US rate hike prospects weigh on the markets

European shares struggled on Wednesday, tracking losses in Asia, as markets were hit with renewed expectations that the US Federal Reserve could raise interest rates later this year. Among those at the bottom of the benchmark were mining stocks, thanks to a strengthening dollar against other major currencies. Wall Street also started the day trading lower, but was able to reverse these early losses ahead of the release of minutes from the Federal Reserve’s April meeting.

In London trading, shares of Burberry were down after the luxury fashion house posted an 8% decline in yearly profit. Unlike the models on its catwalk, the company certainly has some fat to cut. As a result, the company said it will be undertaking a share buyback and a cost-cutting programme, in an effort to save up to £100 million a year. Burberry shares were able to recover some losses during Wednesday’s session, but still ended the day 2.71% below where they started.

One stock that was flying on Wednesday was EasyJet. After starting the day in the red, the company was quick to reverse any losses made earlier in the session. The budget airline may have RBC Capital Markets to thank for this. Shares flew up over 3% after RBC raised its price target to £15.50 on the budget airline, indicating a potential increase of 7.86% from EasyJet’s current price of £14.37.

Other movers on Wednesday were Suzuki Motors. Suzuki is the latest car company to succumb to some form of cheating, as it admitted to tampering with fuel data. The company announced that it used the wrong methods to test the fuel economy of its cars in Japan, widening a testing scandal that has already rocked many car companies. This news led to its shares plummeting as much as 9% during the session.

US stocks rebounded from Tuesday’s slump, as speculation that interest rates may rise twice this year boosted financial shares. A rise in Goldman Sachs and J.P. Morgan Chase added nearly 40 points to the Dow Jones Industrial Average in late morning trading. Unfortunately, this rally faded somewhat, with stocks coming off their mid-session highs. Both stocks still ended the day in the green though, with Goldman Sachs climbing 2.37% higher to $158.32 and J.P. Morgan up 3.19% to $63.62.

Also trading in the green for the third consecutive day was Apple. Shares reached $94.563 during the mid-week session, enjoying a rise of 1.14%.

Meanwhile, Wednesday saw the dollar enjoying fresh gains as it climbed to a seven-week high. This came after two Federal Reserve officials hinted that the US central bank could raise interest rates as soon as June. The central bank’s next meeting is due on June 14-15. The Fed minutes highlighted policy maker’s views that it would be appropriate to raise interest rates as early as June if economic data points to stronger second quarter growth as well as firming inflation and employment.

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 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.