Markets end the week lower

The Fed brought forward the discussion of the next interest rate hike. An EgyptAir plane goes missing. In isolation, both these events would have the power to bring down almost any stock market. It is therefore no wonder that the combined effect pulled many stock markets to multi-week lows.

The US dollar gained and oil and basic material prices fell as a result, as policy makers from the US Federal Reserve opened the door to a possible rate hike in June. The minutes of the April meeting caught investors by surprise and, although a rate hike in June is not a foregone conclusion – it is now priced at 34% according to federal funds futures – markets were forced to recalibrate somewhat.

Global stocks fell in the wake of the release of the minutes, and were offered no relief when news of the Egypt air crash hit the wires. Egypt’s Stock market value fell by almost $450 million after the Egypt air flight came down over the Mediterranean and this is likely to further hinder economic progress as the country struggles to recover from disturbances that have hit the tourism industry hard.

Major bourses were down, with the FTSE 100 a notable underperformer as it closed 1.82% lower on Thursday, dragged down by energy and mining stocks, as the rising dollar slammed metal prices lower. The nationalized UK, postal Service, Royal Mail dropped 3.9% after the company reported a fall in profit and said that its outlook for the U.K’s letter and parcel market trends to remain unchanged.

Airline and holiday operators’ share prices fell in wake of another disaster involving a passenger jet. Budget airline EasyJet’s share price fell around 1.8%, while British Airways parent International Consolidated Airlines was down 2.3%. RyanAir’s share price was also affected, as it dropped 1%.

Travel and leisure stocks made back some of the intraday losses but still closed down for the day. British holiday company Thomas Cook fell to a 3-year low after a sharp decline in demand in its second-most popular destination – Turkey. Rival TUI was also down for the day.

In Japan, first quarter growth was bad news for policy makers seeking looser fiscal policies. This decreases the possibility for a big stimulus package while not signaling any sustained recovery. Gross Domestic product rose 1.7% on an annualized basis. This result was helped by the inflated consumer spending in February.

The good news in Europe came from the banking sector. Banks stand to gain the most from US rate increase, particularly if fueled by a strong US economy (as opposed to a case of runaway inflation). Deutsche Bank, one of the day’s outperformers, rose 3.7%. Baby and child wear company Mothercare returned to profit for the first time in 5 years, as turnaround efforts seemed to have finally borne fruit.

In the US, the S&P 500 and the Dow Jones Index fell to 2-month lows on rate hike fears. Some stocks still managed to put up gains on the board. Wal-Mart reported first-quarter result that beat the Street’s expectations, sending the shares soaring by up to 9%. Cisco Systems also reported a better-than-expected quarter, rising almost 4%.

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.