Market commentary: Inflation rekindles talks of UK rate hike, US economy on track.

On Tuesday, European stocks closed marginally lower, with the Euro Stoxx down less than 0.1 percent, Frances CAC 40 down 0.3 percent and Germanys DAX 0.2 percent under previous day close. 

A buoyant set of corporate results were offset by the persistent weakening in commodity prices driven by worries over China's growth outlook, because of this European markets were weighed down by commodity shares which are facing headwinds due the decline in the prices of metals and energy.

In Greece, Minister Alexis Tsipras is waiting for approval from five euro-area parliaments before he can receive the first tranche from his country’s third bailout package, to support a payment of about 3.2 billion euros due to the European Central Bank on Thursday 20 August.

Austria, Germany and The Netherlands are all stepping stones between Greece and their funding whilst representatives in Belgium, Cyprus, Ireland, Italy and Malta are some of the few countries that won’t have to vote on the plan.

In London, stocks continued their sixth straight day decline with real-estate shares pulled lower as a rise in inflation rekindled talk about when U.K. interest rates will be raised by the Bank of England.

Britain’s inflation rate unexpectedly rose in July and a core measure of price growth increased to the highest in five months; the core measure, which excludes volatile food and energy costs increased to 1.2 percent from 0.8 percent, higher than the 0.9 percent reading predicted by economists.

The FTSE 100 fell 0.4% on the back of this and dipped into intraday lows after the Office for National Statistics issued a statement regarding inflation results. 

In the housing sector, Barratt Developments gave up 1.2% and Taylor Wimpey PLC shed 0.4%. Shares of real-estate investment trust Persimmon turned lower, losing 2.1%. The stock had been up by as much as 1.7% after the home builder posted a 31% rise in pretax profit in the first half of the year, aided by growth in sales volumes and prices

According to Fed Atlanta GDP model, the U.S. economy is on track to grow at an annualized rate of 1.3 percent in the third quarter following last Friday’s news of a stronger-than-expected 0.6 percent rise in industrial output in July. The latest GDP growth estimate was stronger than the regional Fed bank's prior estimate published on Aug. 13 of a 0.7 percent rise in gross domestic product, the Atlanta Fed said on its website.

Home improvement companies and home builders are enjoying a spot in the sun from strong results and economic data. U.S. housing starts rose to a near eight-year high in July as builders ramped up construction of single-family homes, suggesting that the economy was firing on almost all cylinders.

These figures added to solid payrolls, retail sales and industrial output data in suggesting the economy got off to a strong start in the third quarter. The steady flow of upbeat economic reports has bolstered views that the Federal Reserve will raise interest rates in September.

On the markets, U.S. stocks erased most of their losses in late morning trading on Tuesday, as strong results from Home Depot and strong housing data helped offset a slump in Chinese shares and Wal-Mart's weaker-than-expected results.

Home Depot rose as much as 3.4 percent to a record high of $123.80 after the home improvement retailer's quarterly same-store sales increased more than expected.

The stock gave the biggest boost to the Dow and the S&P 500 along with TJX which rallied 7 percent.

Housing stocks such as D.R. Horton, Toll Brothers and KB Home all rose between 1 and 3 percent following the data. 

This article was issued by Andrew Cassar Torreggiani, Trader/Analyst at Calamatta Cuschieri. For more information visit, www.cc.com.mt .The information, views and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri & Co. Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.