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BOV Market Watch - Week ending 30th April 2021
30 Apr 2021

Eurozone economic confidence reaches pre-pandemic level. Confidence in the eurozone economy improved sharply in April as the region’s vaccination programme picked up speed, paving the way for a lifting of coronavirus restrictions in the coming months. Survey results from the European Commission showed on Thursday that its economic confidence index recovered to 110.3 in April from 100.9 in March. The score blew past economists' forecast of 102.2 and reached its highest level since September 2018. Although the surveys have been too optimistic about activity in the first quarter, the economy seems to have started the second quarter on a somewhat stronger footing than anticipated, Jessica Hinds, an economist at Capital Economics, said. All surveyed business sectors showed improvements in sentiment. Confidence among consumers also strengthened in April.

Federal Reserve keeps policy unchanged. Federal Reserve (Fed) officials stayed on course at the end of their two-day policy meeting last Wednesday. The Fed left interest rates near zero and the pace of asset purchases unchanged, but acknowledged an uptick in economic activity as the US recovers from Covid-19. The Fed’s policy interest rate remains close to zero. In addition, the Fed is buying $120 billion of assets per month to support the economy. The first step to remove this accommodation will be for the Fed to “taper” these purchases. According to Fed Chairman Jerome Powell, the central bank is still “not thinking about” pulling back from its easy monetary policy stance even though there are signs the economy is booming.

Private sector growth at eight-year high as UK retail sales jump. A report on the state of the UK’s two biggest sectors – services and manufacturing – showed both booming in April and prompted immediate speculation of a spring recovery. The composite Purchasing Managers’ Index (PMI) rose from 56.4 in March to 60.0 in April, well above the 50 cut-off level that that separates expansion from contraction. The service sector business activity rose from 56.3 to 60.1, while manufacturing output was up from 56.6 to 59.1. Markit’s chief business economist, Chris Williamson, said that it was the strongest showing in the 23-year history of the PMI other than a four-month period between August and November 2013.

German consumer confidence set to weaken in May. German consumer sentiment unexpectedly worsened heading into May as rising Covid-19 cases led to a re-tightening of restrictions on shopping, travel and public life in many areas of Europe's largest economy, a survey showed on Wednesday. Survey results from market research firm GfK showed that its forward-looking indicator fell to -8.8 in May from a revised -6.1 in April. Consumers' views on the economic outlook and personal income expectations decreased significantly albeit their propensity to buy increased moderately, the survey showed. "The third wave will ensure that the recovery of the domestic economy is still a long way off," Rolf Bürkl, GfK consumer expert said.

China manufacturing growth at 4-month high. China's manufacturing sector grew at the fastest rate in four months in April, survey results from IHS Markit showed on Friday. The Caixin manufacturing Purchasing Managers' Index rose to 51.9 in April from an 11-month low of 50.6 in March. Total new orders grew for the eleventh consecutive month in April underpinned by improved market conditions and greater customer demand. Greater inflows of new work led manufacturers to increase production volumes again in April, with the rate of expansion also improving to a four-month high. The sustained increase in sales led to a further accumulation in backlogs of work. Consequently, producers added increased employment or personnel for the first time in five months. 

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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).