Strong greenback, volatile oil | Calamatta Cuschieri

The recent winning streak in financial markets just might be over ...

The unexpected market boost in the post-US election and the strong US Dollar, coupled with rising bond yields could suggest that the equity market might be due for a correction
The unexpected market boost in the post-US election and the strong US Dollar, coupled with rising bond yields could suggest that the equity market might be due for a correction

The recent winning streak in financial markets, especially the Dow Jones Index performing seven days in a row have lost their momentum. Markets are now looking forward to speeches by the Federal Reserve eyeing an interest rate hike in December. The unexpected market boost in the post-US election and the strong US Dollar, coupled with rising bond yields could suggest that the equity market might be due for a correction. Moreover, oil and precious metals also traded in the red region.

In Europe, initially, markets were clinging to a small gain on Wednesday but still settled in a slight decline. A positive performance from the telecommunications and healthcare industry kept the overall decline moderate disguising the losses within the chemical and energy sectors. In the UK, markets had their negative say as well, with property shares lower and shares in the red after British labour-market data showed the unemployment rate fell to 4.8% in the three months to September.

The ups and downs of oil

Moreover, the volatile trading in oil – after rising by 5% the day before - saw the commodity seesawing between losses and gains finding some support after indications that oil producers including Russia were making progress towards completing the OPEC deal to cut the oil supply. In fact, crude had risen more than 1% after a statement from the Russian energy minister on the possible meeting with Saudi Arabia. However, there was an adverse effect on the commodity as it was also affected by the rise in US oil stocks by 5.3 million barrels in the week ending 11 November.

The volatile trading in oil saw the commodity seesawing between losses and gains
The volatile trading in oil saw the commodity seesawing between losses and gains

Pharmaceuticals and telecoms corner

Bayer AG, the multinational pharmaceutical company, lost some ground after it placed $4.28 billion in convertible bonds as a first step to financing the $57 billion purchase of Monsanto Co. The new notes were oversubscribed, which shows a strong interest in the company and as a sign of capital market confidence in the company. Bayer shares initially traded 5% lower, but then is recovered some of its losses in the course of the session ending in the red by 1.31% at around €91.

Shares in Telecoms group Bouygues SA finished the trading session on the high side at 2.65%, after reporting a better than expected profit for the first nine months of the year. Net profit rose to €412 million from €320 million made in the same period the previous year.

The banking side

Dutch Bank ABN Amro said it is shedding another 1,500 jobs as it proceeds in its restructuring process in efforts to reduce costs. These job cuts will result in an extra savings of €400 million. The redundancies will reduce the bank’s workforce by around 13% and thus would generate more savings to offset higher regulatory costs and invests in digital services. Shares in the bank fell 1.7% after the announcement, having gained about 20% since last year’s initial public offering.

This article was issued by Rodrick Duca, 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 Investments Services Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.

More in Business Comment

Get access to the real stories first with the digital edition

Subscribe