Market commentary: Global equity markets trade mixed

Despite a relatively good earnings season so far, the persistent drop in commodity prices, in particular oil markets is having an impact on worldwide equity markets. Brent (-2.11%) joined WTI (-0.68%) in reentering a bear market having slumped 20% from the June 10th high of $67.00, declining to a four-month low in the process.

The turbulence in China certainly isn't helping matters while export data showing Southern Iraq output rising to an all-time high added to the weakness. Meanwhile Gold (-0.47%) did its best to wipe out the bulk of Friday’s gains while Silver (-0.78%) and Platinum (-0.53%) also moved lower. Copper (-1.43%) added to the broad-based weakness, extending its record lows while Aluminum (-0.21%) also declined.

Volkswagen AG surpasses Toyota as biggest automaker

Volkswagen has overtaken Toyota in terms of deliveries in the first half of this year, putting the company on track to capture the worldwide sales crown three years ahead of its target. Toyota announced today that it sold 5.02 million vehicles in the first six months of the year, marginally behind the 5.04 million that Volkswagen already reported. Overall, sales declined 1.5 percent for Toyota and 0.5 percent for Volkswagen.

The main driving force behind Volkswagen’s comparatively superior performance was the increasing car demand in Europe, which accelerated to the fastest pace in five years.

The biggest challenge to Volkswagen’s objective is the slowdown in China, which is the company’s biggest market. The current volatile stock market and slump in demand is expected to impact performance as consumers may be swayed to opt for cheap SUV models by local Chinese brands.

General Motors Co., the third-biggest automaker by global sales, said earlier this month that its worldwide deliveries fell 1.2 percent in the first half to 4.86 million vehicles.

BP Second Quarter profit slides

BP Plc said second-quarter profit tumbled 64 percent as crude prices slumped. Adjusted profit dropped to $1.3 billion from $3.6 billion a year earlier. Chief Executive Officer Bob Dudley is bracing Europe’s third-biggest oil producer for a longer period of low prices by slashing spending, reviewing projects and selling assets.

In the past year the price of oil has declined around 50 percent, thus impacting the profitability of oil companies and forcing them to reduce investment in high-cost projects. Royal Dutch Shell Plc, Total SA, Exxon Mobil Corp. and Chevron Corp. are all scheduled to report second- quarter earnings this week; any surprises to the downside could create downward pressure on broader markets as oil company valuations drop.

European economic data surprises

European data flow yesterday gave us reason to be buoyant following a better German IFO survey reading. The 108.0 reading (vs. 107.2 expected) was up 0.5pts from an upwardly revised June print, signaling an easing of concerns around Greece, while both the current assessment (113.9 vs. 112.9 expected) and expectations (102.4 vs. 101.8 expected) surveys also came in above market. That helped support a strong day for the Euro which finished +0.95% against the Dollar, now trading at USD1.1061/ EUR.

Taking a look at today’s calendar, this morning’s dataflow is centered on the UK where we get the Q2 GDP reading while over in Italy consumer and business confidence readings are expected.

Over in the US this afternoon the two-day FOMC meeting begins today while data wise we get the flash composite and services PMI’s for July, S&P/Case Shiller house price index and consumer confidence. It’s a busy day for earnings with 40 S&P 500 companies due to report including Gilead Sciences, Ford and Pfizer.

This article was issued by Simon Psaila, Treasury Officer 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 & Co. Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.