Market Commentary | Goodbye August, thanks

European markets struggled for direction on Wednesday, as shares darted between small gains and losses. Reports of a potential merger between Deutsche Bank and Commerzbank helped lift German banking heavyweights, but commodity shares remained under pressure.

Stocks in Asia closed mixed, while stocks on Wall Street extended losses, as a thin batch of earnings gave investors little to get excited about. Energy shares struggled, and the latest batch of economic reports added more cause for the Federal Reserve to follow through with recent talk of lifting key interest rates next month.

Shares of Commerzbank and Deutsche Bank were in the spotlight on Wednesday, after a German magazine reported that the two held early talks about a possible merger. Both banks refused to comment of the report. Nevertheless, shares on Commerzbank were up 4.09% and Deutsche Bank shares rose 3.4%.

French construction-to-media conglomerate Bouygues gained 3% after the company named two new deputy CEOs and reiterated its pledge to improve its profitability this year after first-half earnings were boosted by an improved performance at its telecom arm.

French low-cost telecom company Iliad was also trading firmly higher as its first-half earnings before interest, taxed, depreciations and amortisation (EBITDA) rose by 12% to €808.5 million – slightly above forecasts. Shares of Iliad were up 4.34% on Wednesday.

Meanwhile, oil prices slid to their lowest levels in nearly three weeks, as traders bet that a US government report would reveal an increase in crude supplies after data from a trade group revealed a bigger-than-expected rise. Crude oil lost just under 3% to trade at $45.85 a barrel on the New York Mercantile Exchange.

Gold futures fell, holding ground at their lowest levels in two months and poised for their first monthly loss since May, as a private-sector hiring snapshot was seen boosting the chance for an interest-rate hike from the Federal Reserve.

As August comes to an end, traders can look back on a pretty quiet, yet successful month. German jobless claims fell further during the month and the jobless rate stayed at a record low, official data showed. In other positive economic news, German retail sales rose to a multiyear high.

Over in the UK, consumer sentiment saw some recovery in August after suffering its steepest fall in more than two decades after the Brexit vote. The pan-European stock index is on track to wrap up the month of August with a gain of 1.2%, which would mark the second consecutive monthly rise.

And, as August draws to an end, September is gearing up to be a pretty jam-packed month. The first major headline event to kick off the month's notifications is August's non-farm payrolls report, slated to be released on Friday. A strong number would potentially set the scene for a rate hike when the US central bank next meets on 21 September.

The ECB Governing Council meets on 8 September and it faces a make-or-break bid to save its quantitative-easing strategy in the face of self-imposed limits on what it can buy. The BOJ will announce the results of its comprehensive review of its monetary policy on 21 September — the same day as the Fed decision — amid rising expectations it will cut rates further into negative territory. The G20 Summit will also take place on 4-5 September, with China, the host, seeking to focus on global growth and financial-sector issues. In summary: vacation's over. Report back to your terminal immediately.

This article was issued by Rebecca Naudi, 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.