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BOV Market Watch - Week ending 12th August 2022
12 Aug 2022

US inflation eased in July, not enough for the Fed. US inflation eased slightly in July, according to official data, potentially removing some pressure off the Federal Reserve (Fed) from raising interest rates as sharply as many analysts have been predicting, in order to bring inflation under control. According to a report issued on Wednesday by the U.S. Bureau of Labor Statistics, consumer prices rose by 8.5percent in July compared with a year earlier. That is down from a 9.1 percent year-over-year jump in June. On a monthly basis, prices were unchanged compared to June, the smallest increase in more than the last two years. Neel Kashkari, head of the Minneapolis Fed Bank, said, while the latest data is welcome "this is just the first hint that maybe inflation is starting to move in the right direction."

Eurozone investor morale edges up, recession still likely, survey shows. Investor morale in the eurozone rose slightly in August over July, with the rise being too small to dispel fears of a recession a survey showed on Monday. The Eurozone Sentix Investor Confidence index came in at -25.2 in August from -26.4 in May compared with an expectation of a -24.7 print. The current situation was up very slightly at -16.3 in August after falling to -16.5 in July, which was its lowest since March 2021. At the same time, the expectations index rose slightly to -33.8, though close to its July level, the lowest since December 2008. Despite the increase, a recession in the 19 countries that share the euro currency still seems very likely, Sentix said.

Hot weather booster retail sales in UK. Britain’s July heatwave boosted sales in shops and spending on “staycations” as higher cost of living forced buyers to cut back on travel outside the UK, a report showed. The British Retail Consortium (BRC) said on Tuesday that retail sales increased by 2.3 percent in July, ending three consecutive months of decline. One has to keep in mind that the figures are not adjusted for inflation, which the BRC said was around the highest since 2008, with the cost-of-living crisis continuing to hit UK households. Helen Dickinson, chief executive of the British Retail Consortium, said: “Sales improved in July as the heatwave boosted sales of hot weather essentials.

China consumer inflation hits two-year high. China’s consumer inflation gathered pace in July hitting the highest level in two years, as pork prices surged and weak consumer demand put a lid on overall prices. China’s consumer price index (CPI) increased by 2.7 percent on a year-on-year basis. This is the fastest growth since July 2020, but lower than the 2.9 percent expected by analysts. This rise was largely due to a pickup in food prices, which saw an increase of 6.3 percent year-on-year in July from 2.9 percent in June. Core CPI, which excludes volatile food and energy items, rose by 0.8 percent, slower than the one percent rise in June. Although China’s inflation is nearing the government's three percent target, it is still very low by global standards, economists at Capital Economics said. The headline inflation is close to a peak and should drop back over the coming quarters.

Australia's business confidence rises back above average in July. A measure of Australian business confidence rebounded in July on buoyant sales and profits notwithstanding rising interest rates and high inflation, though firms also reported record costs amid supply constraints. The NAB Group Economics business confidence index rose to +7 in July from +2 in June. The rise was mainly the result of an improvement in capacity utilization, which rose to a new record level of 86.7 percent from 84.9 percent in June, suggesting that the economy could be hitting the limit of its capacity. Overall, the survey suggests that, despite global and domestic economic headwinds, demand has remained supportive, as inflationary pressures continue to build, implying that inflation has not yet peaked.

 

 

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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).