Market Commentary | Mixed Feelings in Earnings Season

European markets swayed between gains and losses on Thursday, after the Federal Reserve (FED) announced its monetary policy and will keep the interest rate unchanged at 0.25% to 0.5%. Investors in Europe remained cautious amid the earnings season and ahead of the Bank of Japan’s decision on the new stimulus. In Germany, the ECB’s loose monetary policy factored in an inflation increase for the month of July. Despite this, inflation is still far from the 2%, target rate and this may lead to further monetary stimulus and cuts to its deposit rate. On Wall Street, U.S markets are lower following a mixed batch of quarterly earnings, low oil prices and the market still digesting the FED’s latest policy directive.

Corporate News

British Air Craft Engine maker Rolls-Royce Shares soared around 14%, even after the company posted a big first-half loss mainly due to the weakness of the British Pound. The London-based company posted a £1.8 billion pound net loss after a revaluation of U.S currency hedges. This adjustment came following Britain’s vote to exit the European Union, which caused the Sterling to plunge.

A negative Brexit side effect come from Lloyds Banking Group as it accelerated its job-cutting scheme increasing it by another 3,000 even after reports showing a £2.5 billion or a 101% increase in pre-tax profit. The bank has also raised its branch closure plans with 200 more set to vanish from High Streets by the end of 2017. These changes were attributed to people’s banking habits and the effects of low-interest rates because of Brexit.

Oil Giants Shell and Total SA said the decline in oil prices hurt their second quarter results. Low oil prices continue to be a significant challenge for the businesses. Shell adjusted its earnings to $1.05 billion, which fell short of the $2.27 billion drawn by analysts. This led to a drop in share price by around 3%. Meanwhile, profit at Total SA also fell around 30% to $2.09 billion but the company sounded optimistic about oil prices. Shares in total were up around 0.8% 

Sports Direct saw its shares spike on a £900 million share buyback plan. The retailer shares were up approx. 15% after the announcement. This news comes just days after bad report stating appalling conditions in the workplace.

Broadcaster SKY shares were up by around 6% after reporting a 12% increase in profit to a record of £1.56 billion and an addition of more than 800,000 to its client base across the group. The company stated that UK Brexit vote was unlikely to hurt it financially as people tend to stay home and watch TV when finances are tight. The broadcaster recorded its first operating profit in Germany and Austria, while revenues in Italy were up despite the drop in its operating profit.

Another Advancer was Adidas whose shares were up around 4% in the beginning of the session. The German sportswear maker forecast its net profit rising between 35% and 39%. The company raised its guidance for the fourth time this year and this was partly due to gains derived from the early termination of a partnership with UK football club Chelsea and strong quarterly sales. In three months ending June, quarterly revenue increased by 21%, when adjusted for currency effects to EUR 4.4 billion.

This article was issued by Rodrick Duca, 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.