces Chief of Staff said on Tuesday that Iran wants peace but will defend its interests in the Gulf.

Malta:  Full time Employment And Registered Unemployment

In February 2018, registered full-time employment increased by 6.5 per cent while part-time employment as a primary job increased by 2.8 per cent when compared to the same month last year.  Administrative and support activities and arts, entertainment and recreation contributed mostly to the increase in employment with 2,795 and 1,373 respectively when compared to February 2017.  Registered full-time employment in the private sector went up by 10,990 persons to 153,361 while public sector full-time employment increased by 1,289 persons to 46,626.  Meanwhile, in June, the number of persons registering for work stood at 1,778 decreasing by 26.9 percent when compared to the corresponding month in 2017.

Malta:  Retail Price Index, June 2018

In June 2018, the annual rate of inflation as measured by the Retail Price Index (RPI) was 0.97 percent, up from 0.95 percent in May 2018.  The largest upward impact on annual inflation was measured in the Food Index, while the largest downward impact was recorded in the Clothing and Footwear Index.

Malta: Central Bank of Malta Quarterly Review – Third Issue 2018

The Maltese economy continued to grow strongly during the first quarter of 2018, with real gross domestic product (GDP) rising by 4.4% on an annual basis, after growing by 4.6% in the last quarter of 2017.  Economic growth was driven by net exports.  Domestic demand contracted as increases in private and government consumption were offset by a decrease in gross fixed capital formation.  Growth was double that registered in the euro area as a whole.  The labour market remained robust, with strong increases in employment and further falls in the unemployment rate.  According to the Labour Force survey, the unemployment rate stood at 4.4% in the first quarter of 2018, below the structural measure of 4.8%.  Hence it continued to suggest a degree of tightness in the labour market.  The annual rate of inflation as measured by the Harmonised Index of Consumer Prices (HICP) stood at 1.3% in March, the same rate as registered in December.  HICP inflation in March was equal to the euro area average.   The current account of the balance of payments remained in surplus.

Fiat

Ex-Fiat CEO Marchionne dies at 66 after a 14 year career where he helped to rescue the car maker.  The announcement of the death of Marchionne came before the group reported a surprisingly heavy fall in profit.  He was replaced as chief executive last weekend after Fiat Chrysler said his condition had worsened.  Mr Marchionne rescued Fiat and Chrysler from bankruptcy after taking the wheel of the Italian carmaker in 2004 and he multiplied Fiat’s value 11 times through 14 years deal making.  He was due to step down in April next year.

Facebook

Facebook shares lost as much as quarter of their value on Wednesday after executives said that profit margins would plummet for several years due to the costs of improving privacy safeguards and slowing usage in the biggest advertising markets.  The second quarter results were the first indication that a new European privacy law and a succession of privacy scandals involving Cambridge Analytica and other app developers have hit Facebook’s business.  Facebook first reported revenue and user growth that missed expectations and then issued warnings about future growth and expenses.  The stock price wiped out as much as $150 billion in Market Capitalization and erased the stock gains since April.

Deutsche Bank

Deutsche Bank is trying to bounce back from three consecutive years of losses and has had negative headlines amongst which an abrupt management reshuffle, a downgrade by Standard & Poor and failing the US Federal Reserve’s stress test.  The bank’s share price are down 35 percent so far this year.  Chief Executive Officer Christian Sewing who took the top job in April, plans to restore profitability and restructure the bank.  Net profit in the second quarter was EUR 401 million down from EUR 466 million last year, whilst revenues were flat at EUR 6.6 billion, halting a steep decline from previous years.

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