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BOV Market Watch - Week Ending 18 January 2019
18 Jan 2019

German economic growth at five-year low in 2018.  Germany's economy grew for the ninth year in a row in 2018, albeit witnessing sluggish growth in 2018, according to flash data published this week by German statistics agency Destatis. Gross domestic product (GDP) in Europe’s largest economy grew by 1.5 percent in 2018, compared with 2.2 percent in 2017, thereby showing the weakest growth rate in five years. Destatis noted that “growth has lost momentum". A weaker global economy, poorer sales in the automobile industry, the flu epidemic, strikes, as well as low water levels due to the continuing drought also impacted economic activity, according to the Economy ministry.

Eurozone inflation confirmed at eight-month low in December. The single currency’s headline Consumer Price Index (CPI) met economists’ forecasts in December as it dropped to 1.6 percent from 1.9 percent in November, according to the EU’s statistical office Eurostat. But the month-on-month CPI remained flat, against expectations that it would fall 0.2 percent. The latest inflation rate was the lowest since April, when the rate was 1.3 percent. Core inflation, which excludes volatile items such as energy, food, alcohol and tobacco, was one percent in December, unchanged from November. Both the headline figure as well as the core figure were in line with the flash estimates released on January 4.

US labour market tightens, wages grow moderately: Fed Beige Book. Eight of 12 Federal Reserve districts reported modest to moderate growth in December and early January, according to the Fed’s Beige Book released this week. Furthermore labour markets tightened across the US as businesses struggled to find workers at any skill level and wages generally grew moderately. However many districts reported that contacts “had become less optimistic” in response to a litany of woes: increased financial-market volatility, rising short-term interest rates, falling energy prices and elevated trade and political uncertainty, the report said. The Beige Book is snapshot of the economy gleaned by the Fed from discussions with business contacts.

Brexit pessimism feeds into UK home sale expectations. The UK housing market is set remain lacklustre over the coming three months, as sales expectations plunged to a two-decade low, amid a weaker outlook for prices thanks to the persistent uncertainty surrounding Brexit. Home sale expectations for the next three months decreased to minus 28 percent. That was the lowest reading since the data series began in 1999, survey data from the Royal Institution of Chartered Surveyors (RICS), showed this week. However, the recent sluggishness may prove to be temporary once the Brexit uncertainty dissipates. "The twelve-month outlook is a little more upbeat, suggesting that some of the near-term pessimism is linked to the lack of clarity around what form of departure the UK might make from the EU in March," RICS said.

Australia construction shrinks further in December.
The construction sector in Australia continued to contract in December, and at a faster pace, according to the latest survey from the Australian Industry Group (AIG). The report showed the Performance of Construction Index score of 42.6 in December, down from 44.5 in November, and well below the 50 reading that separates expansion from contraction. Among the individual components of the survey, activity, employment, new orders, supplier deliveries and selling prices all declined. Input prices and average wages both weakened albeit remaining firmly in expansion territory.

Important  Information
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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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).