Market commentary: China breathes fresh air into the market

Global stocks rose on Wednesday as surprisingly optimistic Chinese trade data offered hope that Asia’s biggest economy is finally stabilising, boosting risk appetite. This news resonated in Europe, with European stock markets extending their winning streak to four sessions on Wednesday. America also joined the global rally, with Wall Street trading in the green.

An upbeat trading mood emanated from China’s export figures, which soothed fears that the world’s second largest economy is slowing down. Latest trade data revealed Chinese exports grew for the first time in nine months in March. Export figures led the way, rising 11.5% last month, thereby rebounding from February’s 25.4% decline.

Since China is a major user of natural resources, this better-then-expected data helped drive a rally in UK-listed mining stocks. Shares in Anglo American jumped 9.8%, Rio Tinto added 7.33% and Glencore climbed 7%.

Banks, the worst performing sector so far in 2016, were among the biggest gainers in Europe. Italian banks led the way after the Italian government outlined a plan to shore up its weak financial systems earlier in the week. Shares of Banca Monte dei Paschi di Siena soared 11.7% and Baca Popolare de Milano rose 7.9%.

Carmakers also advanced on Wednesday. Harley-Davidson added 4.4% after the company’s retail sales jumped 10% in March because of warm weather. Shares in automobile giants BMW and Volkswagen were also trading in positive territory, adding 3.5% and 4.05% respectively.

Oil prices, however, ran into profit taking after Tuesday’s session saw crude oil futures settle at a 2016 high. Oil declined from a four-month peak amid speculation over the likely outcome of a meeting by major suppliers to discuss freezing output. According to report on Wednesday, the Saudi oil minister played down the prospect of action on an oil output. This left Brent crude oil trading in the red.

Shares of Tesco plc also slumped, although the supermarket chain swung to a full-year profit. Still, investors seemed to think there is more to be done. The food retailer also cautioned that future profitability will be capped by investment. Shares in Tesco fell 8% on the day.

Investors gave a thumbs up to JP Morgan’s first-quarter earnings. The biggest US lender by assets became the first of the big lenders to report this season, posting a first-quarter profit that beat Wall Street estimates after the firm slashed bankers’ pay and trading revenue declined less than most analyst predictions.

Although net profit fell to $5.5 billion, the New York-based company reported that earnings and revenue both beat expectations, sending shares up nearly 3% in pre-market trading, and ending the day 4.32% higher. Meanwhile, Bank of America, Wells Fargo and Citigroup, scheduled to release results later this week, climbed at least 2.75%.

As global equities erased losses for the year, the cloud that China cast over the financial markets may be starting to lift, with China’s economy on the mend.

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 Investment Services Ltd. has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.