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BOV Market Watch - Week ending 31st July 2020
31 Jul 2020
Fed holds rates steady, says economic growth is ‘well below’ pre-pandemic level. At its two-day monetary policy meeting that ended last Wednesday, the Federal Reserve held interest rates steady, a decision that was accompanied by a tepid outlook on the coronavirus-beleaguered economy. In a move that was widely expected, the central bank kept its benchmark overnight lending rate anchored near zero, where it has been since March 15 in the early days of the pandemic. “Following sharp declines, economic activity and employment have picked up somewhat in recent months but remain well below their levels at the beginning of the year,” the post-meeting statement said. Along with keeping rates low, the Federal Open Market Committee, which sets monetary policy, emphasised its commitment to maintain its bond-buying and the array of lending and liquidity programmes that it launched in response to the pandemic.

Eurozone economic confidence improves, but still remains negative. Economic confidence in the eurozone improved to a four-month high in July as improving sentiment in the industrial and service sectors strengthened amid the relaxation of coronavirus containment restrictions, survey data showed this week. The eurozone economic sentiment index climbed to 82.3 in July from 75.8 in the previous month, survey data from European Commission showed. The score was forecast to rise to 81.0. Notwithstanding the improving sentiment, it remained well below the pre-coronavirus levels and points to gross domestic product contracting by two percent year-on-year at the start of the third quarter, Jason Tuvey, an economist at Capital Economics, said.

German GDP sees biggest decline since 1970 in second quarter. Germany's gross domestic product fell by 10.1 percent in the second quarter of 2020 compared with the first quarter. That was the biggest decline since 1970, according to the German statistics office’s flash estimate and comes amid fears of a second wave of the coronavirus pandemic across Europe. Economists had expected a nine percent decline. Compared with last year, Thursday's figures were even worse. GDP was down by 11.7 percent for April to June, with an overall collapse in exports and household spending alongside an increase in state spending.

China's factories accelerate output in July.  China’s factories notched up activity in July for a fifth consecutive month as improving prospects for electrical and pharmaceutical goods underpinned a broader recovery from earlier coronavirus shutdowns. According to figures released on Friday by the National Bureau of Statistics, the manufacturing sector in the word’s second largest economy continued to expand in July with a manufacturing purchasing managers’ index, or PMI, score of 51.1 for July, up from June’s 50.9. That was the highest reading since March and dashed expectations for a drop to 50.7. The 50-point mark separates growth from contraction on a monthly basis. However, analysts caution the recovery could stall amid the resurgence in global coronavirus infections and as China’s factories deal with disruptions from continuing floods.

Malta Producer Prices Drop In June. Malta's producer prices fell for the first time in three months in June, data from the National Statistics Office showed earlier this week. The producer price index, or PPI, declined by 0.27 percent year-on-year in June, after a 0.31 percent increase in May. Prices for intermediate goods fell by 2.41 percent annually in June. Prices for capital goods and consumer goods rose by 1.19 percent and 1.98 percent, respectively. Domestic market prices increased by 1.46 percent, while non-domestic market prices fell 1.35 percent. On a monthly basis, producer prices fell by 0.06 percent in June, after 0.02 percent increase in the previous month. 
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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).