Market commentary: Markets continue to rally

Stocks rose in Asia and Europe, extending a global rally on the back of positive influence and expectations from central banks. The Euro Stoxx 50 is up 1%, with the German DAX leading, up 1.7% after earlier positive trading sessions for Japan’s NIKKEI (1.75%) and the HANG SENG (1.17%). Two of the world’s three biggest economies review policy this week amid sluggish global growth and inflation figures.

Earlier, Chinese equities jumped after the new head of the securities regulator signaled he will maintain state support for shares. Results from Germany’s regional elections indicated a move against Chancellor Angela Merkel’s party, as the country’s anti-immigration rival party recorded their biggest election result. Germany has had an extraordinary influx of immigrants following the instability of several Arab states, and this is creating increased tension in the nation.

Later on Sunday, further news of terrorist attacks in Turkey emerged, resulting in Turkey’s lira weakening 0.5% after a deadly bomb attack in Ankara, while the rand dropped as a South African police unit said Finance Minister Pravin Gordhan had been asked to assist with an investigation on what he knew about a so-called rogue unit in the tax agency that investigated political leaders.

Since the beginning of the year almost $9 trillion were wiped off the value of equities worldwide up until mid-February. Since then, equity markets have bounced back, recuperating the bulk of the stock-market losses, helped by monetary easing in China and last week’s announcement of unprecedented stimulus by the European Central Bank. The Bank of Japan, which adopted a negative interest rate in January, will conclude a policy review on Tuesday and a Federal Reserve meeting ends Wednesday.

In the commodities space, Copper rose 0.3 percent in London, rebounding from earlier losses. Gold gained 0.7 percent, after retreating 1.8 percent on Friday to trade at $1258.39. Gold has been in demand, making it one of the best performing asset classes, rallying 18.6% since the start of the year

In the oil market, West Texas Intermediate (WTI) crude declined around 2 percent to $37.77 a barrel following four straight weeks of gains. News over the weekend revealed that Iran plans to boost output to 4 million barrels a day before it will consider joining other suppliers in seeking ways to rebalance the global crude market.

Bond markets have benefitted from the increased optimism and low interest rate expectations, with     benchmark US Treasuries rising, with the 10-year yield falling two basis points to 1.963 percent while yields in European sovereigns also fell around 2bps across the board. German 10 year yields are down to 0.25% and Italian and Spanish yields are at 1.30% and 1.47% respectively.

Morgan Stanley forecast the rate will fall to 1.45 percent by the end of September, approaching the record low of 1.38 percent set in 2012, and said the Fed will wait until December before raising interest rates. The U.S. bank also cut its end-2016 projection to 1.75 percent and lowered forecasts for yields on similar-maturity debt issued by Germany, Japan and the U.K., according to a report released on Sunday.

In the high yield space, the ITraxx Crossover index is trading lower, with spreads up 6bps to 314.52, skewed by a large underperformance of the Utilities sector. 

This article was issued by Simon Psaila, 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.