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BOV Market Watch - Week Ending 21 April 2017
21 Apr 2017
IMF raises global growth forecast but warns against protectionism. The International Monetary Fund (IMF) raised its 2017 global growth forecast citing improved manufacturing and trade gains in Europe, Japan and China. At the same time, the Fund cautioned that protectionism threatens a broad-based recovery. World economic growth is set to expand by 3.5 percent in 2017. This marks an increase from the 3.4 percent growth that the Fund projected in January. The IMF anticipates that chronically weak advanced economies will benefit from a cyclical recovery in global manufacturing and trade that started to gain momentum last summer. The IMF raised Japan’s 2017 growth projection by 0.4 percent to 1.2 percent. Meanwhile, China and the Eurozone saw their growth projections rise by 0.1 percent each to 1.7 percent and 6.6 percent respectively.


Beige book detect modest economic growth, tighter jobs market. The Federal Reserve’s Beige Book said that the US economy continued to grow in all twelve Fed districts. The report said that the rate of growth was equally divided between modest and moderate economic growth in the past few months. “In addition, the pickup was evident to varying degrees across economic sectors”. Modest wage pressures increased during the most recent review period. On the labour market, “a larger number of firms mentioned high turnover rates and more difficulty in retaining workers”. The Beige Book also reported that inflation was modest, with selling prices climbing “only slightly”. These marginal increases support recent inflation data.

US housing starts tumble in March. A report released by the Commerce Department revealed that new residential construction in the US fell by 6.8 percent in March, even though the report showed a rebound in building permits. The Commerce Department said housing fell last month to a seasonally adjusted rate of 1.215 million following strong gains in February. Analysts projected a decline of two percent to a rate of 1.262 million units from the 1.288 initially reported in February. The larger than expected decline in housing starts reflected significant falls in both single-family and multi-family starts. The Commerce Department also said that building permits, an indicator of future home construction, rose 3.6 percent in March to an annual rate of 1.26 million.
Eurozone consumer confidence jumps in April. According to figures published this week by the European Commission showed that consumer confidence in the currency union strengthened significantly by 1.4 points to -3.6 in April from a final March reading of -5.0. The reading was better than the consensus estimates of -4.8. In the European Union as a whole, the corresponding indicator rose by 0.8 point to -3.4 in March. Following a minimal decline in confidence in February, the index was at its highest since the financial crisis. Improved consumer confidence indicates that wage growth may also have improved. European Central Bank Chief Economist Peter Praet said, “the economic recovery is gaining momentum” and “there may be some upside risk in the very short term”. 

Theresa May calls for snap election. British Prime Minister Theresa May has called for a snap election in the hope that her Conservative Party would significantly increase its majority in parliament. This would consolidate her government’s ability to negotiate a good and proper Brexit, and “remove the risk of uncertainty and instability and continue to give the country the strong and stable leadership it demands”. The election will give the British people the option to choose the party they wish to deal with the Brexit negotiations and lead the UK after leaving the EU. May said, “at this moment of enormous national significance, there should be unity in Westminster, but instead there is division”.

China GDP growth exceeds government target. Data released this week showed that the Chinese economy grew by 6.9 percent in the first quarter of 2017, higher than the 6.8 percent growth registered in the last quarter of 2016 due to an increase in infrastructure investment and exports. Gross Domestic Product came in at 18.07 trillion yuan ($2.63 trillion) in the first quarter. China’s National Bureau of Statistics said “the national economy maintained the momentum of steady and sound development from the second half of last year, getting off to a good start in 2017 and laying a solid foundation for accomplishing the whole-year growth target”. The government has lowered this year’s growth target to 6.5 percent.

Turkey’s Erdoğan clinches victory in constitutional referendum. The Turkish president, Recep Tayyip Erdoğan, has achieved victory in a historic referendum on a package of constitutional amendments that will grant him sweeping new powers. The constitutional change give Mr Erdoğan, a controversial figure in both Turkish and European politics, significant powers, making him the most powerful president since Mustafa Kemal Ataturk, the founder of Turkey.


Disclaimer. This document is issued by Bank of Valletta p.l.c. (the Bank) for information purposes only and is not intended for dissemination in the general media. 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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