Yoyo Oil Moves Markets

After a negative Asian session European and US markets registered some gains, as oil rebounded from an initial dive after an oil workers’ strike in Kuwait came to an end. Most earning results came in around expectations, denying market bears an opportunity to break this week’s rally.

ARM added 3.7% after reporting quarterly sales that beat analysts’ estimates. BHP Billiton also increased, following miners higher, even as it cut its iron-ore production forecast for its Australian mines. Yahoo and Intel rose after a dismal day for tech on Tuesday to help push technology shares higher. A better-than-forecast profit from credit card issuer Discover took the stock 7% higher, the biggest move in three years, after gains in card spending helped fuel a first-quarter profit that beat analysts’ estimates.

The good news helped offset underwhelming results at Coca-Cola, which saw a drop in sales of its namesake beverage in most markets, although total sales volume rose 2%, helped by performance of other soft-drinks like Fanta and strength in non-carbonated drinks like bottled water and sports drinks. Shares of Coca-Cola dropped as much as 4.4% to $44.55 in midday trading, but are up more than 9% over the past year.

Crude oil erased earlier losses after Iraq’s oil minister said major OPEC and non-OPEC members might meet next month to discuss – you guessed it – freezing output. Someone who won’t be attending that meeting is Russia, who said it plans to push oil production to “historic highs” following the breakdown in last week’s talks. In what could be a dramatic turn of events, Saudi Arabia also said it could increase output in a bid to overtake Russia as the world’s largest oil producer.

Eurozone Bonds Pause Ahead of the ECB

Today marks the most uneventful European Central Bank Meeting of the year so far, as no action is expected and it is still too early to assess the impact of the measures taken at the last ECB meeting. Nonetheless, the drop in most Eurozone government bond prices have paused ahead of the meeting. Investors will be looking for comments about the corporate bond purchase program launched by the ECB in the last meeting, the most novel measure taken so far.

Core Eurozone sovereign bonds have performed very well this year, as the ECB ramped up its Quantitative easing program. Notwithstanding its ultra-low yield, German bunds have returned 3.7% this year, second only to Belgian government bonds which have yielded a 4.2% return in 2016.

Mitsubishi Pulls a Volkswagen

President Tetsuro Aikawa has admitted that Mitsubishi Motors has falsified fuel economy data for more than 600,000 vehicles in Japan, of which more than 75% were produced for Nissan who discovered the fault.  The announcement sent Mitsubishi stock down by a whopping 20%. This is the first time that a Japanese car maker has reported misconduct involving fuel economy tests.

Details were sparse, but it seems Mitsubishi used over-inflated tyres to improve fuel economy on their line of “mini-cars” which are very popular in Japan. The “cheat” is not as widespread or sophisticated as the one used by Volkswagen last year, but has dealt another heavy blow to the car industry’s reputation. In 2014 South Korean car makers Hyundai and its affiliate, Kia, were found guilty of overstating their vehicles' fuel economy ratings. Renault was also under fire earlier this year, and has recalled more than 15,000 diesel cars after an admission that its emissions filtering system does not work in all temperatures. Renault has not been formally accused of any wrongdoing so far.

This article was issued by Andrew Martinelli, 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 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.