Market Commentary | Taking Stock

It seems hard to write about the markets when the main headlines are all about the earthquake in Italy. 247 people have died so far, and the numbers may rise further. News is pouring in about an attack on a university in Kabul, Afghanistan – 12 dead so far. Depressing news. Did I mention geopolitics? Turkey launched a military operation in Syria, and North Korea conducted (another) missile test.

It becomes even more difficult to talk about markets when there’s relatively little to talk about. Indeed, by many measures, August has been typically quiet. Volumes on US stock exchanges have hit a 1-year low, and the S&P 500 last moved more than 1% (in either direction) almost 7 weeks ago. The Chicago Board Options Exchange Volatility Index – aka the VIX – has been very low after the Brexit-induced spike, and the 10-year yield on US Treasuries has seen the tightest monthly range in 10 years.

This may just be the proverbial calm before the storm though. Currencies – the asset class which is most susceptible to changes in monetary policy – has been rising in August, mostly due to the changes in the outlook for interest rates in the US. With the traditional annual Jackson Hole symposium just round the corner, global foreign currency volatility has remained close to its monthly high as traders speculate on whether current Federal Reserve Chair Janet Yellen will give more tangible clues about the interest rate path in the US. Yellen speaks tomorrow, but any formal decision is not expected before the Fed meets again on the 21st of September.

Despite all this European markets held up quite well, with London being the only major stock exchange to end the day lower on Wednesday. The pain may come today, as shares opened significantly down this morning, following in the footsteps of US stocks which yesterday closed in the red. Investors likely took some profit ahead of the already-mentioned Jackson Hole symposium, but were also hammered by a 3% drop in crude oil. The key commodity has found it hard to sustain its latest rally as rumours of a production freeze have struggled to find any legs.

In a rare bright spot, Aussie airline Qantas paid its first dividend since 2009 after profits hit a record high in the period ending in June. It seems the airline’s turnaround program, which involved thousands of job cuts, deferred aircraft orders and the dropping of unprofitable routes has finally yielded the desired results, returning to paying out a dividend earlier than most analysts expected. The company said it will pay out a total of A$75 million to its employees (for comparison, earnings before tax were A$ 1.53 billion) and also announced a share buy-back program of up to A$366 million. Shares jumped more than 5% on market open before settling around 2% higher on Wednesday.

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.