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BOV Market Watch - Week Ending 8 February 2019
08 Feb 2019

Eurozone private sector output at five-year low. The eurozone’s private sector started out 2019 with the weakest growth rate since mid-2013 as a slowdown in the manufacturing sector spread to the services sector, with demand weakening for the first time in more than four years. The final Composite Purchasing Managers' Index (PMI), a measure of overall health in the economy, fell to 51.0 in January from December's 51.1, its lowest reading since July 2013 and barely above stagnation. The preliminary reading was 50.7. IHS Market chief business economist Chris Williamson said that the PMI points to first quarter economic growth of 0.1 percent.

German industrial slowdown continues. Industrial production in Germany fell back for the fourth consecutive month in December, data released by the federal statistics agency Destatis showed this week. This is the latest of a series of signs pointing to a slowdown in Europe's largest economy. Adjusted for seasonal and calendar effects, output fell by 0.4 percent in December compared to November when it decreased by 1.3 percent. The December print was well short of a 0.9 percent rebound forecast by analysts. On a year-on-year basis, industrial production fell by 3.9 percent in December after a four percent slump in November. Economists had expected a decrease of 3.3 percent. Production dropped for a second straight month after October's 0.5 percent increase.

US factory orders unexpectedly drop in November. New orders for US-made goods unexpectedly fell in November amid sharp declines in demand for machinery and electrical equipment, government data showed this week. The Commerce Department said that demand for US-manufactured products fell in November, as factory orders dropped by 0.6 percent from the prior month. The latest figure suggests the onset of a slowdown in manufacturing as 2018 came to an end. The pullback surprised economists, who had expected orders to edge up by 0.2 percent.

India’s central bank cuts interest rates. India’s central bank lowered its key interest rate by a quarter of a percentage point to 6.25 percent, a step that is expected to boost the economy. The Reserve Bank of India judged the consumer inflation rate (at 2.2 percent in December) safe for loosening monetary policy. The central bank forecasts India’s economy will expand by 7.4 percent in 2019-20, up from 7.2 percent in this fiscal year. This week’s interest rate cut is the first one in 17 months. The bank had hiked rates twice in quick succession, in June and in August last year, fearing a ramp up in inflation.

Australia central bank cuts growth and inflation forecasts. Australia's central bank slashed growth and inflation forecasts in response to weaker consumption as it assesses how weakening property prices could affect the economy. In its quarterly update of economic forecasts, the Reserve Bank of Australia (RBA) analysed the factors impacting the outlook amid a darkening picture at home and abroad. Economic growth in the year to June 2019 was reduced to 2.5 percent from 3.25 percent and by half a percentage point in the following 12 months. RBA Governor Philip Lowe this week abandoned a policy tightening bias and instead sees the chances of an interest-rate cut or a hike as "more evenly balanced."

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).