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Optimism reigns | Calamatta Cuschieri

Federal Reserve Chair Janet Yellen sparked a rally in financial stocks by hinting US interest rates may soon go higher

calamatta_cuschieri
Calamatta Cuschieri
16 February 2017, 11:21am
Banks led the gains after Federal Reserve Chair Janet Yellen sparked a rally in financial stocks by hinting US interest rates may soon go higher
Banks led the gains after Federal Reserve Chair Janet Yellen sparked a rally in financial stocks by hinting US interest rates may soon go higher
Global markets enjoyed a day in the green on Wednesday. Stocks in Europe pushed higher for a seventh straight session, with banks leading the gains after Federal Reserve Chair Janet Yellen sparked a rally in financial stocks by hinting US interest rates may soon go higher. It was a similar story on the American stock markets, which marked new record highs as investors parsed through key economic data.

Banks lead the way

Wednesday was a good day for banks and insurers, who found themselves in the driving seat after Yellen signalled that US central banks could raise interest rates sooner rather than later due to current market conditions. Higher interest rates tend to benefit the financial sector, since it allows them to charge customers more for their loans.

Among European banking shares, Barclays, Deutsche Bank and BNP Paribas all climbed on Wednesday. Likewise, Bank of America, Wells Fargo and JP Morgan were also in the green during Wall Street’s session.

Earnings in focus

Heineken reported a 3% increase in full-year sales by volume on Wednesday, adding that it will meet its medium-term target for operating margin expansion, despite continued currency headwinds. Shares shot up on 3.67% this news.

Crédit Agricole posted strong fourth-quarter earnings, with its revenue rising 7%. Shares soared over 5%. Elsewhere, Danone announced a cost-cutting plan of around €1 billion over the next three years due to changes in Europe and a tough environment in China. This news sent its shares into negative territory.

Shares of Fossil group had a rough day, with its shares tumbling 16% after quarterly results were hit by currency headwinds, and the company released downbeat guidance for the remainder of the year.

Bad time to be bearish

It may be a good time for stock market bears to throw in the towel. Equities have mostly trended higher since Trump’s election in November, with investors betting that the policies he is expected to pursue, including massive corporate tax cuts and deregulation, will accelerate economic growth.

A mere 20 trading days after surpassing the psychological milestone of 20,000, the Dow Jones Industrial Average is already flirting with the 21,000 mark. The most recent run-up is pegged to a revived promise by Trump to cut individual and corporate taxes, with the President hinting at an upcoming tax policy that he described as “phenomenal”. All we can do is wait and see.

This article was issued by Rebecca Naudi, Trader 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.8

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