Market Commentary | This week: Focus on Central Banks

The week ended with a stab in the back for Financials, with Deutsche Bank fined by the US Justice Department fourteen billion US Dollar to settle civil claims related to mortgage-backed securities. This results in a ripple effect on other European Banks, with a special focus on Royal Bank of Scotland and Barclays, which are currently in talks with the same Department.

However, there was still positive news coming from the Health Sector. Pharmaceuticals shares, especially in the United Kingdom, climbed with reports that South African Mediclinic was preparing to bid for a FTSE 250 company, Spire Health Group. The news sent shares in Spire Health soaring over 8%. Moreover, currently the African Rand gained momentum against the British Pound, so the acquiring company (if successful) will benefit from the stronger local currency.

More acquisition news comes from Unilever PLC, the maker of Dove Soap, currently in talks with Honest Co, a consumer-product retailer founded by actress Jessica Alba. The deal could be valued more than one billion US Dollars. The news sent the share price of Unilever down around 1%.

This week will focus on important Central Banks, with Tuesday and Wednesday having the Bank of Japan issuing its policy statement and The Federal Reserve (FED) having its Federal Open Market Committee (FOMC) meeting. Thursday will be the day for the Bank of England Financial Policy Committee (FPC) and the European Central Bank Mario Draghi speaking at the European Systematic Risk Board (ESRB) conference in Frankfurt.

The Bank of Japan will be publishing its assessment of the country’s monetary policy. Recent BOJ speeches, increased uncertainty, as the explanation of Japan being on track for the two percent inflation is still being repeatedly missed for about two years. Handling of negative interest rates will also be in the limelight, although increasing negative rates might not help. The FED will also be stating if there will be an interest rate change (if any) in the coming FOMC meeting. The FED had not lifted interest rates since guiding them from near zero to the current range in December.

In the commodities market, a close watch on oil supply is being monitored, especially the effect on its prices when the Nigerian and Libyan exports will return to the market.

This week, company news is also fairly light, which means markets will have little to drive them from a bottom-up perspective. FedEx, the largest cargo air shipper, will be delivering its first quarter report indicating a strong revenue growth. This includes the acquisition of TNT way back in June for the sum of $4.8 billion.

Markets volatility has returned with a vengeance, but this has been driven more by sentiment than actual events. The Fed’s meeting is the key event, and with a press conference to boot there will be plenty for investors to chew over.

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.