Market commentary: Oil continues to set the scene for markets worldwide

Oil continues to set the scene for markets world wide. As crude oil continued to free fall on Monday, equities took a beating and continue to extend losses. Perhaps, the most important figures for the week are the non-farm payrolls. These are due next Friday, but till then oil and Greece continue to take centre stage.

Upbeat sales figures by General motors were not enough to stall the downtrend. The automaker posted great domestic demand sales but this was not enough for the share to edge higher. The S&P 500 closed at the 2020 level on Monday, which means 1.83 percentage points lower from previous close.

At the time of going to print European futures indicate a mixed open, following a weak session yesterday which saw all major markets close in the red. Markets will continue to follow the Greece saga, as the nation will go to the polls at the end of this month.

This political uncertainty is expected to continue to weigh on market sentiment as a vote in favour of Syriza may mean that the country’s economic progress is destabilized and negotiations with international bailout partners negatively affected.

After Samaras was forced to call an early election, there continues to be mention of the exit of Greece from the Eurozone. This is dubbed by the market as Grexit, Germany’s vice chancellor Sigmar Gabriel was quoted in saying that there are no plans for Greece to leave the Eurozone and Germany and the EU should work to keep Greece in the Eurozone.

On the other hand Chancellor Angela Merkel insists that a Greek exit will not be catastrophic to Europe. Merkel and the finance minister Schaeuble voiced their opinion to the Der Spiegel over the weekend.

The Eurozone is now in a better position than it was in 2011 as countries like Ireland and Portugal have now been rehabilitated and therefore the danger of contagion should be somewhat limited. This saga will continue to create noise in the market, which could prove to be an opportunity as investors wait for the ECB to act in the form of a QE.

On the point of QE, president Draghi mentioned recently that the ‘ECB’s governing council has instructed the staff to prepare concrete measures’. In his typical style Draghi stopped short of providing further details.

Before we preview the day ahead, we have a look at Asia where the three main indices are trading in the red. China is accelerating infrastructure projects as policy makers continue to bolster investments in order to promote growth. This should have an effect on the market and we will continue to follow on how this news is digested by the market.

On today’s data front we have the Eurozone PMI which is due this morning. On the corporate front there are no major earnings that are to be released.

This article was issued by Mr. Darin Pace, Treasury Manager 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.

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