Autos stand out amidst worries

The gas-guzzling US consumer helped most automakers to hefty sales gain last month, but the good news was overshadowed by growth concerns. Global bourses were down and the US slid to multi-month lows against the Euro and the Yen. US and German 10-year yields also dropped significantly, highlighting investors’ anxiety over the future or the world economy.

The day kicked off an a bad note in Asia, with an unexpected rate cut by the Australian central bank which brought its benchmark rate down to a record low of 1.75%, which followed a weak report – the 14th consecutive one – on China’s factory activity. The double blow proved to be a significant catalyst and worries about global growth pushed the Japanese yen to an 18-month high against the dollar, further complicating the profit outlook for Japanese exporters. Disappointing corporate earning added to the dull picture, as Sony fell after reporting an annual loss in its image sensor business, whilst Panasonic was also down on weaker sales. There was some good news for telecomms giant NTT Docomo, as it traded almost 5% higher on strong earnings and a solid profit forecast.

Worries spilled over into Europe, the biggest loser being Commerzbank, down more than 9% after a disappointing earnings release. The German banking giant said its first-quarter profit more than halved, mirroring much of the world’s global banks results. On the positive side, Germany’s second-largest lender maintained its core tier capital ratio – a measure of how well the bank can absorb external shocks – at a stable 12%, and also set aside 5 cents a share for a dividend payment. The company last paid out a dividend in 2007.

French bank BNP Paribas outperformed on a higher net income, but was still down for the day. European banks in general were weak, but were in good (or should I say bad) company, as basic resource companies also felt the brunt of the weak data from China. Oil also dropped as rising output from the Middle East renewed concerns about global oversupply.

Performance in the US markets was also predictably negative overall, with the NASDAQ being the worst performer on the day with a drop of 1.13%. One of the few bright(er) spots in tech – Apple broke its 8-day losing streak to end the day up at $95.18.

You wouldn’t think there was good news in the auto sector judging by share price action, but US vehicle sales for April – just over 1.5 million – pushed the auto industry to its best month ever, beating an 11-year old record. But while the old record was fueled by significant discounts and lease deals, the driving force behind this surge in figures came from increased demand.

Honda and Nissan set their own individual April sales records, Ford posted record SUV sales and Toyota boasted record figures for sales of trucks and SUVs. On a model basis, sales of Toyota’s RAV4 were up by a record 32% on ma monthly basis. Ford’s Explorer also did well, posting a 22% monthly increase, while JEEP SUVs helped Fiat Chrysler register a 17% monthly increase.

The negative market sentiment seems to have carried on into Wednesday trading, as Asian shares remained under pressure. Australian bourses are now down for the year, in a move exacerbated by a near 10% plunge in BHP. The Anglo-Australian mining giant, together with Brazil’s Vale SA were amongst the companies targeted by a civil lawsuit filed by Brazilian prosecutors who are demand almost $44 billion in damages after a dam failure in 2015.

There is some good news though. In Europe Societe General and Royal Dutch Shell have both beat analysts’ earnings forecasts. France’s second-largest bank by market value reported an unexpected increase in first-quarter profit, boosted by consumer banking, and announced plans to deepen cost cuts at its investment bank. Net income beat expectations by around 20%. The Anglo-Dutch oil company beat estimates for its first-quarter profit on better performance in its oil refining and chemicals production.

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 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.