Volkswagen and OPEC plan to expand their production | Calamatta Cuschieri

Italian stocks turned sharply lower on Monday, acting as a deadweight on other European markets as investors looked at the increasing possibility of new elections for Italy, while political uncertainty also swirled around Spain.

But investors may see thinner volumes than normal as London markets closed for a bank holiday and U.S. markets are shut in observance of Memorial Day.

Banks were the leading sector facing pressure on Monday, led by Italian financial names, with shares of Intesa Sanpaolo SpA Unione di Banche Italiane SpA and Mediobanca SpA.  

In Spain, Banco Santander SA fell 2%, with BBVA SA that closed lower at around 3%.

Volkswagen expands footprint in Chinese market

FAW - Volkswagen AG announced on Monday that a new production base opened in Qingdao in east China's Shandong Province, marking an expansion of the leading European automaker in the world's biggest auto market.

FAW-Volkswagen, a joint venture between FAW Group and Volkswagen Group, said the 1.1-million-square-meter base has a total capacity of 300,000 vehicles every year. Investment in the base was about 1.58 billion U.S. dollars. Construction of the base started in July 2015. The joint venture now has a total of five production bases.

Volkswagen set up its first joint venture with SAIC Motor in Shanghai in 1985. As the Chinese economy developed and opened, it established a strong foothold in the Chinese auto market and has been expanding its footprint.

The company now has three ventures. The last one was set up with Anhui Jianghuai Automobile Co., Ltd in 2017.

The new plants will focus on bringing more sport-utility and electric vehicles for local production, the fastest growing segments of China’s auto market. Wolfsburg, Germany-based VW is among automakers expanding local production of sport-utility and electric vehicles even as China eases access to its market by reducing import tariffs. The automaker boosted sales in China by 13.4 percent in the first quarter to 1.01 million units, mainly with the help of models manufacturing under its local joint ventures.

It plans to roll out 15 new car models in China by 2020 and launch 40 new energy vehicle models for the Chinese market by the end of 2025.

Oil price slumped as Saudi Arabia and Russia plan to raise output               

Oil prices slumped on Monday, extending steep declines from Friday, as Saudi Arabia and Russia said they may increase supplies and as U.S. production gains show no signs of abating. Brent and WTI have fallen by 6.4 percent and 9.1 percent respectively from peaks touched earlier in May.

The Organization of the Petroleum Exporting Countries (OPEC), as well as top producer but non-OPEC member Russia, started withholding supplies in 2017 to tighten the market and prop up prices, which in 2016 fell to their lowest in more than a decade at less than $30 per barrel.

But prices have soared since the start of the cuts last year, with Brent breaking through $80 per barrel earlier in May, triggering concerns that high prices would crimp economic growth and stoke inflation.

To address potential supply shortfalls, Saudi Arabia, de-facto leader of producer cartel OPEC, as well as top producer Russia said on Friday they were discussing raising oil production by some 1 million bpd.

U.S. crude production has already surged by more than 27 percent in the last two years, to 10.73 million barrels per day, bringing its output ever closer to Russia's 11 million bpd.

"Oil prices are showing symptoms of a falling knife as investors are jittery on the prospect of increased production from three of the world's top producers," analysts said.

Disclaimer:

This article was issued by Linda De Luca, Trader at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view 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.