Market Commentary: Argentina pays foreign-currency bonds, Apple closes at all-time high

The Stoxx Europe 600 Index rallied 1.8 percent in the past two days as concern over the conflict between Ukraine and Russia subsided. The index gained 3.3 percent from its low on August 8.

European shares opened slightly lower this morning, after equities posted the biggest two-day gain since April, as investors awaited signals from central banks. U.S. index futures and Asian shares were little changed.

In the U.K., the minutes of the last Bank of England committee meeting will be released this morning. Economists had speculated that the central bank could be ready to raise its benchmark interest rate - even as early as this year. However, weaker-than-expected inflation data on Tuesday and dovish words by Governor Mark Carney have helped to mellow those expectations. Federal Reserve is expected to release minutes of its July 29-30 gathering after European markets close. Both central banks are considering when to start raising interest rates in their respective countries.

Futures on the Euro Stoxx 50 Index expiring next month gained less than 0.1 percent to 3,094 at 7:11 a.m. in London. Contracts on the U.K.’s FTSE 100 Index advanced less than 0.1 percent, while those on the Standard & Poor’s 500 Index slipped less than 0.1 percent. The MSCI Asia Pacific Index declined 0.1 percent.

The Stoxx Europe 600 Index rallied 1.8 percent in the past two days as concern over the conflict between Ukraine and Russia subsided. The index gained 3.3 percent from its low on August 8.

The annual Fed Bank of Kansas City’s economic symposium starts tomorrow in Wyoming. Fed Chair Janet Yellen and European Central Bank President Mario Draghi will discuss their outlook for the economy and monetary policy this Friday.

Argentina

Argentina plans to pay its foreign-currency bonds locally to sidestep a U.S. court ruling that blocked payments last month and caused the nation to default for a second time in 13 years.

The government will submit a bill to Congress that lets overseas debt holders swap into new bonds governed by local law with the same terms, President Cristina Fernandez said in a nationwide address yesterday. Payments will be made into accounts at the central bank instead of through Bank of New York Mellon Corp, the current trustee. Creditors opting to keep their notes will also receive payments locally, she said.

Holders of Argentina’s $30 billion of overseas bonds have been in limbo since U.S. District Court Judge Thomas Griesa blocked the nation’s attempt to pay $539 million in interest due by July 30. His ruling was meant to compel Argentina to resolve unpaid debts from its 2001 default. Unlike most creditors who agreed to provide debt relief, hedge funds led by Elliott Management Corp. refused and instead successfully sued for full repayment in U.S. court.

Asia

Asian stocks were steady on Wednesday after strong U.S. housing data lifted Wall Street shares, helping nudge Treasury yields higher and keeping the dollar to extend gains against the euro and yen.

MSCI's broadest index of Asia-Pacific shares outside Japan was flat, treading water through the day.

Tokyo's Nikkei inched up 0.1 percent.

Heineken, Carlsberg, Maersk, Apple

Heineken may be active after the world’s third-largest brewer posted first-half earnings before interest and taxes of 1.45 billion euros ($1.93 billion) excluding some items. That surpassed the 1.32 billion-euro median projection of analysts surveyed by Bloomberg.

Carlsberg said operating profit will rise at a low- to mid-single-digit pace on a so-called organic basis. The Tuborg beer previously forecast high-single-digit percentage growth. Carlsberg, which got 27 percent of its 2013 revenue from eastern Europe, said it expects the beer category to deteriorate in the second half of the year, with distributors in Russia stocking less.

Maersk may move after media reported that the company has suspended drilling activities and other operations in Iraq’s Kurdistan because of fighting.

Apple closed at an all-time high, surpassing a 2012 record as investors look ahead to new products such as bigger-screen iPhones and a wristwatch-like device that may jump-start revenue growth.

Apple rose 1.4 percent to $100.53 yesterday, topping the split-adjusted record of $100.30 reached on Sept. 19, 2012, just before the iPhone 5 went on sale. The shares have gained 25 percent this year.

After rising more than sevenfold following the 2007 launch of its smartphone, Apple stock lost a third of its value in the year after the iPhone 5’s release on concerns that the company was running out of hit product ideas without co-founder Steve Jobs. The tenor has changed, with analysts estimating record sales for the next batch of iPhones, set to be released later this year.

Geopolitical tensions

Russia's President Vladimir Putin and Ukraine's Petro Poroshenko are expected to meet next week, with the aim of finding a solution to the crisis. European Union officials will also be in attendance as the pair meet in Belarus on August 26. This comes as relations between the countries are at rock bottom, with Ukrainian forces continuing to fight pro-Russian separatist forces in the east of the country.

In the Middle East, a ceasefire in the Gaza Strip collapsed on Tuesday, with Palestinian militants firing rockets into Israel, prompting Israeli airstrikes.

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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