Financial news

After financial stocks led foreign equity markets in the doldrums as the US authorities rejected a proposed $700 billion bailout plan ,the local market declined in sympathy, dropping 2.4 per cent to terminate yesterday's session at 3,723 points.

Bank of Valletta was the day's most liquid and actively traded equity with a grand total of 30,129 shares, for a market consideration of €120,748, changing hands across 25 transactions. Initial selling activity squeezed the price down to the €3.912 level, however, this price proved attractive to other investors and mid-way through the session, fresh buying activity appeared which continued until the very end clearing supply up to the €4.00 level.

HSBC Bank Malta had a similar trading pattern with the equity declining to €3.031 level before buying activity trimmed the day's decline and helped the largest listed equity close the day at €3.11. During the session a total of 15,736 shares, carrying a market consideration of €49,128 were exchanged across 12 transactions.

A single deal in Lombard Bank Malta saw an investor sell a mere 80 shares at the €3 level.

Elsewhere in the market Grand Harbour Marina was the day's only positive performer with the yacht marina operator gaining 5c or 2.3 per cent as an investor purchased 1,500 shares at €2.20. At the end of the session, 700 shares remained unfilled on the bid side at €2.20 against supply of 2,000 shares best offered at €2.29.

The fixed interest sector of the market, particularly sovereign bonds, was a hive of activity with as many as 18 different securities attracting trades. Government stock prices rose across the board as the broker of the Central Bank upped his bid prices to align the local yields to those in European markets which were affected by the undergoing flight to quality.

Weekly eurozone economic review

Europe's economy is struggling to pull through after shrinking in the second quarter as the year-long credit squeeze leads to bankruptcy filings, bailouts on Wall Street and cooling economic growth damps demand.

The latest economic data is still pointing to a grim picture in Europe. Business confidence in the euro area's three largest economies declined more than it was forecasted this month. In Germany, Europe's biggest economy, the Munich-based Ifo institute's business climate index fell to a three-year low of 92.9 from 94.8 in August. Business confidence in France declined to the weakest in five years, while France saw a drop in business sentiment during September.

On a slightly better note, inflation in the eurozone fell to 3.6 per cent year on year in September as expected, but remained almost double the European Central Bank's (ECB) target.

While the ECB will be pleased to see eurozone inflation falling back further in September from the mid-2008 peak of four per cent, it remains far too high, hence an interest rate hike tomorrow is highly unlikely.

Nevertheless, with heightened financial sector problems and turmoil increasing the already serious risk of eurozone recession, pressure is mounting on the ECB to cut interest rates sooner rather than later.

Markets are also leaning towards this view since the rapidly deteriorating eurozone economic outlook may necessitate the ECB to act before the end of this year.

This article has been prepared by Bank of Valletta p.l.c. (the Bank), which is licensed to conduct investment services business by the MFSA, for your general information only. This information is not a solicitation or offer by the Bank to acquire or sell securities. Nor does it constitute any form of advice by the Bank. Appropriate advice should be obtained before making any such decision. Past performance is not necessarily a guide to future performance and the value of your investments may fall or rise.