Markets Summary | Calamatta Cuschieri

Increase in MSE price index, stable European Stocks, Fed meeting outcome, rise in Japanese shares

The MSE Equity Price Index increased by 0.25% as a result of gains in a number of local equities. On the other hand, a good number of equities closed the trading day unchanged. Malta Properties Company plc rose by almost 3% to €0.72, resulting in the highest price level since late November 2015 following the spin-off from GO plc. Simonds Farsons Cisk plc gained 1.8% to achieve a new record high of €11.20 whilst GO plc increase by 0.9% to a €4.40 price level. Trident Estates plc published their interim financial results for the period ended 31st July 2019. In the first half of the year 2018 the company made a slight loss this time round the company reported a marginal net profit. When it comes to Trident Park, the Directors commented that works are in progress and that the anticipated final cost is in-line with the approved budget. Additionally Trident Estates remain committed to welcome its first tenants in Q1 2021. Finally, Tidents Estates declared that the preparation process for €15 million rights issue is in advanced state and will be officially announced once necessary regulatory approvals are granted.

 Stable European Stocks

European shares ended flat, as gains for the defensive real estate and utilities sectors were countered by losses in luxury good makers, with Fed decision looming. After fractional changes in the pan-European STOXX 600, it closed the day with a marginal gain of 0.02% as investors were cautious with regards to the U.S. Federal Reserve’s interest rate decision. Defensive sectors were in the green again, with real estate and utilities which have a tendency to have a negative relationship to interest rates, rose about 1% and 0.9%, respectively.

Enel, Italy’s largest utility company, increased by 2%, giving a boost to the index of Milan-listed shares to outperform its European peers. The index gained around 10% from its August’s lows. This gain is a result of the formation of a new government.

The insurance specialist Lloyd’s of London reported a first-half pre-tax profit of £2.3 billion, leading the quadruple investment gains and a cutback in underperforming business. Lloyd’s insures commercial risk starting from oil risk to footballers’ legs, experienced high losses in 2017 and 2018 due to a number of natural catastrophes. Lloyd’s in 2018 informed its 99 member syndicates to get rid of the worst performing 10% of their businesses. Additionally, the market proposed its members to move to electronic exchange by next year, as a counter attack to competition from cheaper rivals.

Federal Reserve Meeting

In the Federal Reserve’s meeting a quarter-point interest rate cut was approved together with a few indication of further reduction happening ahead as members split on what is upcoming. The central bank announced that they will be lowering the benchmark overnight lending rate to a target range of 1.75% to 2%. This decrease happened two months after the policymaking Federal Open Market Committee went ahead with its first cut in 11 years.  Major U.S. stock exchanges fell after the decision was announced.

Besides the reduction, the Fed decreased interest it pays on excess reserves by 30 basis points, a decrease greater than the funds’ rate cut, amid a breakdown this week in the overnight repurchase lending market. The committee as a whole did not distinctively pointed out further cuts, divisions remain among individual policymakers.

Japanese shares close to year’s peak

Japanese shares rose close to this year’s peak, with domestic demand-led shares leading gains after a rate by the U.S. Federal Reserve helped in boosting risk sentiment. The Nikkei share rose by 1.34%, close to year-to-date high which happened in late August. The broader Topix increased by 1.24% almost reaching the peak which happened in mid-August. The market’s gains were calmed because the Bank of Japan decided to keep its policy on hold, a widely expected decision but still disappointing some players who had bet the Bank of Japan to act hand in hand with the Fed and the ECB in easing.

 

This article was issued by Peter Petrov, 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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