Market commentary: The show must go on

Despite a public holiday here in Malta to celebrate the feast of St Paul’s Shipwreck, global markets were very much alive and active on Wednesday. Good news for European markets! Despite another bad day in Asia, European stocks were back in positive territory, as bullish corporate outlooks lifted a number of stocks and inspired a return to buying on the back of beaten down markets.

Oil prices, which have often dictated the direction the markets will move, were up 2%. This comes on the back of rekindled hopes of a production cut by major producers.

Wednesday was a good day in the automobile sector. BMW reported a 7.5% increase in their monthly car sales during the first month of the year, as over 150,000 vehicles were sold in January. This led BMW shares to trade higher. Staying in the industry, Japan’s second biggest auto maker, Nissan, saw its net profit jump 25% on sales across Europe and the US. Nissan sold 1.48 million vehicles in 2015 – 7.1% more compared to the previous year.

Banking relief

Following a turbulent start to the week, most major European banks rebounded and are back to trading in positive territory. In Frankfurt, Deutsche Bank shares jumped a staggering 14% (the highest in almost seven years!) on the news that Germany’s largest lender is considering buying back millions of euros worth of its own bonds. Bank executives feel that this move would convey their views that the market is seriously undervaluing the bank’s securities. As a result, this should serve to put investors’ minds at rest, with the bank standing by its statement that it is “rock solid”.

Elsewhere in the banking sector, UniCredit rose 10%, and Commerzbank and UBS gained 8.32% and 6.34%, respectively. Italian bank Intesa Sanpaolo was also up more than 11%.

Credit Suisse have commented about the strength on their bank’s capital base. Tidjane Thiam, Chief Executive of Credit Suisse, said in a recent interview that the company has a “strong balance sheet”. Despite this, Credit Suisse shares fell X% on Wednesday.

Next up: Janet Yellen

Since the Federal Reserve raised interest rates in the United States from record lows in December, the economic landscape has become clouded by falling stock markets, global weakness and sharply low energy prices. Banks have taken a big hit in recent weeks. The decision of the Bank of Japan to adopt negative interest rates hasn’t had the ideal effect, with global growth outlook currently faltering.

These concerns have spread across the globe, and with the dollar languished at a three-month low, traders waited for US interest rate guidance from Fed Chair Janet Yellen. Yellen kicked off the first of two scheduled days of testimony with a bit more caution about the outlook of the US economy, and did not dismiss the idea of a rate hike next month. She signalled that the Fed’s decision will go hand in hand with the current market outlook and whether or not this turmoil will persist.

With her testimony on Wednesday, Yellen joined Vice-Chairman Stanley Fischer and other senior Fed officials in declaring that it is too soon to tell whether sharp drops in stocks, oil prices and some bond yields represent passing volatility, or merely reflect worsening global economic fundamentals that will dampen growth and inflation in the US.

This article was issued by Rebecca Naudi, Trader at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article is 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 Investment Services Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.