Market commentary: Europe takes the reins

As seems to be the norm for the year, stocks worldwide continue to find themselves in a “red” situation. Still only the third week into the year, and 2016 shows indications that this feels like it’s going to be a year of the Bear, as equities, bonds and commodities have all slumped at an equal pace since the start of the year.

The main challenges to the financial system stem from the overall health of the Chinese economy and the continued fall in the oil price. For the first time if as much as 12 years, oil is below $29 a barrel, and companies as big as Goldman Sachs Group and Citigroup, fear there is potential for further declines.

With Trading on Wall Street closed on Monday due to Martin Luther King Day, it was all up to Europe to take the reins in its hands. Unfortunately, an attempted rebound in European stocks quickly died out, as Middle Eastern stocks plunged, catching up with the fall across global boarders.

In just two weeks, the main European indices have caught a cold, and slumped as much as 10%. Despite the fact that Monday morning saw the main indices behave optimistically, any prospect of a rally quickly came to an end, resulting in a rather familiar, bearish close.

U.Ks FTSE 100 and France’s CAC 40 were both once again in the red, having fallen 0.20% and 0.06% respectively. Germany’s DAX was the sole European Index to close in the green, having rose 0.10% on the day.

Moving away from European stocks, German sportswear group Adidas have announced they will soon have a new chief of command. Danish veteran, Kasper Rorsted is set to join the team and take over from current CEO Herbert Hainer in September. Although investors had hoped for an outsider to succeed Hainer, this news saw the company’s shares sail over 5% higher.

In the automobile industry, carmakers are under pressure developing digital features in order to retain customers. With recent news of Apple and Google considering entering the automotive industry, the pressure is on for the rest of the car industry. One company who believe they have the right assets in place to progress in the industry is BMW. Their latest bulletin sees a “digital helper” being introduced which lets drivers locate and book at table at nearby restaurants. 

In the supermarket industry, UK’s third largest supermarket chain, Asda, will be cutting hundreds of jobs, after falling behind its rivals during the key Christmas trading period. While Asda have not yet announced their performance over the Christmas season, analysts expect the supermarket to report yet another quarter loss.

Staying with UK supermarkets, Crispin Odey’s hedge fund company has purchased shares in Tesco PLC, showing signs that prospects are improving for the UKs largest grocer. Tesco endured a miserable 2015, however the company surprised investors by reporting its first quarterly sales growth in four years. This serves as a sign that the company is starting to fight back momentum from its discounted competitors Aldi and Lidl.

“Rough” would be quite an understatement when describing the start of 2016. Signs of turbulence in stock markets appears to be the norm, and investors worldwide ponder about the future of China’s economic growth and whether oil prices will continue to fall to all-time lows, or if a change in the winds will cure the current slope in the market.

This article was issued by Rebecca Naudi, Trader 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.