Market Commentary | Easy does it

After a lackluster Monday most global stocks and bonds returned to winning ways. With no immediate concerns bar Thursday’s ECB meeting – the highlight there will revolve around the current quantitative easing programme – markets took the latest remarks by US Federal Reserve speakers in the face of positive inflation data as signs that a rate hike in 2016 may not be a foregone conclusion or that – even if rates do rise before the end of the year – further increases would come at a slower pace than previously anticipated.

Most global bourses advanced significantly over the day, recovering most if not all the losses made in the last few days. In Europe, the Italian stock exchange took home the daily winner’s crown after the FTSE MIB put in a 2.02% gain, while over the Atlantic the NASDAQ seemed fared better than its peers, closing 0.85% higher on the day. Asian bourses were steady this morning but didn’t rally further after lukewarm GDP and factory data from China, and the morning European session also looks like it’s erring on the side of caution.

As we get into the thick of the latest quarter’s earnings, Goldman Sachs followed the likes of JPMorgan Chase, Citigroup and Bank of America in reporting increased revenue from trading. The bank also reported a second straight rise in quarterly profit after four quarters in which profits declined. Trading revenue for US banks seems to have been boosted by the Brexit vote and by the uncertain global monetary policy environment.

Netflix posts bumper earnings

One of Tuesday’s big stories was the 19% rise in Netflix shares. The online streaming giant posted stronger-than-expected earnings and subscriber growth. The latter were particularly impressive figures – US subscriptions were 23% above expectations while international subscriptions exceeded expectations by a whopping 60%. Earnings came in at $0.12c a share against an expected $0.07c.

The numbers confirm the ‘cut-the-cord’ trend that has now become apparent not only in the US but also globally, but Netflix also credited its original content – namely Stranger Things and the second season of Narcos – for the latest quarterly performance. Indeed, it intends to spend mucho plata to produce further original TV shows and films as the company believes self-producing cuts out many fees and overheads and is – in the longer-term – less expensive than licensing content.

Brexit – deal or no deal?

Keen followers of the British pound will note that the currency recovered some ground against its peers yesterday, as a lawyer for the government said the UK parliament will “very likely” be able to vote on the final Brexit deal. This reduced fears of a so-called “hard” Brexit which had worried markets in the past weeks.

The worries remain however, as any possible deal is still unclear at best. While many MPs are in favour of remaining in the European Union, many have said the will of the people is to be respected. And while almost all treaties are subject to ratification, claimants in the legal case argue that, once invoked, Article 50 is irreversible. Parties opposing Parliament’s claim to vote argue that even if it were given a say on the final deal – possibly in 2019 – it would be “too late” to refuse to ratify it.

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