Market Commentary | Fed’s Cautious Tone Buoys Stock Markets

European markets turned green after the release of the latest set of minutes by the US Federal Reserve showed that the majority of members oppose a near-term hike and prefer an (even more) gradual lift. After rallies on Wall Street and in Asia, European bourses broke a losing streak which lasted four days, but are still down around 7% for the year.

Notable risers for the day were Danish wind turbine maker Vestas Wind which rose around 10% after it beat second-quarter operating profit forecasts. The company also raised its full-year forecasts on the back of the news. Dutch insurer NN Group was also well in the green after earnings fell less than expected. Shares rose more than 8% and also lifted other financial stocks in the region.

Oil prices surged in the afternoon, lifting energy sector stock to multi-week highs. This, Fed minutes and a weaker dollar combined to push US markets higher for the day, although gains were limited.

Walmart shares rose after it posted better-than-expected quarterly results and raising its full year forecasts, just a day after rival Target did the opposite. Sales at stores open at least a year, a key measurement for retailers, were up for the eighth quarter in a row. The world’s largest retailer seems to be reaping the benefits of a recent re-organisation, which saw it shut dozens of low or non-performing stores. Last week, it bought e-commerce site Jet.com for $3 billion to boost its online presence.

Shares in two major US private prisons fell by more than a massive 40% yesterday, after the US Justice Department said in a report it would end the practice of hiring private prisons. Corrections Corp. and GEO registered historic one-day falls and finished 35% and 39% lower respectively on the day. The impact of the decision – bar the effect it had on share prices – is not immediate, as the report indicates a gradual but steady phasing out either via non-renewal of contracts or a substantial reduction of scope.

Harley Davidson briefly plunged over 7% yesterday before recovering. The motorcycle maker ended the day off by 1.7%, after it agreed to pay out a $15 million fine after allegedly selling aftermarket devices that allowed bikers to cheat US emissions standards. The company agreed to buy back the so-called ‘super-tuners’, halt all sales of the units and destroy them.

A spokesman for the company said Harley sought to settle the matter quickly rather than going to lengthy proceedings, but that the pay-out is not an admission of guilt but rather an act of good-faith. The company insisted the product was acceptable under a regulatory framework which classified it as a competition-only part, although the Environmental Protection Agency’s interpretation seems to be different.

This article was issued by Andrew Martinelli, Trader 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.