Tumbling dollar sends oil above $51 a barrel

Global stocks were mixed on Wednesday after Japan upgraded its growth estimate and China reported weak though improved trade in May. In Europe, stocks were unable to keep up a three-day winning streak as a drop in financials led to declines. Meanwhile, Wall Street was in the green, buoyed by a rally in crude oil prices and a dollar that’s hovering around a one-month low. 

Mixed Chinese economic data, along with a decision by the World Bank to slash its 2016 global economic growth forecast, gave some traders a reason to take a negative view on the outlook for stock markets. Among its forecasts, the World Bank said it now expects 2016 growth to be around 2.4%, which is lower than a previous estimate of 2.9%.

In other news, bonds were in focus as the European Central Bank’s corporate bond-buying programme kicked off on Wednesday morning, with the bank buying utility, insurance and telecom bonds. Bank bonds are excluded from the programme since the Bank is focused on purchasing investment-grade corporate bonds.

It was a good day in the energy sector, as the US oil benchmark traded at an 11-month high. After surpassing $50 a barrel on Tuesday, prices crept higher on Wednesday, as both Brent and Crude oil surpassed the $51 mark. Data out of China showed that oil imports stayed strong during May. China is the world’s second largest oil consumer and news about its economy may single-handedly sway the market. This time, it swayed into further positive territory.

But dragging markets lower were financials, as banking shares traded lower. Italy’s UniCredit shed 4.5%, Spain’s Banco Popolare Español lost 4% and Greece’s Eurobanks Ergasias dropped 3.7%. Other major banks also traded in the red, as Lloyds, Royal Bank of Scotland and Barclays all lost ground during the session.

Meanwhile, Amazon.com traded higher on Wednesday. The company has announced that it plans to invest around $3 billion in India since CEO Jeff Bezos suspects there is “huge potential” in the economy. Yahoo! was also up, after the company said it is aiming to raise $1 billion in an auction of around 3,000 patents.

In the retail industry, J. Sainsbury was up as the company appeared to take in its stride its latest sales update. The supermarket giant has announced that same-store sales in the first quarter fell 0.8%, yet shares were up 1.6%. Shares of supermarket rivals Morrison and Tesco were also trading in positive territory. It has been reported that Tesco is preparing to sell its Kipa chain in Turkey as well as its Giraffe restaurants in the UK.

Volkswagen has been given the green light by Germany’s motor vehicle authority to fix another 1.1 million cars effected by the company’s emissions-rigging scandal last September. This would bring the total numbers of vehicles approved for fixes to more than 2.5 million. Stocks began the day trading slightly higher, but were unable to hold onto these gains and closed the day in the red.

The US dollar fell to its lowest level in a month on Wednesday, as rising oil prices supported its commodity-linked rivals and deteriorating expectations for a summer interest rate hike drained some of the greenback’s vitality.

This article was issued by Rebecca Naudi, Trader 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 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.