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Market Commentary

US

Yesterday the US market closed marginally higher taking the S&P index to the1,854.29 level whilst the DJIA hit 16,272.65, an increase of 0.5% for both indices. The telephone industry advanced most within the S&P’s 500 main industries, increasing 1.7%. JP Morgan and Morgan Stanley bought came up with positive views on Verizon.

During yesterday’s testimony before Senate, Yellen suggested that there may be increasing signs of softness in the US economy, however this could be misleading given the unusual cold weather the US has witnessed. We should keep in mind that the weather had brought parts of the US to a standstill in the past weeks. However, if these signs persist and the economy slowed significantly, Yellen said that their tapering schedule may be gently retracted. Until then, she reiterated that the trimming of the asset purchasing programme will continue. One may expect benchmark interest rates to remain unchanged for the foreseeable future.

Adding to this, initial unemployment claims rose by 14,000 taking the jobless level to 348,000. This increased surpassed economists’ expectations which were expecting the number to read 335,000. Meanwhile a more positive number came in for the durable goods reading. This fell by 1% in January. Again, this was affected by the weather, yet the improvements may show that manufacturing is on the road to recovery.

What to watch this afternoon:

* Euro-area February inflation exceeds economists’ forecasts

* Yuan drops most on record amid band widening speculation

* Apple wins dismissal of $2.2b patent suit in Germany

* AT&T said to build Europe case amid silence on Vodafone

* Jos. A. Bank seeks talks with Men’s Wearhouse on deal

* Berkshire Hathaway annual report to be posted Saturday

* United sees rev. cut after 22,500 flights erased by storms

* IBM begins cutting U.S. jobs in $1b restructuring plan

* Salesforce projects 1Q rev. that may top ests.

* Gap profit exceeds estimates as deep discounts draw shoppers

* Gunmen occupy Crimea airports, Ukraine seeks IMF financial aid

Asia

Asia markets dropped overnight after the yuan recorded its largest one-day loss against the USD. The Yuan depreciated to 6.1808 against the dollar, a fall of 0.9%. China’s Shanghai Composite index fell by 1%, while Hong Kong’s Hang Seng Index was down 0.3%.

Emerging Markets

Tensions in Ukraine are escalating. Russia has turned onto the armed forces, commencing military exercises near the Russian-leaning Crimean border. A group of unidentified armen men entered Crimea’s parliament building by force and a Russian flag was hoisted on its roof. According to Bloomberg, Mr Yanukovych is expected to hold a briefing today, from Russia.

Meanwhile, Brazil’s economy surprisingly grew in the last quarter by 0.7%. Over 2013, it has grown by 2.3%, driven by strong investment and consumer spending. There was a 6.3% jump in investment which shows that confidence is returning. The CB increased Brazilian interest rates to 10.75%.

Local Market

This week applications were received for the new 6% bond issue of AX Investments and for the Malta Government Stocks. It appears as though a good number of applications have been received for both issuances. It also appears that there has been a greater demand for the longer dated Malta Government Stocks commanding a higher coupon. The number of applications received may also indicate that the local debt market has greater potential for development. This in turn should help local companies, who may step into the bond market, to access new fresh funds enabling them to realise projects which otherwise would have simply remained drawn on paper.

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