“Two Resignations In The UK …”

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Two Resignations In The UK

Prime Minister Theresa May’s foreign minister Boris Johnson and Brexit negotiator David Davis resigned on Monday after May secured an agreement from senior ministers on an EU exit strategy.   They resigned in protest to May’s plans to keep close trade ties with the European Union after Britain leaves the bloc.  The two departures seem to have shattered the unity described by May last Friday, as she said she believed she had, after two years of wrangling, secured agreement on Britain’s biggest foreign and trading policy shift in almost half a century.  The resignations have encouraged distrust amongst many eurosceptics in May’s party, undermining her position and casting doubt over the Brexit process.  In his resignation letter Johnson complained about how “crucial decisions” had been postponed leading to what he described as a “semi-Brexit” with Britain unable to diverge or move away from rules and regulations set in Brussels.  He further said “in that respect we are truly headed for the status of colony.”  David called May’s plan dangerous and said it would give “to much away, too easily” to EU negotiators.  May replaced him with another Brexit campaigner, junior minister Dominic Raab.   Without having majority in parliament, May can only pass legislation if her party is united or if she borrows support from the opposition.

German Exports

German exports rose by more than imports in May, widening the trade surplus according to data released on Monday.  Seasonally adjusted exports rose by 1.8 percent on the month according to data from the Federal Statistics Office while imports rose by 0.7 percent.  Last week, finance minister Scholz warned that US President Donald Trump’s decision to impose tariffs on goods imported from trade partners like China and the European Union would damage everyone.  The German seasonally adjusted trade surplus widened to 20.3 billion euros in May from 19 billion euros in April.  The Current Account surplus of Germany which measures the flow of goods, services and investments, fell to 12.6 billion euros from 23.5 billion euros in April, according to unadjusted data.

ECB Minutes

According to the minutes published on Thursday the European Central Bank will keep rates at a record low for as long as needed to raise inflation, and its interest rate guidance should be seen as “open-ended” as concluded by policymakers in June.  The ECB guided markets to steady rates “through the summer” of 2019 at its meeting last month, when it announced it would shut a 2.6 trillion euro bond-buying programme in December, ending its unprecedented stimulus scheme. As shown in the minutes, policymakers at the meeting felt the need to stress that rates would move only if inflation continued to rise back towards the target rate of almost 2 percent.  With inflation on the rise and growth appearing to level off, rate setters decided on 14 June to cut bond buys from October and then shut the scheme in December, satisfied that protracted stimulus is boosting inflation, even if slower than expected.  While policymakers said they “expected” to end asset buys in December, they also said that given the prevailing uncertainty, it was prudent to keep the end of bond buys conditional on incoming data.  Unwinding the stimulus is a long process, with the biggest complications arising from the developing trade war with the United States, a populist challenge from Italy’s new government and softening export demand.

At NATO

As western leaders gathered in Brussels for a NATO Summit, US President Donald Trump on Wednesday accused Germany of being a “captive” of Russia as he wants Europeans to pay up more for their own defense.  In a public outburst, Trump told Nato Secretary-General Jens Stoltenberg that Germany was wrong to support news about the $11 billion Baltic Sea pipeline to import Russian gas, while being slow to meet targets for contributing to NATO defense spending that was intended to protect Europe from Russia.   In response to Trump’s comments, Chancellor Angela Merkel said that Germany was independent in its policy choices.   After the two-day summit in Brussels, Trump will meet President Vladimir Putin in Helsinki on Monday.

US Secretary Of State’s Visit In North Korean Capital

US Secretary of State Mike Pompeo has summed up his 27 hours in the North Korean capital as “productive” but the regime itself called the visit “regretful”.  In a statement of more than 1,200 words pusblished after Pompeo’s departure, a North Korean foreign ministry spokesman said that America “never mentioned the issue of establishing a peace regime on the Korean Peninsula, which is essential for defusing tension and preventing a war.

Replacement To Retiring Supreme Court Justice

President Donald Trump nominated Brett Kavanaugh for the US Supreme Court on Monday.  Kavanaugh will replace long-serving conservative Justice Anthony Kennedy, who announced his retirement on 27 June at age 81.  Kavanaugh is Trump’s second lifetime appointment to the nation’s highest judicial body in his 18 months in office.  He is well known in Washington and have been involved in some controversies in the past decades such as when he helped in the investigation of Democratic former President Bill Clinton in the 1990s and when he was on Republican George W Bush’s team in the Florida recount fight in the 2000 presidential election.  He also served as a senior official in Bush’s White House.

China

China accused the United States of bullying and warned that it would hit back after the Trump administration threatened with a 10 percent tariff on $200 billion of Chinese goods.  The move rattled markets.  The Chinese commerce ministry said it was shocked and would complain to the World Trade Organisation, however did not immediately say how Beijing would retaliate to the dispute.  On Tuesday US officials issued a list of thousands of Chinese goods to be hit with new tariffs.  The top items by value were furniture at $29 billion of imports in 2017, network routers worth $23 billion last year and computer components valuing $20 billion.  The list is subject to a two month public comment period.  The US Chamber of Commerce has supported Trump’s domestic tax cuts and efforts to reduce regulation of businesses, but does not back up the aggressive tariff policies taken by Trump.

Gold, Silver and Platinum

Gold edged up on Thursday after two sessions of declines over worries of the intensifying trade war between the US and China.  Spot gold was at $1,244 an ounce at one point while it slipped 1 percent to hit its lowest in over a week at $1,240.89.  On Thursday stocks and commodities recovered slightly as markets consolidated from the previous session’s losses on fears of trade wars.  Investors most often turn to bullion as a so called safe haven in times of economic and political uncertainty.  Meanwhile silver was 0.7 percent higher at $15.56 an ounce after declining earlier in the session to its lowest since mid-December at $15.72 an ounce.  Platinum was up 0.3 percent at $827.3 an ounce, after falling to an over one week low at $821.25 earlier, while palladium was 0.1 percent higher at $938.80 per ounce.

Dollar and US Inflation Data

The dollar rose to a six-month high against the yen and steadied against other major peers on Thursday after US inflation data reaffirmed expectations that the Federal Reserve will hike interest rates two more times this year.  US consumer prices recorded their largest increase in nearly 6 1/2 years in the year through June, while the monthly pace continued to suggest a steady build-up of inflation that could keep the Federal Reserve on a path of gradual interest rate increases.  The Labour Department said its Consumer Price Index edged up 0.1 percent last month on moderate gains in gasoline prices and sharp declines in the cost of apparel and hotel accommodation. Furthermore, other data on Thursday showed first-time applications for unemployment benefits dropped to a two month low last week as the labour market strengthened further.  In the 12 months through June the CPI increased 2.9 percent, which is the biggest increase since February 2012, after advancing 2.8 percent in May.

Turkish Lira

The Turkish lira hit record low this week reflecting deepening investor concern about monetary policy and economic management after President Tayyip Erdogan appointed his son-in-law as finance minister this week.  Such a move increased concerns that the president will look to exercise greater influence over monetary policy.  The currency lost more than a fifth of its value against the dollar this year, pushing inflation to its highest in 14 years and squeezing dollar-indebted companies across the economy.  Erdogan has described high interest rates as the “mother of all evil” and wants lower borrowing costs to keep cheap credit flowing to the construction sector and spur economic growth.  Investors are after decisive rate hikes to rein inflation that hit more than 15 percent last month.  The central bank’s monetary policy committee which has raised rates by 500 basis points since April in an effort to put a floor under the currency, shall meet next on 24th July.

Market Update

The S&P500 stock index hit a four-month high on Tuesday from higher oil prices and strong earnings, while the US dollar rose against the Japanese yen as investors bought riskier assets.  Share markets worldwide remained at their three week highs supported by optimism about earnings of the US Company and the notion that global economic growth can withstand trade tensions.  Second quarter US corporate results start this week  and are expected to show earnings growth of over 20 percent across all sectors as a result of the recent tax cuts, high oil prices and robust economic growth.

Oil 

Energy shares were lifted by oil prices, as they increased due to growing supply outages as Norway shut one oilfield amid a worker strike and Libya said production fell by more than half in recent months.  Brent crude was almost 20 percent higher this year and traded at $ 78.71 recently. On Wednesday Global benchmark Brent crude oil had its biggest one-day drop in two years on Wednesday as escalating US-China trade tensions threatened to hurt oil demand, and news that Libya would reopen its ports raised expectations of growing supply.  The sell-off started early in the session after Libya’s National Oil Company said it would reopen ports which had been closed since late June.

Malta:  Real GDP Expected To Increase by 5.4 percent in 2018

Malta’s real GDP is forecast to increase by 5.4 percent in 2018 and 5 percent in 2019, according to the European Commission’s Summer 2018 Economic Forecast for Malta.  The report noted how real GDP rose by 6.4 percent in 2017 one of the highest growth rates within the EU, driven by net exports, reflecting sustained export growth combined with a contraction in imports.  It further added that growth is to remain robust but to moderate over the forecast horizon.  The main driver of growth in the second half 2018 is set to be domestic demand.  Investment is expected to recover strongly in 2019, supported by projects in health, technology and telecoms sectors.  The robust growth rate of residential investment is set to moderate in line with the expected slowdown in population growth.  Furthermore, economic downturn is expected to further support employment creation, on the back of record-low unemployment and increasing labour supply (arising from the inflows of foreign workers and the rising participation of women in the labour market).  The report concluded by stating that regulated prices in the electricity and moderate wage dynamics have helped keep inflation slightly below the euro area average.

Population in Malta

During 2017, the population increased in nineteen EU member states while decreased in nine according to Eurostat.  The largest increase was observed in Malta (32.9 per 1,000 residents) ahead of Luxembourg, Sweden, Ireland and Cyprus. In total, the population of EU increased by 1.1 million people during the year 2017.   Malta accounts for just 0.1 percent of the EU’s population.

Malta’s Cruise Passengers Fuel Tourist Arrival Growth In Malta

Malta and Cyprus seem to have benefited from spurring cruise line traffic, with tourist increases of 18 percent and 15 percent respectively, over the same period in 2017, according to the European Travel Commission’s quarterly report.

Malta-Based Blockchain Company Launches World’s First Initial Convertible Coin Offering

Palladium a Malta-based blockchain company has launched the world’s first fully regulated Initial Convertible Coin Offering (ICCO) to give investors peace of mind and stake in the future of virtual currencies.  The issuance of a tokenised convertible warrant- which is regulated by a prospectus approved by the MFSA and subject to stringent EU rules will give investors the right to convert the tokens into shares of Palladium three years after the issue date.  According to Prof. Paolo Catalfamo founder and chairman of Palladium more than 100 job opportunities are expected to be created with this project and is expected to bridge the gap between the traditional financial services and cryptocurrencies.

 

Antonella Mercieca

Client Relationship Manager

Source:

Reuters, Bloomberg, https://www.maltachamber.org.mt/

Date:

July 13th, 2018


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