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BOV Market Watch - Week ending 29th May 2020
29 May 2020
ECB's Lagarde rules out mild recession. European Central Bank (ECB) President Christine Lagarde said that the eurozone economy is likely to contract by as much as 12 percent in 2020, as member countries struggle to emerge from the coronavirus pandemic. Ms Lagarde said on Wednesday that the actual economic outcome would come between the ECBs medium and severe scenarios, ruling out the mild scenario. The severe outlook is for a 12 percent gross domestic product decline, while the medium scenario is for an eight percent drop. The mild scenario called for a five percent contraction. The currency bloc’s economy shrank by 3.8 percent in the first quarter of this year, which was the biggest decline since the data series began in 1995. 

Eurozone economic confidence signals recovery amid virus. Economic confidence “showed first signs of a recovery” in the eurozone after the record slumps in March and April amid the coronavirus pandemic, survey data from the European Commission showed. The eurozone economic sentiment index rose to 67.5 in May from 64.9 in the previous month. However, the reading was below economists' forecast of 70.3. The indicator adds to the evidence that the euro-zone economy bottomed out in April, but activity is recovering only very slowly, Melanie Debono, an economist at Capital Economics, said.

US jobless claims fell to 2.1 million last week. Another 2.1 million unemployment claims were filed in the week ending 23 May, the US Labour Department reported on Thursday, pushing the total past 40 million (equivalent to one out of every four American workers) since the coronavirus pandemic took hold in mid-March. The report marks the eighth consecutive week that new jobless filings dipped from the peak of almost 6.9 million, but the level is still far above historic highs. The Bureau of Labour Statistics will release the May jobs report on 5 June, and the unemployment rate is expected to have skyrocketed to 19.5 percent from 14.7 percent in April.

German business less pessimistic in their outlook. German businesses become more confident about their outlook for the rest of this year, as curbs to slow the coronavirus pandemic are lifted. The Ifo Business Climate index, which gauges business morale amount German entrepreneurs, rose to 79.5 in May from a revised 74.2 in April. The uptick came on the back of a marked improvement in business expectations, albeit the views on the current situation edged down slightly. “The German economy is again seeing light at the end of the tunnel,” said Ifo economist Klaus Wohlrabe. “But we are still far away from optimism.” Separate data from the Federal Statistics office showed that Europe’s largest economy contracted by 2.2 percent in the first quarter as a result of restrictions to stop the spread of the virus.

China industrial profits decline less than expected in April. China's industrial profits fell at a much slower pace than expected in April, suggesting that the economic activity in the world’s second largest economy gradually started to return to life following the coronavirus pandemic. Data from the National Bureau of Statistics revealed that industrial profits dropped by 4.3 percent on a yearly basis in April, following a sharp 34.9 percent decrease in March. During January to April period, industrial profits plummeted 27.4 percent from the same period last year compared to 36.7 percent fall in the first three months of 2020.
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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).