Markets give back gains

In a classic case of what goes up must come down, stock markets around the world traded lower on Wednesday. Weak corporate earnings weighed on most indices after strong results helped bourses stage a rally earlier in the week.

The not-so-good news started pouring in in the Asia session, as China’s vice-premier Zhang Gaoli said the Chinese economy faces downward pressure. He was quick to add that the Chinese economy remains resilient in the face of global uncertainties, and that it would meet its economic growth targets for the year, set at 6.5%. But even though the number is stellar in its own right, it would still be a 26-year low.

The comments come just as Chinese markets fell after a commentary in the official People's Daily newspaper said there is no need to stimulate growth by excessive credit expansion, dampening expectations for further monetary stimulus. Record credit growth in the first quarter helped economic indicators in March, but April data seems to indicate the rebound may be short-lived.

Toyota forecast a larger-than-expected fall in net profit for the current year, citing the strong Japanese yen. This comes on the back of 3 years of record profits for the automaker, partly driven – in case you were wondering – by a then weakening currency. Toyota said it was assuming an average of 105 yen to the dollar for 2016, compared to 120 yen just a year before. That’s a negative impact of almost a trillion yen on operating profit this year, the company said. Toyota shares fell almost 6% in Wednesday trading, and are down almost 25% this year.

In Europe, JC Decaux and Raiffeisen both posted declines of around 10%. The outdoor advertising group’s rating and price targets were cut by several analysts after a weak second-quarter outlook, while the Austrian bank was hit by concerns over its plans to merge with its unlisted parent company Raiffeisen Zentralbank. Shares in Banca Popolare fell to a record-low just below €0.50 after taking a first-quarter loss mainly on loan write-downs. In Norway, publisher Schibsted was the day’s success story, with shares soaring more than 12% after higher-than –expected first-quarter earnings.

In the US, shares in Walt Disney were the biggest drag on the Dow Jones index, as shares traded heavily lower after an earning miss. Macy’s was also on the receiving end of a battering as sluggish mall traffic and increased competition from other retailers saw the retailer post weak revenue and sales numbers. Macy’s weak report dragged down other department store chains. Watch retailer Fossil saw its share price slump to a six-and-a-half year low after it cut its forecast for 2016.

The bright spot in the US was Electronic Arts which closed out its fiscal year on a high, helped by better than expected sales and revenue from its latest major console and PC installment, Star Wars Battlefront. Shares rose as much as 16% before giving up some of their gains. EA said it also saw significant growth in the mobile sector in, not only in recently published games but also in previous releases.

 This article was issued by Andrew Martinelli, 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 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.