“UK Lawmakers Approved Legislation….”

UK Lawmakers Approved Legislation

On Tuesday lawmakers approved legislation that will allow Britain to leave the European Union on 31 January with an exit deal.  They voted 330 to 231 in favour of the European Union (Withdrawal Agreement) Bill, that implements an exit deal agreed with the EU last year.  This paves the way to an end to the concerns of an immediate disorderly exit.   The bill will now go to the parliament’s upper chamber and is expected to become law in the coming weeks.

 UK Car Sales

Britain is Europe’s second-largest market for new vehicles and figures released on Monday indicate that households are more cautious over their spending although unemployment is low and wages rose.  Car Sales in Britain fell last year to its lowest since 2013 as consumers held back on their purchases amid increased restrictions on diesel vehicles, ongoing economic uncertainty due to Brexit that affected sales.  According to the Society of Motor Manufacturers and Traders (SMMT) new car registrations dropped by 2 percent in 2019 to 2.31 million, the third annual fall since sales peaked at 2.69 million in 2016.

Eurozone Inflation

According to Eurostat, on Tuesday inflation in the 19 countries who share the euro, rose to 1.3 percent as expected in December from 1 percent a month earlier, amid rebounded energy prices and an increase in the cost of food products.  As inflation remained below its nearly 2 percent target, the ECB has engaged in unprecedented stimulus for years and weak economic growth has increased the risk that further help from the ECB will be needed before there are any price pressure build up.  Prices excluding foods and energy costs, which is an underlying gauge closely watched by the ECB’s policymakers, held at 1.4 percent last month while an even narrower gauge that excludes alcohol and tobacco prices, was unchanged at 1.3 percent.

United States

US – Trade Deficit

The US trade deficit fell to a more than three-year low in November as imports declined further likely effected by the trade war with China and exports rebounded.  The Commerce Department said that the trade deficit decreased 8.2 percent to $43.1 billion, which is the smallest since October 2016.  Meanwhile, the percentage drop was the largest since January.  The goods trade deficit with China, dropped 15.7 percent to $26.4 billion, with imports dropping 9.2 percent and exports jumping 13.7 percent.  Meanwhile the goods trade gap with the EU fell 20.2 percent to $13.1 billion.

US – Non-Manufacturing Activity Index

In a separate report on Tuesday the Institute for Supply Management (ISM) said that its non-manufacturing activity index increased to 55 last month from 53.9 in November. A reading above 50 indicates expansion in the services sector that accounts for more than two-thirds of US economic activity.  The report came about after a survey by ISM last week that measures national factory activity dropping in December to its lowest level since June 2009.  The index has contracted for five straight months.

US – Consumer Goods And Capital Goods Imports

The goods trade deficit declined $3.7 billion to $75.3 billion in November, the smallest since March 2017.  In November, goods imports dropped 1.4 percent to $201.1 billion, declining for a third straight month.  Consumer goods imports fell $1 billion amid declines in cell phones, household items, artwork and other collectibles.  Capital Goods imports dropped $1.2 billion in November, reflecting decreases in civilian aircraft and computers.  Crude oil imports dropped 166.4 million barrels, the lowest since February 1992, from 188.3 million barrels in October.  Meanwhile, motor vehicle and parts imports rose $1.1 billion.  Goods exports rose 0.7 percent to $137.2 billion in November, boosted by an $0.6 billion increase in shipments of capital goods.  Consumer goods exports advanced $0.5 billion.  The goods trade deficit in November was the smallest since October 2016.

US – Weekly Jobless Claims

New applications for US jobless benefits fell more than expected last week, however, labour seems to be cooling as the number of Americans on unemployment rolls increased to more than a 1 ½ year high at the end of 2019.  According to the Labour Department, initial claims for state unemployment benefits dropped 9,000 to a seasonally adjusted 214,000 for the week ended 4th January.  US financial markets did not move much amid politics that dominated sentiment.  Stocks on Wall Street rose with the main indexes reaching record highs after the US and Iran moved away from all-out conflict.

Iraq And US Conflict

Iraq launched missiles on two bases in Iraq early on Wednesday in retaliation for the US drone strike that killed an Iranian commander last week and stoked the fears of a Middle East war.  On Sunday Iran distanced itself from the 2015 nuclear agreement with world powers, which the United States withdrew from in 2018, stating it would continue to cooperate with the UN nuclear watchdog but would respect no limits to its uranium enrichment work.

Trade Deal Between US And China

On 31 December Donald Trump said that the Phase 1 deal with China would be signed on 15 January at the White House.  He also said that he would sign the deal with “high level representatives of China” and that he would later travel to Beijing to begin talks for the next phase.  Infact, China’s Vice Premier Liu He, who is the head of the country’s negotiation team in the US-China trade talks, will sign a “Phase 1” deal in Washington next week, said the commerce ministry on Thursday.  Liu He will visit Washington on 13-15 January.  This raises the hopes that a prolonged trade war between the US and China will come to an end.  The Phase 1 deal reached last month, is expected to cut tariffs and boost Chinese purchases of US farm, energy and manufactured goods.  Furthermore, disputes over intellectual property will be tackled.  No version of the text has yet been made public.

Market Review

European shares dropped on Monday as investors moved away from the risky assets amid the escalating tension between the US and Iran.  Asian shares also fell sharply on Monday as Iran and the United States traded threats after a US air strike on 3 January killed a top Iranian commander.  Meanwhile, things became calmer as the session ended without any new aggression.  On Tuesday Wall Street chose to hope for the best, the Dow Jones rose 0.24 percent, the S&P 500 gained 0.35 percent and the NASDAQ 0.56 percent.  Asian shares rebounded on Tuesday as investors re-considered the risk of the conflict between the US and Iran.  European shares rebounded on Tuesday as the concerns over the US-Iran standoff eased.  Meanwhile technology stocks tracked their Wall Street peers higher.  Eurozone bond yields dropped on Wednesday as investors sought safety following the Iranian missile strikes on US forces in Iraq whilst European shares dropped.  German stocks dropped as much as 0.9 percent after the country’s industrial orders fell unexpectedly in November amid weak foreign demand and a slack of major contracts.  Europe’s largest economy has been struggling due to slowing factory activity over the past year amid global trade and political unrest.  Most European sub-indexes were lower and real estate stocks lead the declines.  Europe’s travel and leisure sector also dipped amid the recent strength in oil prices that pressured major airline stocks.   While shares dropped, the price of gold rose and the US Treasury yields dropped, with the 10-year bond falling around 4 basis points.  Meanwhile the drop in the eurozone bond yields was limited.  Thursday saw US stocks hit record highs as the tensions in the Middle East eased, the optimism over the Phase 1 deal rose and several brokers boosted the price targets of some high-profile companies.  After a better-than expected private payrolls report on Wednesday, investors are waiting for Friday’s jobs report and fourth quarter reports.  Big US banks will kick off the quarterly earnings season next week.  European shares on Thursday also touched record high after the US and Iran backed away from military escalation and investors moved to riskier assets on hopes on the US-China deal.  Stocks in Germany jumped 1.4 percent to a near two-year high as industrial production rose more than expected in November.  A separate report has however shown that the country’s exports sank well below expectations.

Currency Roundup

The yuan fell marginally on Monday as investors waited for more concrete details about the Sino-US trade deal which is scheduled for mid-month.  The safe-haven yen and the Swiss Franc rose against the dollar on Monday amid the broader conflict in the Middle East after the US killed Iran’s most prominent military commander.  Yen surged to a three-month high around 107.75 versus the US dollar.  The Swiss franc which is another safe-haven currency rose against the dollar which fell 0.2 percent to 0.9701 franc.  The dollar index was down 0.1 percent at 96.714.  The greenback is at times considered as a safe-haven asset given that most central banks hold it as their main reserve currency and many companies globally trade using dollars.   Trading in the euro/dollar, which are the most traded currency, were relatively calm.  Meanwhile currencies such as the Australian dollar, New Zealand dollar and the Swedish crown which are sensitive to global risk appetite were weaker.    The pound was trading up 0.5 percent at $1.3144 ahead of a crucial week when lawmakers are due to reconvene to debate the Brexit deal.

Oil

Oil prices rose earlier in the week following fears of an escalating conflict and potential Middle East supply disruptions after the strike on 3rd January in Baghdad that killed Iran’s Qassem Soleimani.  Prices on Tuesday dropped the gains of the previous two sessions as investors took into account the likelihood of the Middle East supply disruptions amid the killing by the US of a top Iranian military commander.  According to a Reuter’s survey on Monday, OPEC members pumped 29.5 million barrels per day last month, which is 50,000 bpd from November’s revised figure.  On Monday the Commodity Futures Trading Commission said that before Soleimani’s death, investors were increasing their bullish West Texas Intermediate Holdings, and money managers were raising their net-long positions in the week to 31 December.  Wednesday saw oil prices steadier by 1 percent.  Prices gave up most of their gains as analysts said market tension could ease as long as oil production facilities were unaffected by the attacks.

Gold

On Monday gold prices rose near to a seven-year high to $1575.70 per ounce as the commodity attracted safe-haven demand amid escalating tensions between the US and Iran.  The Bullion is seen as an alternative investment during times of political unrest and financial uncertainty.  Since the killing of the top Iranian military commander on Friday, gold has gained 3 percent prompting investors to move away from risky assets.  Wednesday also saw Gold surging more than 2 percent breaking the $1,600 level for the first time in nearly seven years.  Prices later edged off their highs, but remained well supported, after tweets from US President Donald Trump and Iran’s foreign minister easing concerns over an immediate further escalation in the conflict.

Malta:  Unemployment Rate – November 2019

In November 2019 the seasonally adjusted monthly unemployment rate was 3.5 percent, an 0.1 percent increase from the previous month and down from 3.6 percent when compared to November 2018.

Malta:  International Trade in Goods – November 2019

During the period from January to November 2019, the trade deficit widened by Eur 813.7 million, when compared to the corresponding period of 2018 reaching EUR 3,661.2 million.  Both imports and exports increased by Eur 1,008.1 million and EUR 194.4 million respectively.  Higher imports were recorded in machinery, transport equipment and chemicals which were partly outweighed by a decrease in mineral fuels, lubricants and related materials.  Meanwhile increases in exports were registered in chemicals, miscellaneous manufactured articles, machinery and transport equipment which were also partly outweighed by minerals, fuels, lubricants and related materials.

Antonella Mercieca

Client Relationship Manager

Source:

Reuters, https://nso.gov.mt

Date:

January 10th, 2020


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