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Monday blues

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Markets worldwide struggled for direction on Monday. After a positive start to the week, all early gains were reversed, sending markets closing in the red. Energy shares were largely to blame for this decline, as a fresh drop in oil prices led markets lower. Meanwhile, the dollar strengthened and investors focused on the prospect of potential interest rate increase.

Asian markets were mixed, as traders held onto their horses ahead of a speech from Federal Reserve chair Janet Yellen at Jackson Hole on Friday. It was a similar story in Europe, with stocks giving up early gains to end the session lower. On Wall Street, stocks shares the same faith, absorbing an early session crude oil stumble, and following recent remarks from central bank officials.

Weakness in oil futures appeared to set the tone for equities in early action. September crude tumbled 2.7% to trade at $47.77 a barrel, with some analysts blaming a rise in the US oil-rig count last week. Meanwhile, Morgan Stanley analysts poured cold water on hopes that major oil producers will freeze production. This wasn’t exactly great news for the likes of Royal Dutch Shell and BP, as shares traded 1.84% and 1.48% lower respectively.

Pfizer Inc. claimed the pharmaceutical industry’s latest big prize Monday, beating out a group of rivals after months of jockeying to buy Medivation Inc. and its blockbuster cancer drug for $14 billion. By acquiring Medivation, Pfizer gets Xtandi, a cancer drug that’s already approved for sale in the U.S. and elsewhere, and that analyst’s project will generate $1.33 billion in annual sales by 2020. Shares of Pfizer rose slightly, while Medivation sailed 19.8% higher.

Staying in the industry, shares of drugmaker Valeant Pharmaceuticsls International rose 7% after the company confirmed it has hired a new chief financial officer.

In other company news, ChemChina said on Monday that a US national-security regulator has cleared its planned $43 billion acquisition of Swiss seed company Syngenta. Syngenta shares drove to the top of the Stoxx 600 on this news, jumping 10.6%.

Markets have recently moved in tandem with comments from Federal Reserve officials, reflecting investors’ uncertainty over the timing and rationale behind the bank’s next move. Corporate earnings season is winding down, with 96% of companies in the S&P 500 having reported, according to FactSet. It will be the fifth straight quarter that earnings have declined from a year earlier. Investors are searching for things to trade off but are remaining cautious ahead of Janet Yellen’s speech on Friday to see if they can read anything between the lines.

This article was issued by Rebecca Naudi, Trader at Calamatta Cuschieri.

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

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