Market commentary: New MGS starts trading today, Draghi fumes during parliament Q&A

Mario Draghi pushed back against an accusation that the European Central Bank is blackmailing Greece and compounding the pressure on the country. Draghi in response to this replied “Let me disagree with you about everything you said,” The exchange came amid signs that Greece could run out of money by early next month which is putting additional pressure on the political front.

Draghi pushed aside concerns that the ECB’s quantitative-easing plan will be hampered by a shortage of bonds available to buy. “We see no signs that there will not be enough bonds for us to purchase,” he said. “Feedback from market participants so far suggests that implementation has been very smooth and that market liquidity remains ample.”

The ECB started buying government debt this month to revive inflation and spur growth. While the region’s recovery is being helped by cheap oil and a weak euro, Draghi is faced with a resumption of the crisis in Greece, with the country on the verge of a default that would shake the foundations of the single currency.

Draghi said that recent signs point to an improving recovery and that QE will be an integral part of this. He also said lower interest rates are feeding through to the broader economy and helping investment.

Draghi has been increasingly upbeat about the euro-area revival since the announcement of the QE program. Two weeks after ECB staff forecast growth will accelerate from 0.9 percent last year to 2.1 percent in 2017, a pace of expansion the region hasn’t seen since 2007.

US housing data disappoints

Sales of previously owned homes fell short of a 5 million annual rate in February for a second month, showing an industry struggling to gain traction amid rising prices and a lack of inventory.

The median value of a house climbed 7.5 percent from the same month last year while the number of properties on the market was little changed. Prices that are rising faster than incomes, still-tight borrowing standards and a lack of properties from which to choose are preventing Americans from taking advantage of mortgage rates that remain near historical lows.

Dot-coms losing steam

Just as the Nasdaq Composite Index surges to the record high set during the dot-com-era, the excitement about China’s Internet boom is fading. Half of the 14 Chinese dot-coms that debuted in the U.S. last year are now trading below their initial sale prices. Even Alibaba Group Holding Ltd., one of those still up in price, has dropped 28 percent from its record high in November.

Investor confidence, so high when Alibaba brought its record $25 billion initial public offering to market last September, is being undermined now by a wave of poor earnings at Chinese technology companies. Those that went public last year including Weibo Corp., the microblogging service, and mobile dating app developer Momo Inc. have failed to deliver the revenue investors were expecting.

3% MGS 2040 starts trading

The eagerly awaited start to the trading of the new 3% Malta government stocks began today, with the current yield curve indicating that subscribers are already “in the money”. My guess is for the price of the bonds to close at around the 110 level on the first day, and to have continued upside momentum in the short term as investors scramble to get in on the action.

As I’ve previously stated, don’t be overly attached to your MGSs as there will soon come a time when it would make sense to dispose of them at a handsome profit; you may subsequently go on that dream vacation or buy that something special you’ve had your eyes on!

This article was issued by Simon Psaila Trader/Analyst 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
Boris Johnson agrees Brexit deal with EU | Calamatta Cuschieri
Markets end mixed | Calamatta Cuschieri
Business Comment
Calamatta Cuschieri
Pound jumps as Barnier says Brexit deal “possible” | Calamatta Cuschieri
Markets advance on trade talks | Calamatta Cuschieri
Business Comment
Calamatta Cuschieri