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BOV Market Watch - Week ending 23rd April 2021
23 Apr 2021

ECB keeps rates on hold and stimulus in place. The European Central Bank (ECB) decided on Thursday to keep policy unchanged as market players look for clues on when its massive monetary stimulus might start to be wound down. The Governing Council kept the size of its pandemic bond-buying program at 1.85 trillion euro, confirming that purchases will run at an elevated pace in the current quarter. The ECB also held the deposit rate at -0.5 percent and said that it will continue to provide long-term loans to banks to keep credit flowing to businesses and households. “Preserving favorable financing conditions over the pandemic period remains essential to reduce uncertainty and bolster confidence, thereby underpinning economic activity and safeguarding medium-term price stability,” ECB President Lagarde said at a press conference.

US consumer sentiment edged higher in April, University of Michigan says. US consumer sentiment was at its highest level in a year in April thanks to the extraordinary government stimulus payments. The closely-followed University of Michigan sentiment index improved from a reading of 84.9 in March to 86.5 in April, according to a preliminary reading. However that was short of the median forecast by economists, who had predicted a reading of 88.8. That was chiefly due to American consumers' economic expectations, a sub-index for which was unchanged from its end of March level of 79.7. Survey director Richard Curtin noted how over the past half century it was expectations that had registered the largest gains in anticipation of the economic recovery and improved current conditions.

German producer price inflation accelerates in March. Germany’s producer price inflation rose sharply to 3.7 percent in March from 1.9 percent in February, German statistics agency Destatis reported on Tuesday. This was the biggest increase since November 2011 and faster than the forecast rate of 3.3 percent. Month-on-month, producer prices gained 0.9 percent versus a 0.7 percent rise in the prior month. Energy prices increased by 8.0 percent compared to March 2020 and the cost of intermediate goods gained 5.7 percent, which was the biggest since July 2011.

Higher costs of petrol and clothes drive up UK inflation in March. UK inflation jumped in March, driven up by higher cost of petrol and clothes in a signal that prices are moving in an upward trajectory as the economy recovers from the coronavirus pandemic. Consumer prices rose by 0.7 percent year-on-year in March, faster than the 0.4 percent increase seen in February. But inflation was slightly below economists' forecast of 0.8 percent as experts predict a burst of pent-up demand after the lockdown. On a monthly basis, inflation rose to 0.3 percent, as expected, from 0.1 percent a month ago. However, the cost of food fell back on the year, as some staples such as bread, cereals and chocolate biscuits were cheaper than at the start of the pandemic.

S&P maintains Japan's sovereign rating at A+.  S&P Global Ratings affirmed Japan’s sovereign credit rating at A+ and maintained its ‘stable' outlook. S&P cited the country's exceptional external position, prosperous and diversified economy, political stability, and savings-rich financial system as reasons for it rating. Nonetheless, Japan has very weak public finances. In the next one to two fiscal years, the negative impact of the coronavirus pandemic will put additional burden on fiscal performance and lead to a significant increase in government indebtedness, the agency observed. The 'stable' outlook suggested that, until fiscal 2024, relatively large fiscal deficits will continue to keep 

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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).