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BOV Market Watch - Week ending 10 August 2018
10 Aug 2018

German industrial output declines in June as trade sanctions weigh on investment. German industrial production declined in June by slightly more than expected, led by a sharp drop in construction output. Total industrial output (which comprises output in manufacturing, energy and construction) fell by 0.9 percent from May, according to the German economics ministry. Economists had expected a 0.4 percent decline. However, compared with the same month last year, total production rose by a calendar-adjusted 2.5 percent. Output of capital goods - a measure of investment in the country - declined by 0.6 percent in June compared with May, while construction output fell by 3.2 percent. The soft German production figures follow a set of weak manufacturing orders indicating that mounting trade tension between the US and the EU is already weighing on corporate investments.

Halifax data supports evidence of stronger UK house prices. UK house prices picked up last month, rising at the fastest annual rate since November, according to Halifax. The lender said that prices in the three months to July rose by 3.3 percent from a year earlier, with the average cost of a house hitting a record £230,280. Prices in July rose by a stronger-than-expected 1.4 percent from June. Despite these rises, Halifax said housing activity remained "soft". Last week, the Bank of England raised its key interest rate to 0.75 percent from 0.5 percent, which is set to affect the 3.5 million people with variable mortgages. However, Halifax said it did not anticipate that the interest rate rise would have a "significant effect on either mortgage affordability or transaction volumes".

US jobs report misses estimates, jobless rate fell below four percent. The employment sector in the US cooled in July while the unemployment rate slipped back below four percent and wage increases remained subdued. This scenario reinforces a picture of steady labour-market growth in line with the Federal Reserve’s outlook for gradual interest rate hikes. In July, the US economy created 157,000 non-farm jobs, after an upwardly revised 248,000 increase in June, Labour Department figures showed. Analysts predicted a gain of 193,000 jobs in July. On the other hand, average hourly earnings increased by 2.7 percent from a year earlier, unchanged from June and in line with projections, while the jobless rate notched down to 3.9 percent, as forecasted. These data mark a solid start to the quarter and should keep the Federal Reserve on track for an interest rate hike in September.

China’s inflation rate accelerated in July but stays within target. China's inflation rate accelerated on higher food and non-food prices, but remained well within the government's target. Data from the National Bureau of Statistics showed that consumer price inflation rose to 2.1 percent in July, up from 1.9 percent in June. A similar higher rate was last seen in March. Inflation was forecast to rise to 2.1 percent. Nonetheless, inflation remains well below the government's full year target of around three percent. Core inflation, which excludes volatile items like food and energy, held steady at 1.9 percent in July. Food prices rose by 0.5 percent, faster than the 0.3 percent rise in June. Likewise, growth in non-food prices increased by 2.4 percent from 2.2 percent in June. Month-on-month, consumer prices rose by 0.3 percent, compared with a 0.1 percent drop in June. This was the first increase in five months. Meanwhile, China’s producer price inflation slowed in July, giving space for monetary policy adjustment.

IMF says India’s growth prospects look bright. Underpinned by the implementation of recent polices, India's economy is picking up and growth prospects look bright, according to International Monetary Fund (IMF). A spokesperson for the Fund, said that India's economy is forecast to pick up to about 7.3 percent for the fiscal year starting April 2018 from 6.7 percent the previous year. At the same time, inflation edged higher partly due to a reduction of economic slack. The goods and services tax, which was launched in July last year, should improve productivity and boost medium-term potential growth, while also creating room for the government to increase much needed social and infrastructure spending, the spokesperson said. India needs to keep up its reform efforts to maintain the growth and job engine running, he added.

Important Information
This documents is issued by Bank of Valletta p.l.c. (the Bank) for information purposes and personal use only. This document is not and should not be construed as an offer or recommendation to sell or solicitation of an offer or recommendation to purchase or subscribe for any investment. This information may not necessarily be appropriate and suitable to your particular investments requirements and risk profile. It is therefore recommended that if you require investment advice or wish to discuss the suitability of any investment decision, including if the financial instrument being considered in this research note carries a higher risk than your risk profile, you should immediately seek financial, legal or tax advice from your professional advisers as appropriate. Opinions, estimates and projections in this report constitute the current judgment of the author as of the date of this report. The Bank has obtained the information contained in this document from sources it believes to be reliable but it has not independently verified the information contained herein and therefore its accuracy cannot be guaranteed. The Bank makes no guarantees, representations or warranties and accepts no responsibility or liability as to the accuracy or completeness of the information contained in this document. The Bank has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated therein, or any opinion, projection, forecast or estimate set for the herein changes or subsequently becomes inaccurate. Income from an investment may fluctuate and the price or value of the financial instrument described in this report, either directly or indirectly, may rise or fall. Furthermore, past performance is not necessarily indicative of future results. Bank of Valletta p.l.c. is licensed to conduct investment services by the Malta Financial Services Authority.

 


 

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Bank of Valletta p.l.c. is a public limited company regulated by the MFSA and is licensed to carry out the business of banking and investment services in terms of the Banking Act (Cap. 371 of the Laws of Malta) and the Investment Services Act (Cap.370. of the Laws of Malta).