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BOV Market Watch - Week Ending 23 Nov 2018
23 Nov 2018

Global growth heading towards soft landing - OECD. Global economic growth remains strong but has passed its recent peak and faces growing risks including from escalating trade disputes and tightening financial conditions, according to the latest Economic Outlook by the Organisation for Economic Co-operation and Development (OECD). Growth forecasts for next year have been revised down for most of the world’s major economies. Global gross domestic product is now anticipated to expand by 3.5 percent in 2019, compared with the 3.7 percent forecast by the OECD last May. The weaker outlook for 2019 reflects deteriorating prospects, principally in emerging markets such as Turkey, Argentina and Brazil, while that for 2020 is more a consequence of developments in advanced economies as slower trade and the withdrawal of fiscal and monetary support take their toll.

UK business optimism lowest in nine years on Brexit concerns. Survey data from financial data provider IHS Markit showed this week that confidence among British businesses plummeted to its lowest level in nine years during the third quarter. In the meantime, households' perception of their financial conditions sank to a five-month low, amid uncertainty over Brexit and a no-deal outcome in Britain’s negotiation with the EU. The net balance of businesses expecting a rise in business activity in the coming 12 months was +32, down from +39 in June. Optimism peaked at +66 in February 2014. On the other hand, a measure of households' overall assessment of their financial wellbeing fell to 44.5 in November from 45.0 in the prior month, the highest degree of pessimism since June. Earlier in the week, figures from the property market data website Rightmove showed that UK house prices declined sharply in November, at the fastest monthly rate in seven years.

US housing shows signs of weakness. US homebuilding rose in October amid a rebound in multifamily housing projects, according to a report released by the Commerce Department. However construction of single family homes fell for a second month in a row, signalling that the housing market remained vulnerable to higher mortgage rates. The Commerce Department said that housing starts soared by 1.5 percent in October after plunging by 5.5 percent in September. Other aspects of the report were also soft. House building permits declined last month and homebuilding completions were the fewest in a year. Earlier in the week, the National Association of Home Builders published a separate report that show a substantial fall in homebuilder confidence in November. The report said the NAHB/Wells Fargo Housing Market Index plunged to 60 in November after inching up by one point to 68 in October.

Next move in rates likely to be up: RBA. Minutes of the most recent monetary policy committee meeting of the Reserve Bank of Australia (RBA) released this week showed members noting that the country's economy has continued to pick up steam at a slightly faster rate than expected. At the meeting, the RBA kept its benchmark interest rate unchanged at a record low of 1.50 percent for the 26th consecutive meeting. The rate has been at the current level since August 2016. US dollar strength has helped to support domestic growth, the minutes said. They added that the inflation rate remained low and stable, undershooting the midpoint of the central bank’s target range, as expected. The minutes further added that, while a change to the benchmark rate is not imminent, the next move is likely to be up rather than down, owing to the improving economy.

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).