The week ahead | Calamatta Cuschieri

Market summary, Greece set to exit bailout and PepsiCo to acquire Israeli-based SodaStream

Minutes of the Federal Reserve’s August policy meeting are to be reported on Wednesday and should show policy makers upbeat on the economy and committed to further gradual rate hikes
Minutes of the Federal Reserve’s August policy meeting are to be reported on Wednesday and should show policy makers upbeat on the economy and committed to further gradual rate hikes

U.S. stocks rallied for a second session and closed the week higher Friday, with the Dow Jones Industrial Average closing at its highest since February as optimism that the U.S. and China will eventually resolve their trade standoff. The Dow Jones Industrial Average rose 110.59 points, or 0.4%, to 25,669.32 and the S&P 500 index climbed 9.44 points, or 0.3%, to 2,850.13, rising 0.6% for the week. The Nasdaq Composite added 9.81 points, or 0.1%, to 7,816.33 for a weekly drop of 0.3% as weak tech names, notably Tesla Inc., Nvidia Corp., and Applied Materials Inc., limited the index’ upside momentum.

European markets ended the week just below the flat-line, with Italian shares leading the move lower as investors fretted over the state of the country’s banks. Italy’s FTSE MIB Index fell 0.6% to 20,400.51 and the Stoxx Europe 600 ended down 0.1% at 381.07. While the index finished off today’s session lows, it wasn’t enough to erase the recent downtrend in equity prices. Germany’s DAX 30 lost 0.2% to end at 12,210.55 whilst the U.K.’s FTSE 100 managed to just end in positive territory moving up 0.1% to close at 7,558.59.

Greece set to exit bailout; worries turn to Italy

After a nearly nine-year debt crisis that shrank the economy by a quarter, Greece exits the last of its three bailouts on August 20, and hopes to borrow again in international markets. Banks are still saddled with bad loan portfolios and its public debt load is still the highest in the euro zone, at 180 percent of national output. However, the economy has started to grow, tourism is booming, and unemployment is decreasing gradually.

Greece becomes a self-financing nation; receiving no financial help from its European creditors. In time, Greece will be able to tap financial markets to fund its activities, just like any other financially-healthy country. Following this news, there might be positive movements in Greek bond markets, though most of the news should already be priced-in by now.

As Greece starts its long road to recovery, renewed market terrors over Italian debt and verbal attacks on Europe’s establishment by politicians in Rome showed hints of destabilising capital flight from a Eurozone country. A first test occurs when Italy’s new populist government present a budget and explain how it will pay for its costly promises to voters.

Federal Reserve

Minutes of the Federal Reserve’s August policy meeting are to be reported on Wednesday and should show policy makers upbeat on the economy and committed to further gradual rate hikes. Federal Reserve Chair and other central bankers will meet to discuss the root causes of stubbornly low inflation, slow wage growth, and tepid productivity gains.

US-China trade talk

US and China are meeting later this week to find common grounds in an escalating trade war. Markets are watching closely the bilateral trade talks, as this threatens to engulf all trade between the world’s two largest economies. A possible outcome from such a discussion might include the further market liberalisation in China, allowing technology companies to enter the market, namely Google which has recently expressed interest in expanding its services.  

PepsiCo to acquire Israeli-based SodaStream

PepsiCo entered into an agreement to acquire SodaStream International Ltd in a deal valued at $3.2 billion. PepsiCo will buy all outstanding shares of the Israeli-based home carbonation maker for $144 per share, funded with cash on hand. The boards of both companies have unanimously approved the tie-up, but the decision lies upon SodaStream shareholder vote. The deal is expected to close in January.

Disclaimer: This article was issued by Lauriann Azzopardi, junior investment advisor 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

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