• The euro zone and the United States are "clearly in a different situation" when it comes the outlook for inflation, European Central Bank President Christine Lagarde said on Monday, playing down any impact from across the Atlantic. 
• With the U.S. economy reopening and prices rebounding fast, Federal Reserve officials have started discussing ending their bond purchase programme and last week brought forward their expectations for the first rate hike since the start of the coronavirus pandemic. 
• This has triggered market speculation about rising inflation and a tightening of monetary policy across the globe. But Lagarde rejected comparisons between both economies, saying the U.S. recovery was farther ahead of the euro zone's. 
• She acknowledged that there would be some "spillovers" from rising inflation in the United States through higher import prices, stronger exports and potentially even euro zone citizens' expectations about inflation. "Overall, however, the effects on euro area HICP inflation are expected to be moderate," she added. 
• She added the ECB estimated a cumulative impact of 0.15 percentage point on inflation and of 0.3 percentage point on growth between 2021 and 2023 in the euro zone from the U.S. stimulus package, reaffirming the bank's March projections.

(Source: Reuters)

• For the 6-month period ending April 2021, The LAB reported a net profit of $113.56Mn (EPS: $0.12), a 31.0% (or $26.89Mn) increase over H1 2020 on the back of brisk growth in operating revenue (31.3%) and a $11.72Mn rise in net finance income. 
• Revenue growth was supported by an expansion in both the production and media segments of the business, which saw increases of 83% (or $106.70Mn) and 18% (or $43.50Mn), respectively. 
• This was enough to outweigh the 28.0% rise in the company’s indirect expenses and 36.3% increase in direct costs. The higher indirect costs were reflective of greater staff costs due to increased work volume, repairs and maintenance of production equipment, and depreciation and amortization charges. Despite the increase, total expenses as a percentage of revenue remained relatively flat at 16.2% compared to 16.7% in the previous period. 
• Since the start of the year, the LAB’s stock price has increased by 2.2% to close trading at $3.13 at the end of June 17, 2021. At this price, the stock trades at a P/E of 19.6x earnings, which is below the junior market average of 24.3x earnings.

(Source: Company Financials)

• Jamaica is poised to benefit from the United States’ donation of an initial 25Mn doses of COVID-19 vaccines that have been earmarked for deployment globally, to assist in easing challenges with access being experienced by a number of countries. 
• This was disclosed by Minister of Foreign Affairs and Foreign Trade, Senator the Hon. Kamina Johnson Smith, who said that representatives of the Government had discussions with US Secretary of State, Antony Blinken, among other officials, during which assurances were given that the region would be assisted with vaccines “at a point in time”. 
• Senator Johnson Smith indicated that Jamaica has also participated in discussions facilitated through CARICOM in relation to securing supplies from the initial 25Mn vaccine doses. “We have not yet had a confirmed quantity. But we continue to liaise as they work out the different formulas that they use, on guidance from Caribbean Public Health Agency (CARPHA)… taking into consideration the rate of transmission which is taking place in the various islands,” she said. 
• This bodes well for the country’s road to economic recovery, which will be dependent on the government’s ability to secure sufficient vaccines to inoculate the population and achieve herd immunity. This would allow for a faster pace of reopening of the economy and is essential if the country is to experience a V-shaped recovery. 
• Jamaica’s vaccination programme, though underway, would need to pick up pace to allow for greater relaxation of restrictive measures intended to curb the spread of the virus, and foster a return to normality. To date, 1.1% Jamaican’s have been fully vaccinated and 5.5% have received one dose compared with 22.1% and 31.3% in Barbados, and 44.2% and 52.6% in the US.

(Source: JIS; NCBCM Research)

• Bermuda’s fiscal deficit will narrow in FY2021/22 (April 2021-March 2022) as an economic recovery drives renewed revenue growth and the government reins in COVID-19 relief spending. 
• The deficit widened substantially in FY2020/21 to 4.1%, up from an average of 2.1% from FY2015/16 to FY2018/19, as an estimated 7.5% contraction in GDP amid the pandemic, significantly undermined revenues. The deficit also increased on account of additional government spending to the tune of US$127.3Mn in emergency spending. This is equivalent to 11.3% of FY2019/20 expenditures and was part of the government’s strategy to mitigate the health and economic impacts of the pandemic. 
• Fitch Solutions has revised its budget deficit forecast for FY2021/22 to 2.1% of GDP, from 2.4% previously. 
• Total public debt is also forecasted to decline to 48.5% of GDP by end-2025, from a peak of 55.6% in 2020, as fiscal consolidation flips the primary fiscal balance into surplus beginning in FY2022/23.

(Source: Fitch Solutions)

• On June 16, 2021, the Brazilian Central Bank (BCB) raised the Selic (policy rate) by 75bps. It is anticipated that it will hike its benchmark Selic target interest rate to 6.25% by the end of 2021, an upward revision from Fitch Solutions’ previous forecast of 5.00%. 
• The revision reflects inflation that has continued to surprise to the upside over recent months, which has pushed up market expectations for hikes and led the BCB to adopt a more hawkish policy stance. 
• The June 2021 interest rate hike was the central bank's third consecutive hike and in line with the guidance provided with its prior decision.  
• The agency forecasts that inflation will average 7.70% through the end of 2021, well above the 5.25% upper target, due to rising electricity costs, high commodity prices and supply constraints. 
• Risks to the forecasts remain to the upside, given the likelihood of volatile market sentiment and the potential for elevated inflation to become sticky.

(Source: Fitch Solutions)

• The number of Americans filing new claims for unemployment benefits increased last week for the first time in 1-1/2 months, but layoffs are easing amid a reopening economy and a shortage of people willing to work. 
• While other data on Thursday showed factory activity in the mid-Atlantic region continuing to grow at a steady pace in June, a measure of future production surged to its highest level in nearly 30 years. Factories in the region that cover eastern Pennsylvania, southern New Jersey and Delaware also reported stepping up hiring, which bodes well for job growth this month. 
• Initial claims for state unemployment benefits rose 37,000 to a seasonally adjusted 412,000 for the week ended June 12, the Labour Department said. That was the first increase since late April. Economists polled by Reuters had forecast 359,000 applications for the latest week. 
• The economy, ironically, is facing a labour crunch despite employment remaining 7.6 million jobs below its peak in February 2020. A shortage of childcare facilities is keeping some parents, mostly women, at home.

(Source: Reuters)

• For its financial year ending March 2021, JMMBGL reported a 7.3% (or $512.34Mn) YoY increase in net profit attributable to shareholders to $7.51Bn (EPS: $3.84). This was driven by 4.3% expansion of operating revenue, an 8.8% reduction in operating expenses and a $1.69Bn increase in the share of profit from associate (Sagicor Financial Corp). 
• Net interest income (12.7% or $1.18Bn), and gains on securities trading (10.0% or $615.56Mn) as the company capitalized on trading activities were the main drivers of the expansion in operating revenues. Additionally, a $315.06Mn rise in the net gain from financial assets at fair value, which is a turnaround from a net loss of $267.98Mn in the prior year, also bolstered the revenue performance. 
• The containment of operating expenses also played a role in the positive outturn,  with expenses declining by 8.8% (or $1.40Bn), largely due to a drop in staff costs (15.0%). The Group continued to focus on extracting operational efficiencies across all entities through the launch of its standardization and process improvements project. 
• The market has been reacting to the positive results. Since its posting on June 15th, the stock has appreciated by over 11.0%, however year to date, it has risen by just 7.0% to  $37.14 as at yesterday’s close. This translates to a P/E ratio of 9.7x earnings, which is below the main market financial sector average of 17.7x earnings.

(Source: Company Financials)

• The All-Jamaica Consumer Price Index (CPI) rose by 1.2% for May 2021 contributing to the point-to-point inflation rate of 5.0% which is a significant increase over the 3.8% reported in April 2021, and now puts inflation at the midpoint of the 4%-6% target range. 
• A 3.4% increase in the index for the heavily weighted ‘Housing, Water, Electricity, Gas and Other Fuels’ division caused by a rise in electricity, water and sewage rates, was the main impetus behind the increase in the index. 
• The ‘Food and Non-Alcoholic Beverages’ index also saw a notable rise (1.2%) due to higher prices for starchy tubers. Additionally, a7% rise in the index for the ‘Transport’ division supported by higher fuel prices following the vaccine-led recovery in global oil prices, also contributed to the increase in the CPI. 
• For the review period, the calendar year-to-date (YTD) inflation rate was 1.7%, and the fiscal year to date inflation was 1.2%, while the point-to-point (May 2020 – May 2021) rate was 5.0%. 
• In its May 2021 Monetary Policy Press Statement, the BOJ indicated expected inflation for the June quarter within the range of 3.5% to 4.5%. This is down slightly from the previous forecast of 4.0%-5.0%, based on expectations that agricultural price increases over this period will be smaller than previously anticipated due to better weather conditions. Recently announced price increases for some processed foods, driven by higher imported commodity prices and freight costs, have been taken into account beyond this forecast horizon. However, the forecast is still for inflation to remain within the target range of 4 to 6% throughout the year.

(Source: Statin & BOJ)

• The Executive Board of the IMF concluded the fifth review of its Extended Fund Facility (EFF) for Barbados. The completion of the review allows the Barbadian government to drawdown SDR 17.00Mn (about US$24.00Mn), bringing total disbursements to the equivalent of SDR 288.00Mn (about US$415.00Mn). 
• The four-year extended arrangement under the EFF was approved on October 1, 2018, and is for an amount equivalent of SDR 322.00Mn (about US$464.00Mn). The disbursement will help the sovereign to meet the balance of payment needs, boost resources for essential COVID-19-related outlays, and catalyze additional support from development partners. 
• Despite the economic challenges, Barbados has continued to implement its comprehensive Economic Recovery and Transformation (BERT) plan aimed at restoring fiscal and debt sustainability, as well as increasing reserves and growth. The government is targeting a debt-to-GDP ratio of 60% by 2033 through a combination of fiscal consolidation, policies to boost growth, reform of public finances and debt restructuring. 
• However, factors such as the depressed economy, especially as tourism remains below pre-pandemic levels, and high unemployment, will challenge the government’s ability to reach its primary balance target of 6% over the medium term, which could set back its goal to reach the targeted debt level by 2033.

(Source: IMF & NCBCM Research)

• The handover of Puerto Rico’s electric utility company, PREPA, to privately-owned LUMA Energy increases the risk of political instability, given resistance to the privatization among significant segments of the population. 
• There are also risks to the popularity of Governor Pedro Pierluisi, who has backed the agreement and is in a relatively fragile political position. 
• In the long term, LUMA’s success operating Puerto Rico’s power grid will influence the cost and reliability of electricity, which could attract higher investments to the territory.

(Source: Fitch Solutions)