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BOV Market Watch - Week ending 24th March 2022
24 Mar 2022
US existing home sales pull back sharply in February. Sales of previously owned homes in the US plunged in February in the wake of rising mortgage-interest rates and a shortage of homes. Existing-home sales plummeted 7.2 percent in February from the prior month to a seasonally adjusted annual rate of 6.02 million, according to a report by the National Association of Realtors. Compared to the same month last year, February sales fell by 2.4 percent. Economists had expected existing home sales to tumble by 6.2 percent to a rate of 6.10 million from the 6.50 million originally reported for the previous month. “Housing affordability continues to be a major challenge, as buyers are getting a double whammy: rising mortgage rates and sustained price increases," said NAR chief economist Lawrence Yun. "Some who had previously qualified at a three percent mortgage rate are no longer able to buy at the four percent rate."

German private sector growth eases in March. Business activity across Germany's private sector eased in March due to the combination of rising prices, material shortages, geopolitical uncertainty and Covid-related absences, survey data from S&P Global showed on Thursday. However, the declines were smaller than expected as easing supply bottlenecks and fewer Covid restrictions allowed the German economy to start recovering before Russia's invasion of Ukraine. S&P Global's flash services Purchasing Managers' Index (PMI) dropped to 55.0 in March from 55.8 in February, which was the highest reading since August. Analysts had predicted a bigger decline to 53.8. Likewise, the manufacturing PMI fell to 57.6 in March from 58.4 a month earlier. The expected reading was 55.8. As a result, the composite PMI, which tracks the manufacturing and services sectors that together account for more than two-thirds of the German economy, slipped to 54.6 in March from February's six-month high of 55.6. 

UK inflation accelerates to 30-year high. UK inflation has climbed to a new 30-year high as spiralling energy costs, energy bills and food prices drive prices higher. Consumer prices rose by 6.2 percent in the year to February, up from 5.5 percent in January, the Office for National Statistics reported on Wednesday. This was the highest inflation rate in the data series which began in January 1997, and the highest rate in the historic modeled series since March 1992, when it stood at 7.1 percent. On a monthly basis, the Consumer Price Index rose by 0.8 percent in February, the largest monthly increase between January and February since 2009. Last week, the Bank of England predicted that inflation would reach eight percent in April and could hit ten percent in the autumn, when the energy price cap rises again.

China leaves interest rates unchanged. China kept its benchmark interest rate for corporate and household lending unchanged on Monday, as expected, although analysts say the case for monetary stimulus is building amid mounting external risks to an already slowing economy. The one-year loan prime rate (LPR) was retained at 3.70 percent and the five-year LPR, the benchmark for mortgage rates, was maintained at 4.60 percent. In January, the one-year LPR was reduced by five basis points, which was the second consecutive reduction and the five-year LPR was lowered for the first time since April 2020. The LPR is fixed monthly based on the submission of 18 banks, though government has influence over the rate-setting. 

Japan’s economy continues to recover: BoJ minutes. Members of the Bank of Japan's Monetary Policy Board said that Japan's economic recovery is continuing at a satisfactory pace in the wake of the Covid-19 pandemic, minutes from the bank's January 17-18 meeting revealed on Thursday. Corporate profits and business sentiment continue to improve, the minutes showed, although employment and income remain weak. To that end, the board said it finds it appropriate to maintain its current monetary easing and support stability in the financial markets.
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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).