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BOV Market Watch - Week ending 21st May 2021
21 May 2021
Eurozone Inflation At two-Year High. Eurozone inflation accelerated to a two-year high in April, driven by higher energy prices. Inflation rose to 1.6 percent in April from 1.3 percent in March.  This was the highest rate since April 2019, when inflation was 1.7 percent. On a monthly basis, the harmonized index of consumer prices advanced 0.6 percent in April. Meanwhile, core inflation eased to 0.7 percent from 0.9 percent in the previous month. Energy price inflation surged to 10.4 percent from 4.3 percent and non-energy industrial goods prices rose 0.4 percent, following a 0.3 percent increase. Eurozone inflation is likely to trend higher and it seems that it will average about 2.5 percent in the second half of 2021.

Germany Producer Prices Rise Most Since 2011. Germany's producer prices increased by 5.2 percent year-on-year in April, faster than the 3.7 percent rise seen in March.   This was the biggest growth since August 2011, when prices rose similarly after the financial and economic crisis. On a monthly basis, producer price inflation eased slightly to 0.8 percent, in line with expectations, from 0.9 percent in the previous month. The annual growth in producer prices was primarily driven by an 8.2 percent rise in intermediate product prices. Also, energy prices grew sharply by 10.6 percent in April.  Excluding energy, producer prices rose 3.6 percent annually in April. 

UK House Price Inflation Highest Since 2007. UK house price inflation accelerated to its highest level in 14 years in March, as the house price index rose 10.2 percent year-on-year following a 9.2 percent increase in February. This increase was the highest since August 2007.The annual rate has climbed steadily since July last year, when it was 1.8 percent. London remained the region with the lowest annual growth, of 3.7 percent, for the fourth consecutive month. It seems that the coronavirus may have caused UK house buyers to reassess their housing preferences. The average price of detached properties increased 11.7 percent in the year to March, while those for flats and maisonettes rose 5.0 percent over the same period. The average UK house price was GBP 256,000 in March this year, which was GBP 24,000 higher than in the same month last year. Compared to the previous month, average house prices in the UK increased 1.8 percent in March, which was double the 0.9 percent rise seen in the same month a year ago.

China Holds Benchmark Lending Unchanged. China kept its benchmark lending rates unchanged, as widely expected. The one-year loan prime rate was maintained at 3.85 percent and the five-year loan prime rate was kept unchanged at 4.65 percent. In April 2020, the one-year loan prime rate was cut by 20 basis points and five-year rate by 10 basis points. Markets have expected the rates to remain on hold as the People's Bank of China had kept the rate on its medium-term lending facility unchanged early this month.  With the economy well above its pre-virus trend, policymakers are focused on tackling financial risks. However, there are few signs that these actions are likely to include policy rate hikes. The upshot for the economy is that, even if rates are left on hold, tighter credit conditions will become an increasing headwind over the coming quarters.

Australia Unemployment Rate Slips To 5.5% In AprilThe jobless rate in Australia came in at a seasonally adjusted 5.5 percent in April, which was beneath expectation for 5.6 percent and down from the upwardly revised 5.7 percent in March. The April labour report is the first since the JobKeeper policy ended on 28 March. That fall in the unemployment rate also looks to owe quite a bit to the falling labour participation rate, which dipped to 66.0% from 66.3%. Over the year to April 2021, employment increased by 637,900 people.
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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).