Fed day | Calamatta Cuschieri

Caution infiltrated global markets on Wednesday as investors focused on the upcoming rate decision by the US Federal Reserve. European stocks slipped slightly away from their best levels in 11 months as investors braced themselves for a likely interest rate increase after market close. On Wall Street, US stocks ended lower, a day after all three major indexes hit record highs, as all eyes turned to Janet Yellen.

Automobiles lower

General Motors sank 3% and Ford fell 1.67% on Wednesday, following a report that China will soon slap a penalty of an unnamed US automaker for monopolistic behavior.

Hertz global was also trading lower, after the car rental company said that Chief Executive John Tague will retire, to be replaced by Kathryn Marinello, and that three of its longest-serving board members will step down. Shares were 1.13% lower on the news.

But shares of BMW were in the green, after Deutsche Bank reportedly raised its rating on the German auto makers to a buy.

Metro and Mediaset gain, Acterlion sinks

Shares in Mediaset surged over 7% after France’s Vivendi late Tuesday said it had raised its stake in the Italian broadcaster to 12.3%. Mediaset shares rallied 32% before that news on Tuesday and continued on the same track on Wednesday.

Metro AG was also trading in positive territory as the German retail and wholesale group posted a 31% rise in fourth quarter adjusted earnings before interest and tax on year. This rise was the result of improvements at its Metro cash & Carry and Media-Saturn divisions.

But Actelion Pharmeceuticals were deep in the red, as shares slid on a Wall Street Journal report that French drug giant Sanofi is in talks for a deal with the Swiss drug company, after Johnson & Johnson abandoned its own pursuit. The deal could value Actelion at as much as $30 billion. Sanofi’s stock fell 2%.

Fed ahead

The focus for investors on Wednesday was the impending rate decision by the Fed. The Federal Reserve on Wednesday raised a key U.S. interest rate for the first time in a year and signaled a more aggressive approach in 2017, when incoming president Donald Trump plans a full-throttle strategy to jack up the American economy.

In a widely expected move, the central bank raised its key short-term rate to a range of 0.5%-0.75% from 0.25% to 0.5%. The vote was unanimous.

At the same time, the Fed’s so-called “dot plot” showed the central bank has now penciled in three rate hikes in 2017 instead of two under its prior forecast.

Although chairwoman Janet Yellen called the shift “very tiny,” she acknowledged some Fed officials took President-elect Trump’s economic plan into account when making their forecast. Still, she suggested that higher inflation and a lower unemployment rate than the Fed had expected were bigger factors in the change.

What’s more, she stressed the Fed would take a wait-and-see approach for now since the outlines of Trump’s plans are hazy.

This article was issued by Rebecca Naudi, 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.