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BOV Market Watch - Week ending 22nd April 2022
22 Apr 2022

IMF cuts global growth forecast on war impact and high inflation. The International Monetary Fund (IMF) said global economic prospects have been “severely set back” by Russia’s invasion of Ukraine and the resulting inflationary shock, together with the ongoing Covid pandemic. In its quarterly World Economic Outlook, the Fund slashed its global growth forecast for 2022 to 3.6 percent, 0.8 percentage points lower than the January projection and down from 6.1 percent in 2021. The fund said prospects have “worsened significantly” with countries closest to the war likely to be hardest hit. IMF Chief Economist Pierre-Olivier Gourinchas explained the war is adding to a series of supply shocks that have hit the global economy in recent years and, “like seismic waves, its effects will propagate far and wide,” impacting commodity markets, trade, and financial links.

Eurozone consumer confidence up slightly. Consumer confidence in the eurozone unexpectedly inched upwards up in April, contrary to forecasts that predicted a decline after the measure plummeted in March's due to concerns over the Russian invasion of Ukraine and rising inflation which weighed on sentiment. The European Commission reported on Thursday that the initial reading of the consumer confidence index rose to -16.9 from -18.7 in March. The latter was the weakest reading since May 2020. “The April reading was a better outcome than the expected decline to -20.0. Eurozone consumption in recent weeks was likely underpinned by increased mobility due to removal of most of the restrictions linked to the pandemic and households releasing their pent-up demand”, Capital Economics said.

German producer prices surge at fastest rate since records began. German annual producer price inflation, or PPI, reached an eye-watering 30.9 percent in March, the country's Federal Statistics Office said on Wednesday. This jump in the prices paid by producers, seen as a harbinger of consumer inflation, hit the highest level since the agency started publishing this data series in the aftermath of the Second World War. The March data comes on the heels of a 25.9 percent increase in PPI in February. Producer prices went up by 4.9 percent compared to the previous month.  The main culprit for the increase were energy costs, which went up by 83.8 percent from March 2021, the statistics office said. Natural gas prices were up by 144.8 percent compared to the same month last year.

Record high house prices and surging mortgage rates weigh on US home sales. Record high prices and surging mortgage rates led to a second straight monthly decline in existing home sales. A report by the National Association of Realtors (NAR) said that contract closings for previously owned homes dropped by 2.7 percent in March to a seasonally adjusted, annualised rate of 5.77 million units. The figure was in line with estimates. At the same time, the reading for February was substantially revised downward, from 6.02 million units to 5.93 million homes. "The housing market is starting to feel the impact of sharply rising mortgage rates and higher inflation taking a hit on purchasing power," said NAR's chief economist Lawrence Yun. "Still, homes are selling rapidly, and home price gains remain in the double-digits."

China’s central bank unexpectedly keeps interests rates unchanged. China’s central bank, the People’s Bank of China (PoBC), on Wednesday kept its one-year loan prime rate (LPR) steady at 3.7 percent, while keeping the five-year rate at 4.6 percent. Economists had predicted that the Bank would adjust the LPR slightly downwards. For now, policymakers are mostly relying on targeted measures to help support firms hit by the latest virus wave, economists at Capital Economics said. The LPR affects the lending rates for corporate and household loans in the country. Most new and outstanding loans are based on the one-year LPR, whereas the pricing of home mortgages usually refer to the five-year rate as a benchmark, according to Reuters.

 

 

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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).