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BOV Market Watch - Week Ending 17 November 2017
17 Nov 2017

Eurozone economic growth rate outstrips U.S. growth. The Eurozone economy kept up its robust growth momentum in the third quarter with the annual economic growth rate outstripping that of the U.S. The European Union statistics office, Eurostat, this week confirmed a preliminary estimate that the Eurozone’s gross domestic product (GDP) grew by 0.6 percent during the July to September period compared to the previous three months. On a year-on-year basis, GDP was 2.5 percent higher and exceeded the 2.3 percent year-on-year growth rate for the U.S. economy. This sets the stage for 2017 to be the best year for the currency area since the financial markets crash a decade ago. Germany was a major factor underpinning Europe’s growth engine (see below), but even some of the bloc’s laggards, such as Italy, showed signs of recovery.

U
.S. House of Representatives passes tax reform bill. The U.S. House of Representatives easily approved their tax reform bill to cut taxes on businesses and individuals. However, the final passage of the legislation is still uncertain. The House voted 227 to 205 in favour of their tax reform legislation known as the Tax Cuts and Jobs Act, with voting largely along party lines. The legislation reduces the corporate tax rate to 20 percent from 35 percent and lowers individual tax rates for low and middle-income earners to zero, 12 percent, 25 percent and 35 percent while maintaining the 39.6 percent rate for high-income Americans. The bill also nearly doubles the standard deduction. Republicans have argued that the proposal simplifies the tax code.

U.K. home sellers cut asking price.
The average asking price for a house in the U.K. was down by 0.8 percent on month in November, according to property tracking website Rightmove. This followed a 1.1 percent increase in October. On a yearly basis, prices advanced by 1.1 percent, slowing down from 1.4 percent in the previous month. Traditionally house sellers cut asking prices in the pre-Christmas period but this year they appear to be holding a collective autumn sale, said the property website. The price cut will be seen as further evidence that the U.K. real estate market has slowed dramatically, particularly in London where prices have been falling.

German economy heads for best year since 2011.
Germany's economic growth accelerated in the third quarter, according to data published by the Federal Statistical Office. This means that Europe’s largest economy on track for its best year since 2011. The 0.8 percent jump in GDP was an acceleration from the previous three months and topped the 0.6 percent forecast by economist. The expansion was driven by exports and capital investment, with a surplus in the balance of trade making a positive contribution. On a yearly basis, GDP climbed a calendar-adjusted 2.8 percent, following the 2.3 percent growth seen in the same quarter last year. Annual GDP was expected to climb again by 2.3 percent.

China investment growth slows.
China's industrial production and retail sales growth decelerated in October and property investment cooled, as measures taken to curb excessive debt and factory pollution weighed on activity. Industrial output grew 6.2 percent in October from a year earlier, the National Bureau of Statistics said this week, just missing analysts' estimates for a rise of 6.3 percent after increasing by 6.6 percent in September. On the other hand, retail sales growth eased to ten percent from 10.3 percent in September. Economists had forecast growth to increase to 10.5 percent. During January to October, fixed asset investment climbed 7.3 percent compared to 7.5 percent rise seen for nine months ended September.

The U.S. is poised to become the world's "undisputed" leader in oil production,
with growth in its output until 2025 to be the strongest seen by any country in the history of crude oil markets, the International Energy Agency predicted in its annual World Energy Outlook. Sparked by technological advances from its shale fields, U.S. production will see growth of eight million barrels per day during 2010-25, accounting for 80% of the increase in global supply over the period.

Record streak for Japanese growth.
Japan's economy expanded at an annualized pace of 1.4% in the third quarter, marking the seventh consecutive period of quarterly growth and the longest uninterrupted growth in more than a decade. This is welcome news for Prime Minister Shinzo Abe, who won a new a mandate from voters in a national election on October 22 to continue pushing the world's third-largest economy out of years of economic malaise.


 
Disclaimer. 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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