Risk in the driver’s seat

Markets seemed to have welcomed the start of another summer week as major Asian bourses traded significantly higher. The sentiment was echoed to a lesser extent In Europe, but came to a downright halt in the US, as all 3 major indices ended the day slightly negative.

Making headlines was yet another déjà vu in the oil market – OPEC are holding informal talks in September and the oil bulls are hoping it will lead to – at least – some kind of supply freezing. A statement on the OPEC website by Qatar – stating that the market and the price should balance out by the end of the year – helped reinforce such bullish expectations. Crude oil rallied 3% lifting energy stocks in the process.

Stocks were also helped by positive employment data in the US. Last Friday’s non-farm payroll data not only gave risk a boost, but also swung momentum back in favour of those calling for another US rate hike by the end of the year. US 10-year Treasury yields held at Friday’s levels, the highest seen since April. Elsewhere, yields in Europe saw a drop with Spain’s 10-year note making the news as it traded below 1% for the first time ever.

In the currency space, the yen gave back some ground to its peers and sterling posted its worst losing streak (versus the dollar) since the Brexit vote. In a testament to the increased risk sentiment, AUD/JPY rose by almost 1.5% on Monday. The Aussie dollar is often seen as a proxy to investor’s risk appetite, while the yen is a gauge of exactly the opposite.

M&A seems to always make the news these days – Wal-Mart is the latest company to bring money to the table as it acquired Jet.com for $3 billion in cash and $300 million in shares. In a bid to take a bigger slice of the pie so far dominated by Amazon, Wal-Mart’s latest acquisition give it access to a website which processes 25,000 average daily orders, and which is adding 400,000 users every month. Jet.com grossed $1 billion in sales in just over a year.

And in the second such incident in a month, a power outage completely knocked out Delta Air Lines’ systems, leaving tens of thousands of passengers stranded. Systems were eventually restored, albeit in a “limited” manner, enabling some commuters to continue their journeys. More than 350 flights were cancelled on Monday, and that number might increase. The news comes on the back of a similar failure in July caused the cancellation of more than 2,300 flights by Southwest Airlines Co. I was looking forward to using the words ‘nose dive’ but shares in Delta Air Lines Inc were only modestly down by 0.58%.

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 & Co. Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.