Markets Summary and Draghi’s expected Stimulus plan | Calamatta Cuschieri

The market is expecting stimulus which makes it almost impossible to affect the market with an upside

The MSE Equity Price Index increased by 0.41% to read 4,839.813 points, these upward trend was a result of five local companies ending the day in the green. On the other hand, Lombard only closed the day in negative territory. Medserv plc went up 2.5% which lead to the €1.23 price level, Simonds Farsons Cisk plc regain a near 3-month high of €10.50 which represents a 1.9% increase, and Malta International Airport plc increased momentum by 1.4% which regained a price level of €7.50. Another large capitalisation company, GO plc surged by 0.9% to achieve a €4.42 price level and lastly Malita Investments plc had the highest move when compared to the previously mentioned equities, of 3.5% resulting in a €0.895 price level. Lombard Bank Malta plc decreased by 0.9% to read €2.20.

European shares hit 6-week high

European shares hit 6-week high as a result of U.S.-China trade tensions easing and hope that in the upcoming European Central Bank’s meeting new stimulus strategies are disclosed and news from individual companies also were a helping hand in this positive trading day. Shares of London Stock Exchange rose to a record high as a result of Hong Kong’s Exchanges and Clearing made an unsolicited $39 billion takeover approach, but wanted the London Stock Exchange to get rid of its acquisition of data company, Refinitiv. The London Stock Exchange shares closed 6% higher, the largest gain ever since the company had Refinitiv purchase agreements in the beginning of August. All the major European indexes have regained losses, which occurred in August, with the SOTXX 600 up about 8%.

Draghi expected to unveil huge new Stimulus Plan

The European Central Bank and its President Mario Draghi found themselves in a cross roads: The market is expecting stimulus which makes it almost impossible to affect the market with an upside. The economy is giving clear signs of weakness, inflation rate not picking up and the U.S.-China has no real end result. Recent economic data is not giving any particular positive news, although leading indicators have somewhat stabilised. In detail the ECB is expected to do the following: Cut deposit rate, re-launch monthly net asset purchases, having a stronger forward guidance by imposing an extension on the horizon to keep rates at present or lower levels beyond the first half of 2020, introduce a tiering system for bank deposits and lastly raise self-imposed issuer limit for purchases of government bonds from 33% to 40%, or even 50%. If that is what the ECB announces, it will probably the most comprehensive package ever by the ECB.

Argentina – Currency control amid Economic Crisis

Argentina’s central bank declared further currency checks in an effort to control speculation and ease a spiralling debts crisis in Latin America’s third largest economy. These new controls forces anyone buying foreign currency to provide an oath promising that they will wait a minimum of five days before using the funds to purchase bonds. Previous regulation was less stringent which represented investors with the opportunity to use the foreign currency to buy a bond and then immediately sell it at a more favourable exchange rate. This would result in the investor making a quick 5%-7% profit. Initial restrictions were limited to dollars purchase and asked for companies to seek permission from the central bank to access the foreign exchange market to purchase foreign currency and make transfers abroad. This negative news in the bonds, stocks and peso currency as a result of market fears over a potential return to the interventionist policies of Fernandez de Kirchner’s previous government.

Trump delays Tariff hikes

President Donald Trump tweeted that he will delay increasing tariffs on $250 billion worth of Chinese good from the 1st of October to the 15th of October as a gesture of good will to China. Trump commented that this delay is taking place because the Vice Premier of China, Liu He, requested it and the People’s Republic of China will be celebrating their 70th Anniversary. As a result to this news the U.S. stock futures increase by more than 0.5% and the Dow opened 150 points higher.

 

This article was issued by Peter Petrov, Junior Trader at Calamatta Cuschieri. For more information visit, https://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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