Patience | Calamatta Cuschieri

European markets searched for direction on Wednesday as investors digested a number of corporate earnings reports. UK stocks were slightly higher, recovering some ground after suffering their worst loss in six months after the British Prime Minister revealed her government’s Brexit plans. US stocks were flat to slightly higher on Wednesday as robust gains for financial shares partially offset weakness in transportation and retail shares.

Burberry, Goldman Sachs and Citigroup shine

UK luxury brand Burberry was trading in positive territory after reporting a better-than-expected performance in its third quarter. Retail revenue was up as sales growth came in at 3% above analysts’ expectations. Burberry shares were 3.14% higher on Wednesday.

Technology stocks moved higher after strong earnings reports. ASML Holding, the largest supplier to semiconductor manufacturers, was up 6.43% after beating net income forecasts.

Investment banking giant Goldman Sachs also reported quarterly results that didn’t disappoint. The company easily topped analysts’ expectations, and was boosted by a surge in trading revenue. Staying in the sector, Citigroup also posted positive results, reporting profits that surpassed estimates as a bond trading revival spurred by Donald Trump’s surprise victory lifted earnings across Wall Street. The two firms were the last of the major US banks to report results, with JP Morgan Chase, Morgan Stanley and Bank of America all posting gains earlier on in the week.

Outside the financial sector, shares in Target sank 5% after the second largest US retailer cut its guidance for the fourth quarter based on “softer-than-expected” holiday sales.

Waiting game

Market participants have been largely focusing on Trump's plans for fiscal stimulus, deregulation of certain sectors and tax reform. The broader US indices have risen to record highs since the election. However, the Dow has held in its tightest trading range dating back to 1957 over the past month, as investors look for more details about Trump’s policies.

It is now clear that UK Prime Minister Theresa May does not want to retain access to the European Union’s Single Market, but is willing to negotiate a free trade agreement with the other 27 countries. In simple terms, she will be pushing for a ‘hard Brexit’.

Meanwhile, investors will be focusing on the US as President-elect Trump prepares to take office. He told the Wall Street Journal that the dollar was “too strong”, making it more difficult for American companies to compete with other countries.

This article was issued by Rebecca Naudi, Investment Manager at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article is 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.