< Back to Trader Blog Articles

Market commentary

  • Risk Manager
  • Blog post submitted on 30th May 2014

Good morning!

S&P 500 reached during yesterday’s trading session new highs after investors resisted the disappointment in the bottom Q1 GDP growth figure and focused on the changes that underpinned the revision to -1% from 0.1% (expectations were for a review to -0.6%). That is, the fact that the contraction was driven to a large extent by the drop in business inventories’ growth is deemed to provide a boost for this quarter’s growth. This apparently sufficed to make equity investors disregard the almost 10% quarterly fall in corporate profits and the slower growth in spending (excluding services). What’s more, the below expectations growth in pending home sales (0.4% MoM versus 1.1% expected) also failed to tamper optimism in the stock markets. In contrast, the treasuries appeared categorical in continuing to discount below expectations growth. Hence, the 10 year US Government bonds remained below 2.5%

As the ECB meeting approaches there are also signs that the FX market is following the other assets in incorporating expectations of additional monetary easing. This tendency consolidated after the dismal data on private loans and monetary aggregates that came out on Wednesday and which points to below expectation inflation data next Tuesday. As such, the Euro has been hovering close to 1.36 yesterday and early today. Reflecting the same expectations, peripheral yields remained near all-time lows. Meanwhile, the European stocks were almost unchanged yesterday with the futures pointing to a similarly uneventful trading session today.

Moody’s announced yesterday that it is revising its rating outlook for 81 European banks to negative so as to reflect the lower likelihood of government support in the aftermath of the European resolution regulation. The release will probably be non-material for the markets given that the move has been contemplated for some while and that it follows a similar decision taken by S&P about a month ago. A more negative piece of news coming from the banking sector is the possibility of BNP facing a USD10 billion fine following the US Authorities’ investigation; the previous figure circulated by the media was USD5 billion.

Today we will be looking into a series of US statistics that are deemed to provide an insight into the consumption outlook; specifically, today’s calendar includes personal income growth, personal spending growth and consumer confidence. In Europe, German, Portugal and Greece are scheduled to release the retail sales data whereas the Italian statistics office will release the preliminary inflation figure. This string of data will likely highlight yet again the persisting growth discrepancies in the Eurozone and make the case for strong ECB action next week.

Have a nice day!

Raluca

The Calamatta Cuschieri Traders Blog is available daily on CC WebTrader. Other market coverage including coverage of the International Bond Markets is also available.

Important(Notices)
The information provided on this website 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. Similarly any views or opinions expressed on this website are not intended and should not be construed as being investment, tax or legal advice or recommendations. Investment advice should always be based on the particular circumstances of the person to whom it is directed, which circumstances have not been taken into consideration by the persons expressing the views or opinions appearing on this website. Calamatta Cuschieri & Co. Ltd. (CC) has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website. You should always take professional investment advice in connection with, or independently research and verify, any information that you find or views or opinions which you read on our website and wish to rely upon, whether for the purpose of making an investment decision or otherwise. CC does not accept liability for losses suffered by persons as a result of information, views or opinions appearing on this website.
This website is owned and operated by Calamatta Cuschieri & Co. Ltd (Co. Reg. No. C13729) of 5th Floor, Valletta Buildings, South Street, Valletta VLT 1103, Malta. CC is licensed to conduct Investment Services in Malta by the Malta Financial Services Authority.