Market commentary: US dollar continues to strengthen

According to Goldman Sachs Group Inc. global stocks and bonds will offer lower returns in the coming years as economic growth remains subdued and interest rates remain low. In this scenario equities are expected to be the best performers.

Yields on sovereign bonds from the US and Germany will increase as economic activity regains traction while oil and gold will remain at low levels. Going forward the US is expected to grow at the same rate as in 2014, while Europe and Asia will benefit from current low energy prices.

The US dollar is expected to continue to strengthen, reaching $1.15 against the Euro. In this scenario, Goldman expects European firms to slowly catch up to their US counterparts. European equities are expected to gain 9% in 2015.

US

US stocks ended the session slightly lower yesterday as minutes from the previous Federal Reserve meeting failed to give a clear direction on the next US interest rate movement. The minutes indicate that members are debated the outlook on inflation and the economy.

This somewhat surprised the market that had previously set the target for an interest rate increase for the third quarter of 2015. The debate reduced confidence in this timeline as the market is unsure whether to interpret the discussion in a hawkish or dovish manner.

Tech names were among the worst performers as Microsoft and Qualcomm retreated. Qualcomm on Wednesday unexpectedly gave a conservative five-year outlook.

The market was surprised as Nokia announced that they will be launching an Android tablet. Nokia had previously sold its mobile unit to Microsoft and Microsoft has permission to use the Nokia name for 10 years. A rebound by Nokia so early was not expected, especially in direct completion with Microsoft.

 Asia

Asian stocks mostly fell on Thursday morning as factory output data suggested that China’s economy was slowing. The Japanese yen continued to slide.

Europe

European stocks dropped led by a decline in commodity producers. European benchmark indices have gained over 9 percent from a low in October. Investors are awaiting further economic data to gauge the region’s economic strength.

BHP Billiton Ltd said that previous massive expansion in iron ore production has ended. The stock fell 1.5% on the news.

Techip SA fell 6.3 percent after saying it will attempt a bid for CGG SA, a French seismic surveyor of oil.

ThussenKrupp Ag posted its first annual profit in four years.

Commodities

Gold remained under pressure after a poll showed weaker support among Swiss voters for a referendum that would require the Swiss National Bank to boost its gold reserves. If the referendum passes, Switzerland will have to increase gold reserves from 7.8% to at least 20%.

US Crude oil was down 5 cents to $74.53 a barrel.

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

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