Market Commentry | Markets mixed as oil eyes $50 a barrel

European stocks traded in the red on Wednesday as investors failed to get excited about a sharp rise in oil prices, with markets continuing to dwell on news surrounding the US Federal Reserve and the European Central Bank. Fears linger after a report cited the possibility of the ECB scaling back its monthly bond purchases before the scheduled end of the programme in March. Meanwhile, stocks in the US traded higher as the oil price rise was music to the ears of investors, helping to lift energy shares to weekly highs.

Shares in supermarket giant Tesco soared on Wednesday after the company reported a 60.2% year-on-year rise in first-half operating profits before exceptional items. Shares jumped over 10% as the company’s financial results indicated its turnaround effort is taking hold. Staying in the industry, shares of WM Morrisons and Marks and Spencer were higher, but shares of Sainsbury were in red.

Shares of Twitter were enjoying a day in the green. There has been a lot of speculation about the fate of the social media company recently. Wednesday saw fuel added to the fire, as Twitter appears to be considering takeover bids as early as this week. Shares were up over 4% during the session.

Meanwhile oil extended gains on Wednesday afternoon, with prices rising after news emerged that US crude inventories had declined by around 3 million barrels in the previous week. Brent traded at around the $52-per-barrel mark and crude flirted with the key $50-a-barrel level. Shares of Chesapeake Energy made the most of this, with its shares cruising over 7% higher.

Utility shares drifted to intraday lows after Britain’s Prime Minister Theresa May hinted at the Conservative Party conference that the government will review pricing within the industry, saying many energy customers have been stuck paying “expensive” rates.  Stocks of SSE plc lost 2% and British Gas parent Centrica was down 2.4%. Stocks in water suppliers United Utilities Group and Severn Trent fell 4% and 3%, respectively, thanks to a downgrade to underperform at RBC.

Elsewhere, concerns over Brexit continue to weigh on sterling, with the currency hitting a 31-year low against the dollar on Tuesday. On Wednesday, sterling remained under pressure, roughly flat against the dollar at $1.2746.

Markets largely ignored data showing the US trade deficit increased by 3% in August, as investors awaited the Institute for Supply Management’s services index, probably the day’s most important piece of economic data.

Investors will be looking for signs that economic growth accelerated into the end of the third quarter. A strong report would strengthen the case for the Fed to raise interest rates in December, market strategists said. Economists expect an ISM reading of 53.1%. Higher interest rates are, in theory, bad for stocks because they increase the cost of corporate borrowing while also pushing up yields on government debt, making it more attractive to investors.

This article was issued by Rebecca Naudi, 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.