Market commentary: Markets rally on central banks stimulus ahead of today's payroll data

The equity markets’ rebound started on Wednesday extended firmly during last trading session with almost all equity indexes recording large gains while turning sharply around into green territory.

An accommodative Federal Reserve, and Europe slipping into deflation, and therefore putting even more pressure on the ECB to act firmly with the launch off a full QE programme, have supported the markets with investors returning to a “Risk On” mode. The oil also join the rally extending some gains with the WTI adding another 0.61% and the Brent Benchmark remaining above the $51 level.

The European markets posted one of their best day in recent weeks, with the Dax Index adding 3.36%, the France’s CAC 40 adding 3.59% (despite a terrorist act in Paris that resulted in 12 deaths, a policeman killed and the two main suspects on the run chased by a large police’s task force), and the Euro Stoxx 600 gaining 2.75%.

The UK equity market also recorded a positive session with the FTSE 100 rising 2.34%. Today European Markets opened flat, swinging between gains and losses with some investors taking profit from yesterday rally while awaiting the December job report from US which will be realised in the afternoon.

Tesco PLC one of the larger grocery chain in the UK jumped to GBP 211.83p closing up 16.77% after reporting better than anticipated sales over the Christmas season, and after the Company CEO Dave Lewis announced a major restructuring and turnaround plan.

The plan involving among else the closure of as many as 43 unprofitable stores, the exploration of several assets disposals and the omission of this year final dividend, attempts to have the Company returning to its core business and to have the financial resources to sustain an extensive company’s reorganisation.

Although the resilient reaction to yesterday news, the company has shed over 35% of its value over 2014 following several quarters of losses in sales, market shares and operating margins.

The US Markets rally erasing most of the losses accumulated since the start of 2015. The DJIA and the Nasdaq both added 1.84% during yesterday trading session, with the S&P 500 rising 1.79% and some large cap stocks supporting the rally such as Apple which gained over 3.84%, Facebook added 2.66% and the oil sector which added an overall 3.55%.

US stock futures at the time of writing were slightly lower with investors most likely starting the today trading session in a “Waiting Mode” ahead of a particularly important Nonfarm Payroll data to be released at the opening of US markets.

Valeant Pharmaceutical, one of the best performers of the Toronto Stock Exchange, jumped 6.2% during yesterday session after the Company updated it guidance on both Q4 2014 and full year 2015. The largest Canadian drug maker revised upwards its Q4’s revenues now forecasted at $2.2 billion, with its EPS now expected to be at least $2.55 a share, placing it at the highest end of it previous guidance.

The Company also said that it expects revenues to settle between $9.2 billion and $9.3 billion in 2015, with a forward estimated EPS of $10.10-$10.40 for the same period, up from just about $10.00 previously forecasted.

Valeant has been very much in the news last year for a prolonged hostile takeover attempt, backed by hedge fund active investor Bill Ackman, to acquire US drug maker Allergen Inc., which only recently managed to fend off this attempt by agreeing to be acquired by generic drug manufacturer Actavis plc instead.

Although the acquisition of Allergan did not go through, Valeant still delivered an outstanding performance in 2014 gaining over 57% and confirming to be one of the most aggressive growth-by-acquisition company in the biotech and pharmaceutical sector.

Overnight the Asian Markets had a relatively mixed session with some profit taking and the major indexes recording contained gains and the mainland Shanghai Index posting another small decline of 0.24%. In contrast the Australian AXS 200 Index joined the US markets’ rally adding 1.56% with the Nikkei 225 and the Hong Kong market gaining 0.18% and 0.38% respectively.

This article was issued by Mr. Paolo Zonno, Analyst/Trader 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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