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BOV Market Watch - Week ending 27th May 2022
27 May 2022
Fed minutes hint at more 50 basis point interest rate hikes. Minutes from the Federal Reserve’s (Fed’s) May 3-4 meeting, released on Wednesday, show that policymakers discussed the possibility that they would raise interest rates to levels high enough to slow economic growth deliberately, possibly by means of multiple half-point rate hikes, as the central bank struggles to tame high inflation. In addition, the policy-setting Federal Open Market Committee said that policy may have to move past “neutral” and into “restrictive” territory. The US central bank is trying to cool the hottest inflation rate in 40 years without tipping the economy into a recession. At the May meeting, the Fed decided to raise the target range for the federal funds rate by 50 basis points to 0.75 to 1.0 percent, marking the biggest rate hike since May 2000.

Eurozone business activity holds up in May despite inflation and supply bottlenecks. The eurozone business activity continued to expand in May despite rising inflation that dampened consumer spending power and supply bottlenecks that held back expansion in manufacturing, a preliminary survey showed. The currency bloc’s composite Purchasing Managers Index (PMI), which comprises both the manufacturing and services sectors, came in at 54.9 in May compared to 55.3 expected by economists and 55.8 in the previous month. Any reading above 50 indicates growth. The bloc’s services PMI dropped modestly to 56.3 in May compared to 57.5 expected by economists and April’s 57.7. The indicator registered a two-month lows. On the other hand, the manufacturing PMI reached an 18-month low in May to a level of 54.4, down from 55.5 in April and economists' forecast of 54.9.

German economy grew 0.2 percent in the first quarter. The German economy grew in line with expectations in the first quarter of this year, despite difficult economic conditions caused by the Russian invasion of Ukraine, supply chain issues and pandemic-related lockdowns in key Chinese cities, data showed on Wednesday. According to a second estimate, Europe’s largest economy grew by 0.2 percent quarter-on-quarter and by 3.8 percent year-on-year, adjusted for price and calendar effects, the Federal Statistics Office said. Economists had predicted growth of 0.2 percent and 3.7 percent, respectively. Despite the difficult conditions in the global economy, the German economy started 2022 with slight growth, Destatis president Georg Thiel said in the report.

US GDP falls more than estimated in the first quarter. The US economic contraction at the start of the year was worse than initially estimated as weak business and private investment failed to offset strong consumer spending, the Commerce Department reported Thursday. Gross domestic product (GDP) dipped at an annualized pace of 1.5 percent, rather than the 1.4 percent preliminary reading. The slightly bigger than expected pullback came after GDP skyrocketed by 6.9 percent in the fourth quarter of 2021. Downward revisions to private inventory investment and residential investment contributed to the slightly bigger than previously estimated decrease, while the jump in consumer spending was upwardly revised to 3.1 percent from 2.7 percent.

China industrial profits fall as lockdown squeeze tightens. Profits at Chinese industrial firms shrank in April for the first time in two years as Covid outbreaks and lockdowns disrupted factory production, transport logistics and sales. Profits shrank 8.5 percent from a year earlier, swinging from a 12.2 percent gain in March, according to figures based on National Bureau of Statistics (NBS) data released on Friday. The slump is the biggest since March 2020. The contraction piles greater pressure on the government, which has insisted on maintaining its zero-Covid policies that seek to eliminate infections through mass testing, lockdowns and quarantine.
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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).