Market Commentary | Banks buck market trend

Markets on Wednesday were hit with concerns over central bank importance and a weakening economy

Markets on Wednesday were hit with a familiar cocktail of concerns over central bank importance and a weakening economy following the release of mediocre US auto sales figures and lukewarm consumer spending data. European stocks were slightly lower during the session as banking shares found some relief after recent declines and helped offset weaker auto stocks. Stocks in Asia were mixed, with Japanese equities trading lower, as strength in the yen weighed in.

The FTSE 100 inched down 0.11% on Wednesday as a small early gain quickly faded throughout the session. The benchmark is treading water after closing lower for two sessions in a row. Pulling the index higher were shares in financials, as bank shares were stabilising after recent drubbings, which came as stress test and regulatory concerns weighed on the sector.

London-based HSBC pushed 5% higher after the bank said it would spend up to $2.5 billion during the second half of the year to buy back shares. This news eased investor concerns as the lender reported a 40% plunge in second quarter net profit! Shares in ING Group jumped 9.3% after the Dutch bank reported a 27% increase in underlying net profit. Elsewhere, Société Générale moved 3.72% higher after the French lender reported a jump in second quarter net profit, helped by the sale of its Visa Europe stake. Shares in Royal Bank of Scotland also closed the day 2.5% higher.

Nevertheless, this rally by banking shares wasn’t enough to offset double-digit slides by power generator provider Aggreko plc and Swiss money manager GAM Holdings AG. Shares in Aggreko tumbled 13% after the UK Company reported a 40% slide in first half pre-tax profit, as lower oil prices continued to hit a number of its markets. GAM shares gave up 13.2% after the company said a drop in performance fees helped cut profits in half, offering a fresh sign that choppy markets are hurting investment managers.  

Over in the US, stocks turned marginally higher on Wednesday as investors combed through economic reports on the services sector and the private sector labour market ahead of the all-important employment report, due on Friday. Financial and energy stocks lead the way with gains, as oil futures posted strong gains in volatile trade on Wednesday. September crude was up 3%, trading just above $40 a barrel.

Shares in Time Warner climbed 2.92% after the media company reported improved second quarter earnings, and said it is invested in a 10% stake in streaming service Hulu – a joint venture of Walt Disney, 21st Century Fox and Comcast Corp. Shares in Walt Disney and 21st Century Fox also traded in the green on Wednesday.

Among the top risers was Fitbit Inc. The maker of fitness-tracking wristbands jumped 13.5% after quarterly sales and earnings beat market projections. The company advised clients to look out for upgrades of existing products, while also dropping hints that new products appear to be in the pipeline.

The main indexes have been drifting south over the past couple of sessions, as investors question the pace of economic growth and fret about the stability of global economies. The highly anticipated official jobs report on Friday will help shed light on the situation at the moment, as well as provide indication whether a rate hike over the remainder of 2016 remains a possibility.

This article was issued by Andrew Martinelli, 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.