Puerto Rico bonds and Trump’s address | Calamatta Cuschieri

The S&P 500 and the Dow closed higher on Tuesday gaining 0.47% and 0.68% respectively with the large cap technology stocks leading the charge. This is the highest the index has been in two-months. This is the fifth straight trading day that the major indices closed higher. Economic data for the day was mixed and volumes were below the 30-day average as investors awaited tonight’s State of the Union address. West Texas intermediate oil prices declined to $53.67 a barrel following disappointing U.S. data on the global economic slowdown and decline orders for U.S. made goods.

European markets traded in the green on Tuesday led by the FTSE which had an increase of 2.04% to close at 7,177.37. The largest gainer in the FTSE was BP gaining 5% following a stellar quarterly report. The higher oil prices and the devaluation in the pound helped the company profitability increase to $12.7 billion from $6.2 billion last year.  The Euronext 100, CAC 40 and DAX all closed higher gaining 1.77%, 1.66% and 1.71% respectively.

On the Maltese side, the MSE equity price index closed marginally higher, reaching a three-week high. At the close the market was mixed with thee stocks closing higher and five closing lower. International Hotel Investments plc was by far the largest gainer, gaining as much 3.3% for the day. This came following their announcement of an acquisition of Moscow property to be turned into a luxury Corinthia hotel. The largest loser for the day was Trident Estates plc losing 3.7% for the day.

Puerto Rico Bonds soar

A federal court approved a debt restructuring plan for Puerto Rico. This was a highly anticipated development following the island’s default on payment nearly four years ago. The deal allows Puerto Rico to cut its debt however the government is required to pay $32 billion in the next 40 years as part of the restructuring. The debt had both senior and junior tranches with the senior ones collecting 93 cent on the dollar and the junior tranches collecting 54c on the dollar. This deal has been hyped by the judge that it should revive Porto Rico’s economy making it once again an island investors flock to.

The governor of the island Ricardo Rosello said "Puerto Rico has taken an important step toward its total financial recovery. This represents more than $400 million annually that will be available for services in critical areas such as health, education, pension payments, and public safety, in compliance with other obligations."

This is the latest of a string of good news that has hit the Island following the disaster aid that was promised by the Trump administration. After the announcement Mutual funds who had previously abandoned the bonds because of their riskiness, are now going back into the market to purchase bonds. 

Trump State of the Union address

The long awaited State of the Union address was delivered by President Trump on Tuesday night following the end of the longest government shut down in history that costed the US economy billions. The speech was bipartisan and encouraged the two major parties in the U.S. to work together for the benefit of the country. While unlike Trump, this was not surprising given the fact that now the democrats control one of the two houses in congress and no law can pass through congress unless some of the democrats vote with the current republican administration. The divide on economic issues between to two major parties makes economic policies hard to implement resulting in slower governmental response to economic problems. This problem is made even more significant when one considers the high debt levels and the expected economic slowdown in the U.S. and around the world.

In after-market hours, the markets seemed to react negatively to the president’s speech with the S&P 500, NASDAQ and Dow Jones all in the red. The declines where 0.16%, 0.09% and 0.2% respectively.

Disclaimer: This article was issued by Aaron Saliba, junior trader at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view 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.