Market Commentary | Airlines, retailers struggle but oil reaches $50

Stocks searched for firm direction on Thursday, as traders in Europe were seen pausing for breath and investors across the globe stayed on the sidelines ahead of a key US jobs report on Friday. Airline shares took a hit after a profit warning from EasyJet, and bank shares held higher ground. On Wall Street, stocks traded lower on Thursday, weighed by a decline in shares of Wal-Mart and as investors held off taking sizable, risky bets.

Shares in EasyJet stood out for the wrong reasons, as the shares in the budget airline tumbled over 5.5%. This drop came as a result of a fall in the company’s forecast of its full-year profit. EasyJet cited a slowing in bookings after terrorist attacks and the plunge in the pound after the Brexit vote, and said that the company’s earnings took a £90 million hit in the fiscal year that ended 30 September.

Shares of Lufthansa also hit a four-year low on the back of the news. Other airlines also struggled after EasyJet’s warning. RyanAir lost 1% and Air France gave up 1.5%.

Retails were struggling on Thursday. Marks and Spencer was down over 2% after Numis cut its rating on the stock from “hold” to “reduce”. Fellow retailer Next was also in the red, after Numis cut its rating on this stock too.

Wal-Mart shares were in the red. The world’s largest retailer reiterated its guidance for the current fiscal year, and said it expects next year’s earnings to come in relatively flat as it invests more in digital and technology. Wal-Mart also said it will open fewer stores than originally planned this year, but will spend around $11 billion in capital expenditure this year and next. Shares traded 3% lower on this news.

It was a rough day for Twitter as its shares tumbled 18%. The social network’s shares, which rallied earlier in the week on reports that takeover bids were set to start rolling in, dropped 17% in pre-market trading on worries that some likely suitors are not so interested.

The slide came on the back of a report that Google, Apple and Walt Disney – all deep-pocketed companies that were considered to be potential buyers of the social media company – are unlikely to bid for Twitter or have ruled it out entirely.

Meanwhile, the European banking sector was outperforming fellow sectors after Citi recommended in a note that investors go "overweight" on the sector. Citi pointed out names to buy, including BBVA, Standard Chartered, BNP Paribas and Intesa Sanpaolo.

Several stocks posted solid gains. However, weakness in the broader market capped the positive sentiment seen in the sector. In individual banking news, asset manager Amundi is willing to offer around €4 billion for UniCredit's fund management arm, Pioneer, according to a report in Il Messaggero, sending shares in the lender into positive territory.

Despite all the turbulence in the markets on Thursday, oil prices rallied to a four-month high thanks to the help of a surprisingly large drop in US inventory levels, and by growing expectations for the world’s largest producers to agree to a supply cut. Crude oil jumped to $50.29 a barrel, having broken above $50 for the first time since June.

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.