Markets got off on a positive note this week, buoyed by a broken political deadlock in Spain and positive manufacturing data from Germany.

Yields in Spanish sovereign paper fell as Spain moved towards forming a minority government and ending a political stalemate, after the Socialist party took a step back allowing Mariano Rajoy to take office.

In Germany, the latest manufacturing and services PMIs – or Purchasing Managers Indices – rose to 3-month highs, and grew at the fastest pace in almost 3 years, allaying fears of a slowdown in Europe’s biggest economy. The data is likely to prove positive for inflation further down the line. Data releases will be a prominent feature this week, particularly in Europe where PMI data will be joined by other indices such as the IFO, GFK and a Eurozone sentiment index. The week will also see the release of the crucial flash HICP inflation data and quarterly GDP figures from the US, the UK and France.

Expectations have turned positive for earnings especially in the US as a number of companies have already released results above market expectations. With end-of-year seasonality that usually favours bullishness US indices seem primed to hit record highs in the coming days.

Another headline grabber is AT&T’s proposed $85 billion takeover of Time Warner. The biggest deal of the year has drawn scrutiny by US regulators. The issue could feature in the run-up to the US Presidential election – the deal has already been slammed by Donald Trump and Bernie Sanders, with Hillary Clinton yet to comment.

In the commodity space, watch out for whipsawing price action in crude oil. Prices have gone up recently on the back of an informal agreement to control supply by OPEC, but Iraq stated this morning it would not sign up. Iraq is the second-largest oil producer after Saudi Arabia, and a freeze or a cut would be difficult to sustain if it didn’t participate.

 

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.