Market commentary: Global stocks enter a bear market

Following an uncommonly optimistic day of trading on Tuesday, markets failed to keep up the pace, as European stocks slid to fresh 13-month lows on Wednesday. To no one’s surprise, it was oil producers who once again led declines, dragging Asian and European stocks sharply lower. This déjà-vu is making traders and investors increasingly sceptical that governments and central banks are able to stimulate their economies.

The Stoxx 600 erased Tuesday’s rebound, tumbling 2.4% to new lows of 324.81. Germany’s DAX was also a big loser on Wednesday. This was after it slid 2.2% to reach its lowest level since October. Volkswagen, Commerzbank and Deutsche Bank all contributed to declines on the day, seeing losses of at least 3.8%.

Similarly, the UK’s FTSE 100 has crashed into a bear market, as a result of losing more than 20% since its April 2015 high. Likewise, Japan’s Nikkei index also closed in the negative, and the Chinese stock market in Hong Kong fell to its lowest level since 2007.

Oil giant Shell has released its fourth-quarter earnings figures. The company announced that its profit has fallen by as much as 50%, illustrating how the slump in oil prices is playing havoc with its performance. Shell puts its fourth-quarter profit for 2015 at around $1.6 billion. This figure is down $3.3 billion compared to the same period the previous year. Its shares fell 3.7% in early trading on Wednesday.

One company reporting positive figures despite market turmoil is Netflix. The online video company that offers its subscribers unlimited access to TV shows and movies, recently undertook an aggressive push into international markets. As of early January, Netflix has expanded its network into an impressive 130 countries, including Malta. The company’s revenue rose to $1.82 Billion, sending its shares up 7%.

Gold prices also rose on Wednesday, as plummeting global markets pushed investors into safe haven assets, rekindling the precious metal’s appeal in times of turbulence. Gold’s gains came as stock markets around the world once again sold off sharply. Gold has gained 3.3% an ounce since the start of the year. Still, it wasn’t good news for all precious metals, as platinum hit a seven-year low, while silver was down 0.2% at $14.09 an ounce.

Technology giant Apple has applied to open its own stores in India, one of the worlds’ fastest growing smartphone markets, as the iPhone maker looks to tap new opportunities amid worries of slowing growths in its main markets. At present, Apple operates more than 450 stores in 18 countries. Shares in Apple, the world’s most valuable company by market value, are down 28% from  their peak in April last year.

New York-based bank, Goldman Sachs Group, announced a 65% tumble in its fourth-quarter profit. This decline was mostly the result of a $5 billion regulatory penalty that it was made to pay the Justice Department, stemming from the marketing and selling of faulty mortgage-backed securities to investors, leading to the financial crisis. The bank’s net income fell to $765 million, from $2.17 billion a year earlier.

The current sell-off in global markets has cast a dark cloud over the economy. Unsettled investors have pushed global stock markets deep into the red, with anxiety and pessimism being the norm. With the oil price slide showing no signs of halting, this is definitely a trying time for investors worldwide. While it may take a while to get back to ‘normal’, I am reminded of some wise advice from Warren Buffet: “In the short term, the market is a popularity contest. In the long term, the market is a weighing machine.”

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.