Market commentary: US markets bounce back

Safe to say it’s been quite a difficult start to the year in financial markets, where unless you had a large exposure to investment grade credit or gold, your portfolio was most likely struggling. Yesterday for the first time this year we saw the Dow Jones close in positive territory (+0.32%) after being down as much as 10% in February. T

he S&P 500 closed 0.66% higher, however just failed to maintain the positive YTD territory. The recent upsurge was sparked by the more dovish tone of Fed Chair Janet Yellen on Wednesday, where investor expectations for rate hikes have diminished to possibly 1-2 hikes as opposed to the previously expected 3-4.

Over in Europe this morning, stocks are trading flat after a softer opening on the back of the stronger euro, as the follow through from the ECB stimulus package has waned. The Euro Stoxx 50 is down 6.85% year to date, recovering from as low as 18% in February. European credit markets are continuing their recent rally with the iTraxx Main and Crossover 1.4 bps and 2.3bps higher, with the technology sector leading.

Amazing news from Russia this morning, where Vladimir Putin has announced that Russia will be starting their own rating agency after attempting to regulate international rating agencies, which they categorically refused. This move reduces the credibility of future rated Russian financial assets as the independence of the ratings themselves will come into question. This could further impact the nation’s access to credit markets and impact negatively equity markets as investors will look for an increased risk premium on Russian assets.

WTI Crude regained the USD 40 level, now trading closer to the breakeven points of US shale companies. The move was helped by positive US manufacturing data  where the NY Fed empire manufacturing survey earlier this week, yesterday’s Philly Fed manufacturing survey showed the headline business conditions index rising an impressive 15.2pts to 12.4 (vs. -1.5 expected) and the best print since February last year. Oil is now up an impressive 54% from intraday lows of last month.

In equity trading in Europe Daimler AG and BMW AG led gains among carmakers on the back of the weaker euro. Government and corporate issuers have raised more than 50 billion euros ($56 billion) in European bond markets this week, the second-highest tally of the year, according to data compiled by Bloomberg. The flood of sales followed the European Central Bank’s decision to expand easing.

In the US this afternoon the lone release will be the first read of this month’s University of Michigan consumer sentiment survey, where current consensus is for no change to current conditions but a modest pickup in expectations.

This article was issued by Simon Psaila, Treasury officer at Calamatta Cuschieri. For more information visit, www.cc.com.mt .The information, views and opinions provided in this article are 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 Investment Services Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.