Market Commentary | Winning streak snaps

Stocks worldwide lost ground from their record highs on Wednesday, as investor’s awaited minutes from the Federal Reserve’s latest meeting to check for clues on whether US policy makers are ready to start raising interest rates. Asian markets closed mixed, while European stocks mostly headed lower. Wall Street faced the same faith, with markets trading lower for most of the session thanks to disappointing earnings reports from companies such as Target and Lowe’s.

The FTSE 100 was down 0.5%. Mining, financials and consumer services shares were in the red, while consumer goods and energy shares pulled slightly higher.

Dragged to the bottom of the index were shares of Admiral Group Plc. The insurer reported a rise in first half pretax profit of 4.3% and also raised its dividend by 23%. Despite all this, Admiral said that market volatility after the UK’s vote to leave the European Union had hurt the group’s solvency position. Shares tumbled 8% on Wednesday.

Shares of Old Mutual PLC were also having a tough day mid-week. Shares fell following a ratings downgrade to neutral from outperform at Credit Suisse.

Also struggling on Wednesday was Carlsberg. The Danish brewer’s net profit climbed 25%, however, its first half sales slipped to 31.24 billion Kroner, coming in less than estimated. Despite this, Carlsberg expects to maintain its 2016 outlook as its cost-cutting strategy appears to show progress. Shares traded 5.25% lower.

Also missing estimates were Lowe’s and Target. Lowe’s shares fell 6% after high estimates could not be reached in its recent quarter, despite the recent strength in the housing sector. Shares of Target tumbled 7% after the company cut its full-year outlook based on weaker sales in the first half of the year. The retailer also reported a decline in same-store sales for the first time in more than two years.

But going against the flow on Wednesday were Urban Outfitters. Shares reacted to the company’s profit margins improvement in the second quarter, and surged 16.7%.

Fed officials split

After spending the day in red, US stocks rebounded to close slightly higher on Wednesday as minutes from the Federal Reserve’s July meetings showed policy makers remained divided on prospects for a near-tem rate increase. Stocks bounced off session lows after St. Louis fed President James Bullard said that with US growth trending below 2%, interest rates can stay low.

Such divergence in views, as shown in minutes of the central bank’s July 26-27 meeting issued Wednesday, means officials are likely to need more concrete evidence that inflation is picking up and economic growth is strengthening before deciding that an increase in borrowing costs is justified. Investors will listen closely for additional clues on timing when Fed Chair Janet Yellen speaks on 26th August at an annual symposium hosted by the Kansas City Fed in Jackson Hole, Wyoming.

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.