Financial news

During yesterday's trading session at the Malta Stock Exchange, investors focused their attention on fixed interest market rather than equities where only two securities attracted trade. Both equities retained their previous closing prices which meant that the MSE Index terminated the day unaltered at 3,303 points.

Relatively speaking, Bank of Valletta was the most active with 2,738 shares, carrying a market consideration of €9,856 being exchanged across four transactions. All trades were executed at the €3.60 level.

Otherwise Malta International Airport was the only other equity to attract trades, with barely 770 shares changing hands across two transactions without altering its previous closing price of €2.24. At the end of the session, a further 2,580 shares remained outstanding on the bid side at this level, while best supply stood for 9,840 shares offered at a lofty €2.50. The bulk of the day's trades were however in the fixed interest market, where investors jolted for the best possible yields ahead of the monetary policy meeting of European Central Bank which will be held tomorrow, and once again it is widely expected that the ECB will lower its benchmark interest rate.

The single largest transaction was struck in the 5.70 per cent MGS 2012 where 1,000,000 nominal changed hands at the €108.30 which represents a 29 tick premium to its previous price.

The 5.90 per cent MGS 2015 was the sector's top gainer in monetary terms, moving higher by €1.34 as 310,000 nominal were exchanged at €112.75 level.

In total, five sovereign issues gained in value, with a single issue remaining at a standstill, while the 5.40 per cent MGS 2010 was the only decliner, dropping 59 ticks on the transaction of 2,330 nominal.

The corporate bond market was less active, although activity was spread across six securities. The US dollar denominated eight per cent Bank of Valletta 2010 shed 140 ticks on the transaction of 2,500 nominal to terminate the session at $105.00.

Weekly eurozone economic review

The European outlook took a turn for the worse last week. In Germany, the IFO business climate survey saw its second largest monthly fall on record, as forward looking expectations fell below those seen going into the early 1990s recession. Business surveys from France and Italy repeated this result. This prompted the European Commission to announce a coordinated response, in the form of a €200 billion package (1.5 per cent of Gross Domestic Product) aiming to restore confidence, stimulate investment and create jobs. This target fiscal stimulus may not be so coordinated given that the German government has expressed its unwillingness to adhere to the proposed plan.

Fiscal policy is not the only tool at hand for the euro-area economies, the European Central Bank (ECB) still holds some bullets in its monetary arsenal. Given that inflationary pressures are receding rapidly, the ECB has more room to manoeuvre. To this extent, November inflationary figures boasted the biggest drop since the eurozone was created 10 years ago. Consumer price inflation in the 15-country bloc fell 1.1 percentage points to 2.1 per cent, just 0.1 per cent shy of the ECB target. This fuelled further expectations of an aggressive rate cut in the upcoming ECB meeting tomorrow, where market prices are currently showing that traders have already fully priced in a 75 basis point cut.

Meanwhile, Eurostat also said eurozone unemployment rose 7.7 per cent in October, its highest level since January last year, from an upwardly revised 7.6 per cent in September.

This article has been prepared by Bank of Valletta p.l.c. (the Bank), which is licensed to conduct investment services business by the MFSA, for your general information only. This information is not a solicitation or offer by the Bank to acquire or sell securities. Nor does it constitute any form of advice by the Bank. Appropriate advice should be obtained before making any such decision. Past performance is not necessarily a guide to future performance and the value of your investments may fall or rise.