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BOV Market Watch - Week ending 9th July 2021
09 Jul 2021
Fed minutes hint at patience regarding tapering asset purchases. Federal Reserve (Fed) officials talked about asset purchase tapering at their most recent meeting, but few seemed in a hurry to get the process going, according to the minutes released on Wednesday. The Federal Open Market Committee’s June 15-16 meeting summary provided only a few new glimpses into talks about when the central bank should begin reducing the pace of its bond purchases. Some members indicated that the economic recovery was proceeding faster than expected and was being accompanied by an outsized rise in inflation, both making the case for taking the Fed’s foot off the policy pedal. However, the prevailing mindset was that there should be no rush and markets must be well prepared for any policy shifts.

EU raises growth outlook, warns of higher inflation.
The European Commission raised the growth forecast for the eurozone on Wednesday but warned that inflation could be higher than expected if supply bottlenecks persist. The eurozone is set to grow by 4.8 percent this year, the executive arm of the EU said in its latest summer projections. That is stronger than the spring projection of 4.3 percent. The outlook for next year was raised to 4.5 percent from 4.3 percent. At the same time, the average inflation forecast for the eurozone was raised to 1.9 percent from 1.7 percent projected earlier. The outlook for next year was lifted to 1.4 percent from 1.3 percent.

US service sector activity cools in June on labour and material shortage.
The US services industry grew at a moderate pace in June, likely restrained by labour shortages and raw material bottlenecks. The Institute for Supply Management (ISM) said on Tuesday that its services purchasing mangers’ index, or PMI, fell to 60.1 in June from 64.0 in May, which was the highest reading in the history of the data series and well above the 50 mark that separates expansion from contraction in the sector. Economists had expected the index to inch down to 63.5. "The rate of expansion in the services sector remains strong, despite the slight pullback in the rate of growth from the previous month's all-time high," said Anthony Nieves, Chair of the ISM Services Business Survey Committee.

German ZEW economic confidence index at six-month low.
 German economic confidence slid to a six-month low in July, survey data among German financial market experts showed on Tuesday. The ZEW - Leibniz Centre for European Economic Research gauge of expectations plummeted to 63.3 from 79.8, the lowest level seen since January and below economists’ estimates. Still, the measure of current conditions turned positive for the first time in two years, indicating that more respondents described the situation as good than bad. “Germany has clearly overcome the coronavirus-related decline,” ZEW President Professor Achim Wambach said in a statement. Although the expectations index “has once again fallen significantly, it is still at a very high level.”

UK house prices fell in June as full stamp duty holiday ended, says Halifax.
UK house prices fell last month for the first time since January in a sign that house prices are finally starting to cool, according to lender Halifax. Month-on-month, the price of the average home slipped by 0.5 percent in June to £260,358, a drop of £1,284 from £261,642 in May’s average. On an annual basis, Halifax reported that property prices were still 8.8 percent, or about £21,000, higher than they were a year ago, with the strongest growth in Wales, Northern Ireland and north-west England. The dip in prices coincided with June’s end of the full stamp duty holiday, which had removed the purchase tax on properties worth up to £500,000. 
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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).