” UN Warns ahead of COP26…”

Greenhouse gas concentrations hit a record last year and the world is “way off track” in capping rising temperatures, said the United Nations on Monday.  A report by the UN World Meteorological Organisation (WMO) showed carbon dioxide levels surged to 413.2 parts per million in 2020, rising more than the average rate over the last decade despite a temporary dip in emissions during the COVID-19 lockdowns. WMO Secretary-General Petteri Taalas said the current rate of increase in heat-trapping gases would result in temperature rises “far in excess” of the 2015 Paris Agreement target of 1.5 degrees Celsius above the pre-industrial average this century.   According to Taalas, “We are way off track”.  He further added, “We need to revisit our industrial, energy and transport systems and whole way of life” calling for a “dramatic increase” in commitments at the COP26 conference beginning on Sunday.  Under countries’ current pledges, global emissions would be 16% higher in 2030 than they were in 2010, according to a separate analysis by the UN Framework Convention on Climate Change (UNFCCC).  That is far off the 45% reduction by 2030 that scientists state is necessary to cap warming at 1.5 degrees and avoid its most devastating impacts. 

The EU and the energy price spike

European Union countries failed to agree on a bloc-wide response to the surging energy prices in an emergency meeting of government ministers on Tuesday.  Some countries even seek a regulatory overhaul while others showed their opposition.  European gas prices have hit record highs this autumn and remain at high levels, urging most EU countries to respond with emergency measures like price  caps and subsidies to help cut consumer energy bills.  However, countries are struggling to agree on a longer-term plan to cushion against fossil-fuel price swings. Spain, France, the Czech Republic and Greece say that a bigger shake-up is required of the way EU energy markets work.  Spain made the case in Tuesday’s meeting for joint gas purchases by EU countries and proposed that individual countries should be able to opt out of the EUR’s current system of setting electricity prices.  Some other countries opposed the proposals as they are sceptical of an overhaul in EU energy laws in response to what they say is a short-term price crunch. Meanwhile, nine states including Germany, published a joint statement ahead of the meeting stating they would not support EU electricity market reforms.  

ECB Policy Unchanged

The European Central Bank kept policy unchanged on Thursday as widely expected.  The bank reaffirmed its plan to keep buying bonds to keep borrowing costs near record lows and promised to keep interest rates on hold for the years to come.  The ECB has long argued that the current spike in prices is transient and that the underlying inflation pressures are weak enough to require its support for the years to come.  Meanwhile, on Thursday European central bank President Christine Lagarde pushed back against market bets that runaway inflation would force a rate hike as early as next year, reaffirming the view that price pressures would ease by then. With the topic being the centre of the policy discussion, she said, ”We talked about inflation, inflation and inflation.” Lagarde identified higher energy prices, a global mismatch between recovering demand and supply, and one-off base effects such as the end of a cut in German sales taxes, as the three main factors temporarily driving eurozone inflation.  She further added, “While inflation will take longer to decline than previously expected, we expect these factors to ease in the course of next year… We continue to see inflation in the medium term below our 2% target.”   

German Inflation

German consumer prices rose more than expected in October, showed data on Tuesday, reflecting growing price pressures as Europe’s largest economy deals with supply shortages and high energy prices.  Consumer prices, which are harmonised in line with inflation data from other EU countries, rose by 4.6% year-on-year compared to 4.1% in September, said the Federal Statistics Office.  This was the highest reading recorded since January 1997, when the EU harmonised series began. 

Inflation Expectation in the EU

Eurozone inflation expectations among bond investors hit a new seven-year high of 2.0509% on Tuesday, exceeding the European Central Bank’s target amid soaring oil prices and supply chain crunches worldwide.  Oil prices reached multi-year highs this week on tight supply and strengthening fuel demand supporting prices that add to several months of high inflation readings in the eurozone.

Eurozone Banks

Eurozone banks have tightened access to mortgages in the three months to September and expect to continue doing so in the final quarter of the year, showed a European Central Bank survey on Tuesday.  The ECB’s Bank Lending Survey painted an unchanged picture for corporate borrowers, however the bar was raised for households looking for a home loan, whilst also facing less favourable mortgage terms.  The ECB said, “for housing loans, the net tightening was related to banks’ risk tolerance and their cost of funds and balance sheets constraints.”  “In the fourth quarter of 2021, banks expect a further net tightening of credit standards and, on balance no change in demand for loans to households for house purchases.  Amongst the eurozone’s largest economies, approval criteria for mortgages were tightened in Germany, Spain and France while they remained unchanged in Italy.  The ECB said, “In the largest euro area countries, overall terms and conditions for housing loans tightened in Germany and in France, whereas they eased in Spain and Italy.” “The narrowing of margins in the euro area was driven by Spain and France for average loans and by Italy for riskier loans, while German banks reported a widening of all margins,” it added. The ECB is broadly expected to wind down its Pandemic Emergency Purchase Programme in March but continues running its smaller, regular bond-buying scheme beyond that date.

UK’s Budget

British finance minister Rishi Sunak announced stronger economic growth and lower public borrowing forecasts as the country emerges from the COVID-19 pandemic.  He also vowed to protect households from rising inflation.  In his budget statement Sunak stated that the economy is likely to grow by 6.5% in 2021, faster than a forecast of 4% made in March when Britain was still in a coronavirus lockdown.  The 6.5% forecast was close to the International Monetary Fund’s estimate that British gross domestic product will grow by 6.8% in 2021, the fastest among Group of Seven nations after the country suffered the biggest slump in the G7 in 2020.  Sunak acknowledged the risks posed by rising inflation, much of which he blamed on problems in the global economy. He further announced further measures to ease a shortage of truck drivers which led to supply chain problems.

German Consumer Sentiment

German consumers kept their spirits high whilst heading into November despite rising inflation, as the mood improved for the second month in a row, according to a survey on Wednesday.  The GfK institute said its consumer sentiment index based on a survey of around 2,000 Germans rose to 0.9 points for November, from a revised 0.4 points a month earlier.  The institute however warned that the good feelings were unlikely to last if prices continued to rise.  Inflation accelerated at a higher pace than expected in September, German government data showed, rising by 4.1% year-on-year compared with 3.4% in August.  

Market Wrap

European stocks closed flat on Monday as gains in banks and commodity-linked sectors were offset by losses in industrial stocks amid rising bond yields and a deterioration in the telecom sector.  The pan-European STOXX 600 closed largely unchanged at 472.21 points on concerns over rising inflation and slowing economic growth also weighing on sentiment.  Mining and energy stocks rose 1.8% and 1% respectively boosted by oil prices at multi-year highs and a rebound in copper prices as a drop in Chinese inventories fuelled expectations of more buying.  Asian stocks largely rallied on Tuesday, following Wall Street’s record highs overnight, although fresh worries about China’s property sector weighed on investors’ sentiments.  European stocks hit more than two-months high on Tuesday ending just below record levels as strong results from companies such as UBS and others added to overall optimism about the third quarter earnings season.  The financial services sector climbed 0.9% as the world’s largest wealth manager, UBS posted its best quarterly profit since 2015, helped by robust trading activity.  The CAC 40 closed higher by 0.8% to 6,766.51, DAX closed 1.01% higher reaching 15,757.06 and FTSE 100 climbed 0.76% to close 7,277.62.  The latter closed higher for a third straight session boosted by consumer goods company Reckitt Benckiser after it lifted its sales forecast.   European travel and leisure stocks were the best performers for the day adding, 1.9%.  Meanwhile, in the US, the Dow Jones Industrial Average closed higher by 0.04% to 35,756.88, NASDAQ 100 climbed 1.33% to close at 15,559.49 and S&P 500 closed higher by 0.18% to close at 4,574.79. European stocks slipped on Wednesday with miners in the lead after concerns about Chinese intervention hit metal prices, while mixed corporate earnings reports kept investors on edge.  European miners dropped the most with a 1.4% drop as Chinese steel futures declined with raw material prices plunging amid government intervention to cool commodity prices.  Tech shares slipped and short-term Treasury yields jumped on Wednesday as investors expect inflation to boost interest rate hikes.  Overnight on Wall Street, the S&P 500 lost 0.51% from an all-time high of 4,574.79 reached on Tuesday, while the NASDAQ closed the session little unchanged, amid strong earnings from Microsoft and Google parent Alphabet.  Meanwhile other earnings reports showed the largest US manufacturers that include General Motors, General Electric, 3M and Beoing are facing logistics issues and higher costs due to global supply bottlenecks that are likely to persist into next year. 

Currency Roundup


Sterling rose slightly on Monday however remained within recent ranges as analysts said concerns about economic growth and inflation limited its gains amid expectations that the Bank of England will raise rates. Sterling was up 0.1% against the dollar at $1.3773, having dropped below $1.38 after Friday’s retail sales miss.  Against the euro, it was up around 0.3% at 84.34 pence per euro.  Sterling rose to a 20-month high against the euro on Tuesday, driven by diverging interest rate expectations for Britain and the eurozone, particularly due to data showing UK full-time earnings rising most since 2008.  So far this month sterling has rallied around 2% versus the euro and the dollar, with the euro also impacted by indications that the European Central Bank (ECB) will be among the last to raise rates in the developed world.    Sterling was little changed on Wednesday ahead of a half yearly update on the public finances and economic outlook from British finance minister Rishi Sunak.  Sterling firmed on Thursday against the euro and the dollar as investors assessed whether the Bank of England would proceed with an interest rate hike at the upcoming meetings or keep them on hold amid concerns related to economic growth.  Sterling touched 0.2% to $1.375 with the dollar on the back foot amid a recovery in market sentiment.  Meanwhile, against the euro, sterling was modestly firmer at 84.35 pence and holding off 20-month highs reached earlier this week on bets around diverging interest rate expectations. 


The dollar slipped on Tuesday however struggled to gain momentum.  Most major currency pairs little changed as investors waited for major central bank meetings later in the week and next.  The Bank of Canada met on Wednesday whilst the Bank of Japan and European Central Bank meetings  were on Thursday.  Meanwhile next week, the Reserve Bank of Australia meets on Tuesday, the US Federal Reserve on Wednesday and the Bank of England on Thursday.  The dollar rose 0.2% against the Japanese yen, holding the pair at 113.93, holding below the four-year high of 114.695 reached last week. 


The euro was up 0.1% at $1.162 on Tuesday as expectations that the European Central Bank will take a dovish approach when it meets on Thursday, has weakened the euro in recent sessions.  It dipped below $1.16 ahead of the European Central Bank meeting on Thursday as investors waited to hear policymakers’ views on the outlook for inflation. 


Gold prices dropped on Tuesday after a five session rally, as the dollar steadied and investors awaited key central bank meeting for any clues related to interest rate hikes amid rising inflation concerns.  Spot gold dropped 0.3% to $1,802 per ounce while US gold futures were down 0.1% at $1,804.9.  The dollar recovered from a recent pullback, making bullion more expensive to holders of other currencies.   Gold is often considered an inflation hedge.  Reduced stimulus and interest rate hikes push government bond yields up, increasing the opportunity cost of the non-interest bullion. Thursday saw gold prices rising, drawing support from softer US bond yields and the decision by the European Central Bank to keep policy unchanged as expected, reducing investor’s fear of an imminent interest rate hike.  Spot gold was up 0.3% to $1,802.60 per ounce and US gold futures gained 0.5% to $1,806.90. 


Oil prices reached multi-year highs on Monday before steadying amid tighter global supply and strengthening demand for fuel in the US and beyond.  Brent crude futures gained 46cents to settle at $85.99 a barrel.  The contract reaches a session high of $86.70 a barrel, its highest level since October, 2018.  US West Texas Intermediate crude futures were unchanged at $83.76 a barrel after reaching $85.41 a barrel, also the highest since October 2014.  Both benchmarks have increased by around 20% since the start of September.  Oil prices have also been bolstered by worries over coal and gas shortages in China, India and Europe, which spurred fuel switching to diesel and fuel oil for power.  


Bitcoin on Tuesday dropped to $62,742.65, around 0.6% having fallen below the all-time high of $67,016.50 it reached last week.  Wednesday saw the Bitcoin dropping to its lowest level in 1 ½ weeks taking losses since hitting a record high last week to around 12%.  The digital currency is however still on track for its best month since February.  Bitcoin, fell as much as 3.7% to $58,100, its lowest since 15 October.  It lost 12.1% since it hit an all-time high of $67,016 on 20 October.  Smaller coins such as Ethereum and ripple which tend to move in tandem with bitcoin also dropped between 3.5% and 7%. 

Malta:  Unemployment Rate – September 2021

The seasonally adjusted monthly unemployment rate for September 2021 stood at 3.2% dropping by 0.1% when compared to the previous month.  The unemployment rate for males was 0.7% while the rate for females stood at 2.4%.  During September 2021, the number of unemployed persons was 8,790, with the unemployed males and the 25 to 74 age group being the major contributors to the overall level of unemployment. The seasonally adjusted number of unemployed youths amounted to 2,804, whereas those aged between 25 and 74 years stood at 5,986. 

Antonella Mercieca

Client Relationship Manager


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


October 29th, 2021

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