“Suspension Of Parliament By PM Johnson Was Unlawful…”

Suspension Of Parliament By PM Johnson Was Unlawful

After Parliament was suspended, or prorogued in the formal term, from 10th September to 14th October, the UK Supreme Court ruled on Tuesday that Prime Minister Boris Johnson’s decision to shut down parliament in the run-up to Brexit was unlawful.    The prorogation was approved by Queen Elizabeth, Britain’s politically neutral head of state, on the advice of the prime minister.  There was an unanimous decision by 11 judges that has undermined Johnson and gave legislators scope to oppose his promise to take Britain out of the EU on 31st October.  Meanwhile Opposition leaders demanded that he should resign immediately.  The Supreme Court President Brenda Hale said whilst reading out the decision, “The decision to advise Her Majesty to prorogue parliament was unlawful because it had the effect of frustrating or preventing the ability of parliament to carry out its constitutional functions without reasonable justification.”  The government declined immediate comment.  After the ruling, opposition lawmakers demanded Boris Johnson to resign, stating he misled the queen.  Whilst the ruling reinforced the belief that Britain was unlikely to leave the European Union without a deal by 31st October, other risks remain, including a split parliament and an election. Whilst parliament returned to sitting, Johnson’s opponents are seeking new ways to block him from pursuing a no-deal Brexit which could cause huge economic disruptions.  He repeatedly said he can strike a deal at an EU summit to be held on 17-18 October.  EU negotiators say that he has not made any new proposals to the EU that could break the deadlock over how to manage the Irish border after Brexit.  Meanwhile Parliament has already passed a law requiring him to request a Brexit deadline extension to 31 January should a deal was not reached.

Germany’s Private Sector: PMI

Markit’s flash composite Purchasing managers’ index (PMI) which tracks the manufacturing and services sectors that together account for more than two-thirds of the economy, fell to 49.1 from 51.7 in the previous month.  This is the first time since April 2013 that the reading fell below the 50 mark that separates growth from contraction.  Meanwhile a sub-index measuring the manufacturing sector plunged to 41.4, the lowest level in more than 10 years.   Phil Smith from IHS Markit said, “The economy is limping towards the final quarter of the year, and on its current trajectory, might not see any growth before the end of 2019.”  He further said that, “the manufacturing numbers are simply awful.”

German Business Morale

German business morale rose in September for the first time in six months but Europe’s largest economy is still likely slipping into recession amid the US-China trade conflict and Brexit, said the Ifo economic institute on Tuesday.  Ifo’s business climate index rose to 94.6 from 94.3 in August, after a run of five consecutive falls. Ifo’s current conditions index rose to 98.5 from 97.4 in August but its expectations index fell to 90.8 from 91.3.    After the release of the Ifo data, Economy Minister Peter Altmaier said Germany’s growth dynamics have deteriorated but insisted: “We are not in a recession”.  The German economy is affected by factors beyond its control, mainly weaker global growth, the trade conflict between the US and China and whether the UK could achieve an orderly exit from the European Union.

Business Activity In France

French business activity expanded at a slower than expected pace in September as the growth of the manufacturing sector eased to a near standstill, showed a survey on Monday.

Quarter 2 European Bond Trading

According to the Association for Financial Markets in Europe (AFME) on Wednesday, average daily trading volume in European government bond markets jumped 13 percent in the second quarter from a year earlier, driven by French, Finnish and Portuguese debt markets.  Whilst average daily government bond trading volumes in France jumped 37 percent year-on-year in the second quarter, those in Finland jumped 27 percent and Portuguese volumes soared 22 percent.  Concerns over weak economic growth and the trade war have pushed bond yields across Europe sharply lower this year, with eurozone bond market moving in negative yield territory.  Furthermore, the AFME said that a total of 8 billion euros in sovereign green bonds were issued in the second quarter, the greatest quarterly change to date.

US Consumer Confidence – September 2019

US consumer confidence fell by the most in nine months in September, far more than expected, as the economic outlook for America darkened amid the US-China trade war, according to a private sector report released on Tuesday.  According to the Conference Board, an industry group, said its index of consumer attitudes fell to 125.1 from downwardly revised 134.2 the month before.  September’s reading marks the largest shortfall relative to Wall Street’s expectations since 2010.   Meanwhile, the expectations index based on consumer’s short-term outlook for income, business and labour market conditions declined to 95.8 in September from 106.4 last month.

US- Formal Impeachment Inquiry

Democrats in the United States House of Representatives launched a formal impeachment inquiry into President Donald Trump on Tuesday.  This could change the 2020 presidential race.  House speaker Nancy Pelosi who had for months resisted calls from inside her party for Trump’s impeachment, announced her decision after meeting with members of her party on Tuesday.   Pelosi changed her view, following reports that Trump had pressured Ukrainian President Volodymyr Zelenskiy in a telephone call on 25th July to investigate Biden, the former US Vice president, and his son.  In a brief nationally televised statement, Pelosi accused Trump of seeking Ukraine’s help to smear Democratic presidential frontrunner Joe Biden ahead of the 2020 election.  She described the Republican president behaviour as a “betrayal of his oath of office, betrayal of our national security and betrayal of the integrity of our elections.”  Trump retaliated on Twitter calling the inquiry “Witch Hunt garbage”.  Trump has admitted that he discussed Biden and his son in the call, but denied  putting any pressure on the Ukrainian leader despite his administration’s withholding of nearly $400 million in military aid approved for Kiev by Congress.  Support from House members for impeachment has surged in recent days as anger increased over the Trump’s administration’s refusal to comply with a law requiring the release of a whistleblower’s complaint over the discussions with Ukraine.  On Tuesday the US Senate voted unanimously, with no objections from Trump’s fellow Republicans, for a resolution calling for the whistleblower’s report to be sent to Congress.  The Democratic-led US House of Representatives Intelligence Committee released a declassified version of the report.  The report said Trump acted to advance his personal political interests, and that White House officials intervened to “lockdown” evidence.  At the time of writing of this report the whistleblower has not yet been made public.

US – China Trade Talks

In a United Nations address, Trump accused China of unfair trade practices, including “massive” market barriers, currency manipulation and intellectual property theft, a few days after the officials from the two largest oil-consuming economies held inconclusive trade talks in Washington.  Trump said, “Hopefully we can reach an agreement that will be beneficial for both countries”.  He also said, “I will not accept a bad deal”.  Meanwhile, US President Donald Trump said on Wednesday that a deal to end a 15-month trade war with China could happen sooner than people think and that the Chinese were making bid agricultural purchases from the United States, including beef and pork.  US Trade Representative Robert Lighthizer said there was communication between the two sides and the Chinese would be in the United States for talks in early October.

US And Japan Sign Limited Trade Deal

US President Donald Trump and Japanese Prime Minister Shinzo Abe signed a limited trade deal on Wednesday that cuts tariffs on US farm goods, Japanese machine tools and other products whilst keeping the threat of higher US car duties off.  According to Trump, the first-phase deal would open Japanese markets to some $7 billion worth of US products annually, cutting Japanese tariffs on American beef, pork wheat and cheese.  The agreement does not cover trade in autos, but Abe said he had received reassurance from Trump that the United States would not impose previously threatened “Section 232” national security tariffs on Japanese car imports.  Autos are the biggest source of the $67 billion US trade deal and frequently Trump has complained that US automakers do not enjoy equal access to Japan’s market.  US trade representative Robert Lighthizer said that the two countries would tackle cars in a later round of negotiations expected to start next April.

Japan’s Factory Activity

Japanese manufacturing activity shrank at the fastest pace in seven months in September, highlighting the broad economic impact the US-China trade war has left on the economy.  The Jibun Bank Flash Japan Manufacturing Purchasing Managers’ Index (PMI) slipped to a seasonally adjusted 48.9 from a final 49.3 in the previous month, marking the quickest pace of deterioration since February.   The index stayed below the 50 threshold that separates contraction from expansion for the fifth straight month amid the Brexit uncertainty, the political upheaval in Hong Kong and trade frictions.  The PMI showed factory output and total new orders both contracted for the ninth straight month, while the backlog of work dropped to a level not seen since 2012.  The key activity gauges in the PMI survey painted a unpromising picture of the manufacturing sector and will bolster expectations for the Bank of Japan to add to its massive stimulus.  The BOJ has already indicated in the policy review last week for more support measures as early as its next policy meeting in October.  Meanwhile a separate survey the Jibun Bank Flash Japan Services PMI fell slightly in September, expanding at a pace of 52.8 on a seasonally adjusted basis, compared to a final 53.3 in the previous month.


The intercontinental Exchange ICE.N, the NYSE owner, listed its Bakkt bitcoin Futures on Monday.  The opening of Bakkt, ICE’s bitcoin futures platform, was cited for the steep gains earlier in the year.  Bakkt said that on Tuesday 166 contracts traded hands which according to traders and analysts are unimpressive volumes.  Meanwhile, Bitcoin which is the biggest cryptocurrency by market capitalisation, fell 2 percent to $8,364 in early trading.  It plunged as much as 15 percent on Tuesday briefly touching the $8,000 in its biggest one day drop since 16th July, before recovering some of its losses.  On Wednesday, Bitcoin struggled to recover from the three-month lows it reached a day earlier.


Oil ended up 1 percent higher on Monday after a volatile trading session as traders focused on when Saudi Arabia would be able to restore full output after the attacks on its facilities.  Oil dropped more than 2 percent on Tuesday to their lowest level since 14 September when Saudi Arabia crude facilities were attacked amid rekindled fears that the US-China trade conflict that has affected energy demand is far from over.  China is the world’s largest oil importer and second-largest crude user, whilst the United States is the largest consumer of oil.    Prices continued to extend their losses in after-hours trading as industry data showed an unexpected build in US crude stockpiles.  Oil prices dropped for a second day on Wednesday amid worries that fuel demand could fall after US President Donald Trump reignited the concerns about the global economic growth.

Currency Roundup

After the ruling by the UK Supreme Court, sterling initially hit a day’s high of $1.2479 before falling back to stand at $1.2454 up 0.2 percent on the day and only slightly stronger than before the court’s decision.  Tuesday saw the dollar firm as the euro struggled amid more signs of economic trouble in the eurozone, while the sterling tumbled around near one-week lows before the ruling of the Supreme Court.  The dollar rose slightly against the yen to 107.59 and inched higher against a basket of currencies to 98.664.  It was steady against the euro, which stayed under $1.10 mark where it fell on Monday following dismal readings on German manufacturing.   On Wednesday the pound fell 1 percent against the dollar, giving up the gains made in the previous day as investors priced many more months of Brexit and the risk of a general election.  China’s yuan firmed on Thursday on signs Beijing and Washington are heading to end their trade dispute while authorities are keen to keep the currency stable ahead of the republic’s 70th anniversary of the founding of the People’s Republic of China.   Chinese financial markets will be closed between the 1st and the 7th October.  Fresh optimism regarding the trade talks encouraged Asian equities and currencies as investors returned to riskier assets.

Markets Wrap

On Monday European shares edged lower after weaker than expected business activity data from France.  Investors were also cautious after mixed signals from the China-US trade talks.  A day after posting their biggest one-day drop since June, Tuesday saw Germany’s bond yields touching higher amid dismal business activity data.  Tuesday also saw US stocks dropping, with the S&P 500 and the NASDAQ poised for the biggest declines in a month, as calls for impeachment of Trump gained momentum while weak consumer confidence added to worries over the prolonged China-US trade war.  European shares climbed higher on Tuesday as gains were dominated by sectors perceived as defensive.  A day after the collapse of Thomas Cook, the British travel giant, the travel and leisure sector .SXTP gained another 0.5 percent with rival airlines and travel operators rising on expectations they will pick up the lost business.  On Wednesday, Japan’s Nikkei share average fell to a one-week low after the call by US lawmakers for an impeachment enquiry into President Donald Trump.  Furthermore, weak US consumer confidence data heightened worries over the China-US trade war.  Likewise, US shares slipped in volatile trade overnight, giving the S&P 500 its biggest one-day drop in a month.   Meanwhile, earlier on, major Wall Street indexes lost their footing when Trump used a harsh tone about China’s trade practices at the United Nations General Assembly.  Wednesday also saw European shares broadly falling, with technology stocks leading the losses as the impeachment inquiry over Trump raised political uncertainty in the US.  Eurozone government bond yields dropped as investors rushed to safe-haven assets in the wake of dismal economic data and heightened political uncertainty

Malta:  Retail Price Index – August 2019

In August 2019 the annual rate of inflation as measured by the Retail Price Index (RPI) was 1.75 percent up from 1.68 percent in July 2019.  The largest upward impact on annual inflation was recorded in the Food Index, while the largest downward impact was recorded in the Clothing and Footwear Index.


Antonella Mercieca

Client Relationship Manager


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


September 27th, 2019

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