Market commentary: Positive ripples after Draghi bazooka move

European markets enjoyed a good start to the week on Monday, after mining stocks led the way with gains, and the broader market was still buzzing after last week’s boost in stimulus from the European Central Bank. 

On the other hand though, Wall Street was slightly lower on Monday, as a fall in oil prices weighed on energy stocks, which saw investors pause ahead of what looks to be a busy week. Following Draghi’s bazooka move on Friday, all eyes will now turn on the UK, Japan and US central banks to see what moves – if any – they announce.

Among the top movers, Glencore saw its shares leap 4.45%, with Anglo American also enjoying a good start to the week, rising 6.15%. These increases were the result of speculation in the market over a slowdown in China’s industrial production, which is a key buyer of Europe’s industrial and precious metals, and could serve as motivation for more stimulus from Beijing.

In other industries, carmakers also featured among the top movers in Europe, helped by a weakening euro. Fiat Chrysler Automobiles, BMW and Peugeot all climbed around 2%, while Volkswagen managed to recover an early morning slip to end the day trading in the green.

Among stocks moving on corporate news, Italy’s Banca Monte dei Paschi rose the most in six weeks, after Italian newspaper La Repubblica reported that Prime Minister Matteo Renzi is pressing other lenders to consider a takeover of the country’s third largest bank. Shares climbed as much as 13% in early morning trading in Milan.

Staying with big banks, Royal Bank of Scotland was down after news reports that the bank plans to cut 550 jobs as it shifts toward greater use of automated investment advice systems.

In other movers, London Stock Exchange Group shares were trading in the green after a report in the Telegraph said that Deutsche Boerse may raise its takeover offer for the exchange operator.

Meanwhile, crude prices, which have heavily dictated the direction of the stock market this year, fell around 3% as oil went back to trading below $40. This came after Iran squashed hopes of a co-ordinated production freeze any time soon, sending bearish sentiment over a supply glut that has sent prices crashing.

Fed ahead

The Fed’s policy meeting comes just days after the ECB took easing measures that exceeded expectations on Thursday. As a result, speculation lingers towards the Fed keeping interest rates on hold at the two-day meeting starting on Tuesday. Central bank intervention has been at the forefront of efforts by major economies to calm financial markets and spark growth at a time when demand and inflation remain low.

Investors will be on the lookout for the Fed’s comments on the economy and its plan to hike rates amid global economic weakness. The Fed raised interest rates in December for the first time in almost a decade, amid expectations that more tightening would come in 2016. The turmoil in financial markets at the beginning of the year, however, has pushed out forecasts for the next rate rise.

Meanwhile, the Bank of Japan began its two-day meeting on Monday and is expected to keep policy unchanged after adopting negative interest rates in late January.

This article was issued by Rebecca Naudi, 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.