“US Congress approves Coronavirus Aid Package…”

On Monday US Congress approved an $892 billion coronavirus aid package after days of negotiations. President Donald Trump is expected to sign it into law.  The package will see direct payments made to most Americans and provide enhanced payments to unemployed people.  It will expand a small business lending program and direct money to schools, airlines, transit systems, and vaccine distribution.  The stimulus package, which is the first congressionally approved since April, comes as the pandemic is accelerating in the US, infecting more than 214,000 people every day and slowing the economic activity. 

US Third Quarter GDP Growth

The US economy grew at a record pace in the third quarter, fuelled by more than $3 trillion in pandemic relief as confirmed by the government on Tuesday.  It seems to have lost momentum amid new Coronavirus cases as the year ends.  In February, the economy plunged into recession and remains 3.4% below its level at the end of 2019.  With more than 17.78 million people infected and over 317,800 dead according to a Reuters figures of official data.  The Commerce Department said that gross domestic product rebounded at a 33.4% annualised rate last quarter in its third estimate of GDP.  Meanwhile the economy contracted at a 31.4% rate in the April-June quarter, the deepest since the government started keeping records in 1947.  In the last quarter twenty-one industries led by the automobile sector contributed to GDP growth. Mining was the only drag.  

UK Economy

Official data showed that the British economic recovery was a bit quicker than previously thought in the July-September period.  It further showed that government borrowing soared to pay for the coronavirus crisis.  Gross domestic product grew by a record 16% in the third quarter, revised up from a previous estimate of 15.5%, still not making up for its 18.8% slump in the April-June period when most of the economy was shut down.  The Office for National Statistics said that Britain borrowed a record 241 billion pounds in the first eight months of the financial year, nearly 190 billion pounds more than the previous year.  Public debt stood at almost 2.1 trillion pounds or 99.5% of annual economic output, the highest debt-to-GDP ratio since 1962, said the ONS.    

Brexit

Britain insisted on Sunday that the European Union should shift its position to open the way to a post-Brexit trade pact.  Negotiations are expected to continue on Monday beyond a Sunday deadline set by the European Parliament with a senior British government source describing them as “difficult” because of the “significant differences” in position. 

Oil

Oil prices tumbled nearly 3% on Monday due to the fast-spreading new coronavirus strain that has shut down much of Britain and led to worries over the impact on the recovery of fuel demand.   Brent crude settled down 2.6% at $50.91 a barrel while US West Texas Intermediate crude for delivery in January dropped 2.8% lower at $47.74 ahead of expiry.   

Market Wrap

European stocks dropped on Monday in their worst session in almost two months due to the rapid spread of the new strain of the coronavirus.  The pan-European STOXX 600 index dropped 2.3% its lowest close since mid-November after the UK imposed an effective lockdown reversing the restrictions which were supposed to be eased during Christmas as the new strain is up to 70% more transmissible than the original. A sharp drop in the pound limited losses in London’s FTSE to 1.7% while the main indices in Germany, France, Spain and Italy all nosedived close to 3%.  Spain’s IBEX posted its worst day in six-months.  Travel and leisure stocks had theirs worst day in three months.

Meanwhile, US benchmark Treasury yields dropped on Monday amid dented risk appetite and the boost in demand for safe-haven bonds.

London’s blue chips fell on Tuesday amid the fast-spreading new coronavirus strain that pushed more countries to shut their borders.  Meanwhile broader European markets recovered after the approval of the US aid package.  London’s FSTE 100 dropped 1.73% closing 6416.32, with materials and energy shares leading the declines.  Strict lockdowns went into effect in Britain to curb the spread the of the new strain which is said to be up 70% more transmissible than the original.  It triggered border bans and travel restrictions from several countries.  An impasse over a post-Brexit trade deal further dented the economic outlook.  France shut its border to arrivals of people and trucks from Britain, closing off one of the most important trade area with mainland Europe.  Hong Kong shares fell on Tuesday tracking the losses in its regional peers as investors feared of the highly infectious new coronavirus strain that hit Britain and which could hurt global economic recovery. 

Hong Kong shares settled higher on Wednesday amid gains in tech firms.  The UK FTSE 100 slipped on Wednesday due to a stronger pound that weighed on exporters, while midcap stocks rose as France agreed to lift a ban on freight from Britain.  European peers rebounded from a sell-off on fears abut the highly infectious coronavirus in Britain. The pan-European STOXX 600 index traded 0.4% a “final push” to strike a Brexit trade deal with Britain, although there are still rifts overfishing rights, said the block’s chief negotiator on Tuesday.  Meanwhile, France will reopen its borders to passengers from England to Wednesday ending a blockage intended to stop the spread of a new coronavirus variant that have held up thousands of lorries before Christmas. 

Currency Roundup

The dollar was firm on Tuesday however was below the peak hit on Monday as the new coronavirus strain in Britain hit the currencies. Against the euro the pound was down 0.25% at 91.11 pence after it fell to as much as 92.16 on Monday.  Official data that shows that the British economic recovery from the pandemic was faster than expected in the third quarter also helped to support the currency.   In Asia, sterling fell half a percentage whilst the Australian dollar dropped 0.4% and the euro was 0.2% softer at $1.2228.  China’s yuan was largely flat on Tuesday in thin trading ahead of the holidays against a wait-and-see backdrop as the new developments about the vaccine impacted optimism.  Sterling firmed on Wednesday after falling for three days as France lifted a partial border blockade whilst hopes of a post-Brexit trade deal increased. 

Malta:  Retail Price Index – November 2020

In November 2020 the annual rate of inflation as measured by the Retail Price index was 0.27% down from 0.35% in October 2020.  The largest upward impact on annual inflation was measured in the Food Index, while the largest downward impact was recorded in the Transport and Communication Index.  The Retail price index measures the monthly price changes in the cost of purchasing a representative basket of consumer goods and services and is closely linked with the cost-of living adjustment (COLA) increases and periodic rent payment adjustments. 

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