Market Commentary: Sanctions against Russia undermine recovery, may keep interest rates on hold

The European Central Bank is expected to keep interest rates on hold today as weaker-than-estimated German industrial output added to evidence that the conflict in Ukraine and sanctions against Russia are undermining recovery.

The US has joined NATO and Poland in warning there’s a risk President Vladimir Putin could send troops into Ukraine, while Russia hit back at the sanctions. Until we see an improvement in the Russia-Ukraine situation, the markets will continue to remain volatile. This is creating an opportunity for investors with a long-term horizon to be able to pick up stocks at attractive entry points.

A large number of European companies posted results this morning. Adidas, the world’s No. 2 sports gear maker, cut its profitability forecast for 2014 by 2% points after first-half revenue in North America dropped 14% on slumping demand for golf equipment.

The operating margin for this year will be in a range of 6.5% to 7%, rather than an 8.5% to 9% prediction earlier.

Nestle SA, the world’s largest food company, plans to spend 8 billion Swiss francs in its first share buyback in three years as it reported first-half revenue growth that exceeded analysts’ estimates.    

Revenue gained 4.7% excluding acquisitions, divestments and currency shifts, the Vevey, Switzerland-based maker of KitKat bars and Nespresso coffee said today in a statement.

Aviva, the U.K.’s second-biggest insurer by market value, reported a 4% increase in first-half profit that topped analysts’ estimates. Operating profit in the six months through June climbed to 1.05 million pounds, according to a statement today.

Deutsche Telekom, Europe’s largest phone company, reported an increase in profit as the company shifted network investments from its U.S. unit, which it’s struggling to sell, to its German home market. Earnings before interest, taxes, depreciation, amortization and excluding some items rose 0.3 percent to 4.43 billion euros, the Bonn-based company said today.

Commerzbank, Germany’s second-biggest bank, set new asset-reduction and loan-loss provision targets after second-quarter profit more than doubled. Commerzbank will cut unwanted assets to around 67 billion euros by the end of 2016, more than a previous target of 75 billion euros, the company said in a statement today. Provisions for bad debt in 2014 will be “well below” the 2013 level, the bank said.

Companies reporting results out of the US today include Wendy’s Co, Duke Energy Corp and SanRidge Energy Inc.

This article was issued by Calamatta Cuschieri, visit www.cc.com.mt for more information.

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 & Co. Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.

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