Market Commentary: Equity markets resume sell-off

The global economy is facing another confidence test as investors are fearing that monetary policy can no longer sustain otherwise ailing economies. Following arguably the worst financial crisis in history, central banks have been at the center of a jobless recovery. However, recent weak economic data amid concerns that they have used all their firepower have raised expectations of a relapse into recession.

In the past five years, emerging markets riding high on a weak US dollar pulled the global economy forward. Unless the US is able to reprise its traditional role as a global growth engine, the global economy may be in for a period for slow growth.

US

US stocks rebounded during yesterdays’ session after plunging more than 3 percent intraday. The S&P 500 lost 0.8 percent adding to recent dips. The Index fell 7.4 percent from a record high on September 18. The 3 percent intraday plunge is the heaviest since 2011 and wiped out all gains for this year.

The sell-off follows data that shows that retail sales in the US dropped more than forecast in September, decreasing 0.3 percent after a 0.6 percent gain in August. The decline exceeded forecast by analysts that called for a 0.1 percent decline.

Concern about the spread of the Ebola virus is also starting to affect markets. Airline stocks declined as much as 22 percent.

Asia

Asian stocks followed US markets dropping to their lowest levels since a peak in July. The Benchmark MSCI Asia Pacific Index dropped 8.7 percent since the peak.

Europe

The focus of the economic crises remains the Euro Area. To add to established worries German growth now appears to be faltering. Mario Draghi, the ECB’s President, has already managed to pull the Eurozone from the brink of a debt crisis in 2012 by cutting interest rates to a record low and issuing cheap loans to banks. However, purchase of government debt appears to be the last option remaining for the Central Bank.

Meanwhile, this morning the European Union started its two-weak probe into Euro-Area budgets. French and Italian spending plans are the main items for discussion as both economies face weakening economic growth amid mounting deficits.

Commodities

Crude oil extended declines falling 1.3 percent. Brent for November delivery retreated to $82.72 per barrel in London.

Gold dropped further to $1,240 per ounce or 0.1 percent.

The following Companies will be reporting results today;

In Europe; Nestle, Ziggo, Carrefour, Roche, Syngenta, Faurecia and Diageo.

In the US; Netflix, Delta, Mattel, Baker Hughes Inc, Philip Morris International Inc, Goldman Sachs, Baxter International, Sandisk, Google and Schlumberger.

Apple Inc has as Special Media Event during which the company is expected to introduce new products.

This article was issued by Calamatta Cuschieri, visit www.cc.com.mt for more information.

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