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BOV Market Watch - Week 27th March 2020
27 Mar 2020
27th March 2020

Eurozone private sector contracts sharply on covid-19 outbreak. As the spread of the covid-19 epidemic intensified, the flash composite purchasing managers index (PMI) for the eurozone plummeted in March to a reading of 31.4 from 51.6 in February. That was a record low since the data series began in July 1998. The PMI reading was below the forecast of 38.8. Given its consumer-facing industries, such as travel, tourism and restaurants, the services component of the PMI was hit particularly hard, plunging to 28.4 from 52.6 in February. Any PMI reading below 50 indicates contracting conditions. "The March PMI is indicative of GDP slumping at a quarterly rate of around two percent, and clearly there's scope for the downturn to intensify further as even more draconian policies to deal with the virus are potentially implemented in coming months," said Chris Williamson, chief business economist at IHS Markit.

US jobless claims jump to 3.3 million, which is a record high. The much-awaited figures by the US Department of Labour show that a record number of Americans filed for unemployment benefits as a result of the coronavirus crisis. The number of Americans who filed for benefits last week hit the 3.3 million mark, according to the weekly report released on Thursday. That figure is quadruple the previous record and dwarfed the previous week's 282,000. The surge in weekly applications was a stunning reflection of the damage the viral outbreak is doing to the economy. Filings for unemployment aid generally reflect the pace of layoffs, which is set to accelerate as the US economy sinks into a recession.

UK consumer prices ease in February before virus outbreak. UK consumer price inflation eased marginally in February, data from the Office for National Statistics (ONS) showed on Wednesday. Consumer prices rose by 1.7 percent from last year after gaining 1.8 percent in January. Meanwhile, core inflation, that excludes volatile items such as food and energy, also rose to 1.7 percent from 1.6 percent in January. On a monthly basis, overall consumer prices registered a 0.4 percent increase. Another report from the ONS showed that output price rose by only 0.4 percent annually in February, which was the lowest rate since July 2016. Economists had forecast prices to climb by 0.9 percent after rising by one percent in January. Nonetheless, the annual rate has remained positive for 44 consecutive months.

China industrial profits plummet on covid-19 measures. China's industrial profits plummeted at the start of the year as the covid-19 epidemic weighed heavily on economic activity, data published by the National Bureau of Statistics (NBS) showed. Industrial profits declined by a whopping 38.3 percent during the January to February period from the same months last year. Profits of state-owned enterprises declined by 32.9 percent and that of private firms dropped by 36.6 percent. Amid drastic epidemic control measures, production as well as sales declined considerably. The sudden outbreak of covid-19 has severely impacted the production and operation of industrial enterprises, NBS official Zhang Weihua, said. Zhang added that the domestic epidemic situation has been effectively controlled and the production is resuming.

The Reserve Bank of India cut interest rates and announced steps to boost liquidity in a stimulus worth 3.2 percent of GDP to counter the economic impact of the covid-19 outbreak. The benchmark repurchase rate was cut by 75 basis points to 4.40 percent, Governor Shaktikanta Das said on Friday after an emergency meeting of the rate-setting committee. The Reserve Bank of India also cut the Cash Reserve Ratio, the amount of deposits lenders must set aside as reserves, by 100 basis points to three percent to boost liquidity.
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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).