Market commentary: Markets trade lower as year-end approaches

As the New Year approaches, yesterday’s market activity was somewhat subdued. The major European indices all traded lower yesterday.  The Euro Stoxx 50 shed 1.55% to close at the 3135.95 level, while the German DAX dropped 1.22 to 9805.55. 

The CAC 40 was the biggest loser in percentage terms as it lost 1.68% to end its trading at 4245.54 whilst the Spanish IBEX 35 managed to contain its losses most as it trimmed 1.11% to close at 10279.20. Some analysts have argued that this downward pressure is directly linked to investors taking profits towards as the end of 2014 approaches. 

It is interesting to note that data compiled by Bloomberg shows that the volume of the Stoxx 600 shares traded yesterday was 43% lower than the 30-day average. With the drop recorded yesterday, European indices are moving towards their first December decline since 2008. 

In specific company news, Next Plc saw its share price soar by 3.2%, recording the largest gain for 2014. This comes on the back of an indication of improved retail sales.  The company reported its Christmas season sales which have beat analysts’ expectations. 

A number of investors are also turning bullish on energy related companies such as Exxon Mobil and Schlumberger. This is being done through increased exposure to ETF which hold significant stakes in such aforementioned companies. 

For the month of December, more than USD3.13 billion has been invested in these ETFs as investors seek capital gains through the purchase of oversold and undervalued stocks. Meanwhile, a number of analysts also reflect this bullish stance as 44 companies that form part of the S&P500 are expect to see stock valuations increase by more than 23% in the new year. 

US

US trading followed the Europe into negative territory as the three major indices ended their respective sessions at lower levels.  The S&P 500 closed at 2080.35, dropping 0.49% whilst the Dow Jones Industrial Average ended trading at 17983.07, shedding off 0.31%. The NASDAQ was also down by 0.61% as it closed at the 4777.44. 

Investors may have acted cautiously as a consumer confidence report issued yesterday showed that the increase in consumer confidence was lower than expected. An increase of 93.9 was expected however the figure came in at 92.6. Furthermore, the Case-Shiller Home Price Index showed that home prices in 20 US cities rose at a slower pace in October. 

Year on Year however, prices were up 4.5%.  One must add that this was the slowest increase in two years.  An increase of 4.7% was expected.

Technology shares were put under pressure yesterday; Apple also felt the pressure as it was down 1.2%. A report issued by ABI Research stated that iPad sales are forecasted to decline for the first time. Utility shares that form part of the S&P500 were also put under pressure yesterday as they dropped 2.1%.

What to look out for today

Although it is expected to be a quiet day in trading, the US will be issuing the weekly unemployment claims figures together with the month on month Pending Home Sales data. The reading is expected to come in at 0.6%; a significant improvement from the previous reading of -1.1%.

The Crude Oil inventories data is also another interesting indicator to look out for given the recent volatility in oil prices and developments in Libya.   

On behalf of the employees at Calamatta Cuschieri, I would like to wish our readers a very prosperous new year 2015. 

This article was issued by Mr. Karl Cremona, Investment Advisor 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 & Co. Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.

More in Business Comment
Markets break records | Calamatta Cuschieri
Business Comment
Calamatta Cuschieri
Markets climb higher | Calamatta Cuschieri
Business Comment
Calamatta Cuschieri
Markets surge with Dow at fresh record | Calamatta Cuschieri
Markets surge on jobs data | Calamatta Cuschieri
Business Comment
Calamatta Cuschieri