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BOV Market Watch for the week ending 11 August 2023
11 Aug 2023

US inflation gauge rises less than expected. A closely-monitored measure of US consumer prices increased only modestly for a second month, supporting the argument that the Federal Reserve can bring inflation under control without leading the country into a recession. July’s reading for the US consumer price index (CPI) rose a seasonally adjusted 0.2 percent, in line with the estimates, the Bureau of Labour Statistics said on Thursday. The annual rate was slightly below the 3.3 percent forecast albeit higher than in June and the first increase in more than a year. The core CPI, which excludes volatile food and energy prices, also rose by 0.2 percent for the month, meeting estimates and resulting to a 12-month rate of 4.7 percent, the lowest since October 2021.

Eurozone investor confidence improves for first time in four months. Confidence among investors in the eurozone improved for the first time in four months in August, even though the region is still assessed to be in recessionary mode. Survey results from the behavioural research institute Sentix showed on Monday that investor confidence in the currency bloc rebounded more than expected in August, with the Sentix index coming in at -18.9 compared to -22.5 in July, bringing the three consecutive months of declines to an end. Analysts had expected the index to fall to -23.4. The improvement was entirely driven by an increase in the future expectations indicator, which rose by 7.3 points to -17.3. However, Sentix notes that the figure still “underscores current recessionary conditions” and suggests that “the expected rate of deterioration is simply easing”. Commenting on the survey's findings Sentix Managing Director Patrick Hussy said "Germany, in particular, has become the sick man of the eurozone and is weighing heavily on the region”.

German inflation eases slightly in July. Final data from Destatis, German’s official statistics office, showed on Tuesday that Germany's inflation cooled as estimated in July but remained elevated as prices of food and energy increased. Inflation in Europe’s largest economy was 6.2 percent for the month of July, Destatis reported, confirming the preliminary figures it issued at the end of last month. Inflation in June was 6.4 percent and 6.1 percent in May. "The rate of inflation has fallen slightly but remains at a high level," said Destatis President Ruth Brand. In particular, food prices continue to have an "upward effect" on overall inflation, she added, with an increase of 11 percent year-on-year.

Chinese economy slips into deflation. China’s economy has tipped into deflation after consumer prices fell year-on-year in July for the first time in more than two years, official data shows. China’s consumer price index (CPI) fell by 0.3 percent in July on a year-on-year basis but was up by 0.2 percent when compared with June of this year, according to a report by the National Bureau of Statistics on Wednesday. The year-on-year CPI print for July was marginally better than expectations for a 0.4 percent decline. Having said this, it was the first year-on-year decline since early 2021. Slowing domestic spending puts into question predictions that the world’s second largest economy would stage a strong recovery after the removal of stringent Covid-19 restrictions.

India pauses rate hikes in surprise decision. The Reserve Bank of India (RBI) unexpectedly kept its key interest rate unchanged on Thursday after six hikes in a row, saying it was assessing the impact of recent global financial turbulence on India’s economy. Following the monetary policy meeting, RBI Governor Shaktikanta Das said that policymakers all agreed to keep the policy repo rate unchanged at 6.5 percent with preparedness to act, should the situation evolve. The pause in rate hikes was accompanied by hawkish language by the central bank, amid headline inflation rising to 4.8 percent in June, as a result of higher food prices and forecasts projecting the headline inflation will again supersede the upper limit of six percent in July, underpinned by rising prices tomatoes, pulses and cereals.

 

 

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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).