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BOV Market Watch - Week ending 20th March 2020
20 Mar 2020

20 March 2020

S&P Global expects world growth at 1.0 – 1.5 percent in 2020. The global economy is set to see a significant slowdown this year due to the severe economic shock caused by the coronavirus pandemic, according to financial information firm S&P Global. World gross domestic product (GDP) is expected to grow at just 1.0 percent to 1.5 percent this year, with risks remaining firmly on the downside, S&P said on Tuesday. The severe impact is seen in Europe and the US, as containment measures such as social distancing and travel bans are set to lead to a demand collapse and hence economic activity is expected to be sharply lower in the second quarter.

Federal Reserve launches emergency stimulus to support money-market funds. The Federal Reserve (Fed) is creating an emergency lending programme to help unblock a short-term credit market that has been disrupted by the coronavirus crisis The Fed said that it will lend money to banks that purchase financial assets from money-market mutual funds, including short-term IOUs known as commercial paper. By facilitating the purchase of commercial paper, which is issued by large businesses and banks, the Fed hopes to support lending to firms that are seeking to raise cash as their revenues dwindle as a result of fears of the spread of the coronavirus.

UK employment hits record high before coronavirus struck. UK employment increased to a record high but the unemployment rate also advanced even before the economy faced the impact of the coronavirus outbreak, data published by the Office for National Statistics (ONS) showed this week. The statistics office said that the number of people in work increased by 184,000 in the three months to January to reach a record high of 33 million, reflecting the strength of the jobs market before the spread of the disease. The employment rate rose by 0.3 percentage points from the previous three months to 76.5 percent, a joint record high. However, the jobless rate gained 0.2 percentage points from the preceding quarter to 3.9 percent, largely unchanged from a year earlier, the ONS said. This was above economists’ forecast of 3.8 percent.

German economic sentiment plummets on recession fears. Sentiment among German investors deteriorated far more than expected in February on worries that the coronavirus outbreak would dampen world trade, a survey showed on Tuesday. The ZEW research institute said that its monthly survey showed that economic sentiment among investors plummeted to 8.7 in February from 26.7 in January, its sharpest decline on record. Economists had forecast a drop to 21.5. A separate measure of investors’ assessment of the economy’s current conditions decreased to -15.7 from -9.5. Analysts had forecast a reading of -10.3. “The feared negative effects of the coronavirus epidemic in China on world trade have been causing a considerable decline of the indicator of economic sentiment for Germany,” ZEW President Achim Wambach said.

Reserve Bank of Australia slashes interest rates and launches its first-ever QE programme. The Reserve Bank of Australia (RBA) this week cut interest rates to a record low of 0.25 percent and announced extraordinary measures to help prevent a coronavirus-induced recession. The RBA will buy Australian government bonds as part of its first-ever quantitative easing (QE) programme, and provide a three-year funding facility to provide cheap loans for Australian banks. In turning to QE, the central bank is using a lever that it has not used even during some of the worst catastrophes in recent history, including the global financial crisis and the September 11 2001 terrorist attacks.

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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).