Market Commentary | A Cautious Start

Asian and European stocks were mixed on Monday, and bourses in the US ended lower as the week kicked off on a cautious tone ahead of monetary policy meetings in the US and Japan later on this week. No immediate action is expected from both countries just yet, but investors will certainly be looking for clues about what may be around the corner. In the US policy is on a tightening course and another interest rate hike should be on the cards for this year, but global macroeconomic factors may induce Fed President Janet Yellen to hold off for a few more months. In Japan some form of stimulus is largely expected although it is unclear whether the Bank of Japan will play any part in it.

A fall in oil prices also reverberated in the markets. Crude oil fell to levels last seen in May amid worries that oversupply would weigh on the markets for a protracted period of time. The US dollar strengthened while most benchmark government bonds in the Eurozone, the US and Japan saw an uptick in prices as an over-the-weekend G20 saw strong commitments towards bolstering growth using all possible “monetary, fiscal and structural” tools. The pound sterling has been hovering at 2-week lows, while the yen strengthened significantly over the past 2 days.

In company specific news, Sprint saw a huge jump of over 25% in its share price after its first-quarter revenue beat estimates and the company said it had enough money to fund its business this year. On the other end of the scale, Nintendo fell by 17% – the maximum allowable drop in Tokyo. The drop comes after the company said that, despite the hugely successful launch of Pokemon Go, it expects limited impact on its bottom line. According to an estimate by Macquarie Securities, Nintendo only has an "effective economic stake" of just 13% in the Pokemon Go app, despite being shareholder in both the game developer and the cartoon brand.

Verizon Buys Yahoo!

After a lengthy saga, Yahoo! Has finally found a buyer in Verizon who paid $4.8 billion for the core assets of what was once the dominant force in the Internet space. The US wireless carrier, who last year bought AOL for roughly the same price, hopes to gain an edge in mobile content and advertising thanks to a combined subscriber base of over 140 million subscribers. Yahoo! Will keep operating mainly through its hugely successful investment in Alibaba – the company had invested $1 billion in the e-commerce giant in 2005.

In another sale story, LVMH Moët Hennessy Louis Vuitton, the world’s largest luxury conglomerate is selling a fashion brand for only the second time in its almost 30-year history. The French company agreed to sell the Donna Karan International brand to US-based G-III Apparel Group. G-III is a manufacturing and licensing company that owns Andrew Marc, Vilebrequin and Bass. It also holds the licenses for Calvin Klein and Tommy Hilfiger amongst others.

The deal has been valued at around $650 million, based on stock market valuation plus net debt. LVMH had bought the brand in 2001, 5 years after it went public for roughly the same figure it is selling it for now. The only other brand which was sold off by LVMH was Christian Lacroix in 2005.

This article was issued by Andrew Martinelli, Trader at Calamatta Cuschieri. For more information visit, www.cc.com.mt . The information, views and opinions provided in this article are 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.