Market commentary: Markets give thumbs up

All smiles in the markets today as Janet Yellen’s cautious tone on future interest rate hikes drove stocks well in the green. The S&P 500 and the Dow industrials closed at 2016 after the Federal Reserve Chairwoman emphasized a cautious approach to normalizing monetary policy in light of fears about the domestic and international economy.

Europe was performing even better this morning, following a positive lead in Asia with gains hovering around 1.5% in most indices. What is worth taking note of is Yellen’s increased focus on forces outside of the US and the Fed’s reduced expectations for rate increases in 2016, now at two versus an earlier projection for four.

She noted recent readings on the strength of the U.S. economy since the beginning of the year have been mixed. On the policy front, she said research suggests that, with a funds rate at zero and increased uncertainty, the best policy is greater gradualism. Still, in a bid to still retain flexibility, Yellen said the Fed can hike if the economy grows faster.

Another major analyst has jumped on the commodity selloff bandwagon. After a gloomy call by Goldman Sachs in the past weeks, Barclays has said in a note that natural resources such as oil and copper are at risk of sharp, near-term losses in the absence of any real improvement in the markets. The analyst who issued the mote might want to take note of the rally in commodities brought about by the weaker dollar in the wake of the Fed meeting, although it must be said that the basis of the note – a marked slowdown in the global economy – remains very valid.

Market movers

In other news, Volkswagen's 'clean diesel' advertising campaign (oh, the irony) put the automaker on the receiving end of yet another lawsuit on Tuesday launched by the US Federal Trade Commission. Shares in Volkswagen were slightly lower.

Metro was over 9% higher after it outlined a proposal to split itself in two. The German retailer is proposing a split into a wholesale a food business and a separate consumer electronics business.

French supermarket chain Carrefour was in positive territory after Península Participações Ltda upped the amount of shares it owns in the company. Also in France, railroad transport giant Alstom outlined its long-term goals on Tuesday, saying that it wants 30% of orders to come from newly developed products by 2020, sending shares higher.

Elsewhere, Boeing said it will cut around 4,500 jobs by June in a bid to cut costs. 4,000 of those will come from its commercial airplane division by the middle of the year, while the rest will be cut from a testing division. The news sent shares in rival Airbus slightly lower. Airliners have been under pressure since the terror attacks in Belgium and Pakistan and the Egypt Air hijack, even though the latter was only ‘for love’.

In Japan, Foxconn – notoriously in the news a couple of years back due to a high employee suicide rate – is set to buy Sharp Corp, in a deal which marks the largest acquisition by a foreign company in Japan's tech industry and the end of independence for a 100-year-old company which started out making belt buckles and mechanical pencils. The deals gives Foxconn control of Sharp's advanced screen technology and helps in strengthening its pricing power with its major client, Apple.

Apple vs FBI, Round 2

In a complete turnaround of events, the FBI announced Monday that it managed to unlock an iPhone 5c belonging to one of the San Bernardino shooters without the help of Apple. Unsurprisingly, the agency is highly reluctant in telling Apple how managed to do so, leaving the tech giant guessing about a vulnerability that could compromise millions of devices.

It's unclear whether the FBI's hacking technique will work on other versions of the iPhone, though a law enforcement official who spoke on the condition of anonymity said its applications were limited. Some news outlets citing anonymous sources have identified Israeli police technology maker Cellebrite as the undisclosed third party helping the government but, not surprisingly, neither the company nor the FBI has confirmed those reports.

While hacking, be it ethical or otherwise is an almost universally accepted concept this case is highly different. It is entirely out in the open, the FBI declared it needed to access a smartphone and it did so despite Apple refusing to give in. This case highlights a new ethical dilemma - should tech companies be made aware of security flaws, or should law enforcement keeps these to themselves and use them just as crime-fighting tools?

This article was issued by Andrew Martinelli, 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.