Global equities rally after US jobs data

Global equity markets rallied on Friday after it was announced that US employment grew by 175,000 in May. Economists had anticipated an increase of 167,000. Despite this, the unemployment rate edged higher to 7.6 per cent from the 7.5 per cent in April, due to an increase in the labour force.

Investors moved from a risk-off to risk-on mood

The data raised more questions than it provided answers. While the job growth is seen as a positive sign, the increase in unemployment might test whether the Federal Reserve will maintain its asset purchase programme at the current pace. What is sure is that investors moved from a risk-off to risk-on mood and the US equity markets ended the week considerably higher.

On the other hand, despite a bounce back on Friday, European markets registered losses on the week, as investors reacted to Thursday’s move by the European Central Bank (ECB) which slashed growth forecasts for the region for this year. In fact, the ECB expects the single-currency economy to contract by 0.6 per cent in 2013, worse than its previous estimate of a 0.5 per cent shrinkage, but it anticipates growth of 1.1 per cent next year.

However, the single currency gained ground against the US dollar last week despite giving up some of the gains on Friday.

Locally, the Malta Stock Exchange (MSE) index reached a two-year high as it gained 0.8 per cent to close the week at 3,390.775 points. Investors showed confidence in the equity market throughout the week. The MSE was active in only four sessions due to Friday’s national holiday.

Bank shares proved to be a key source of support for the broader market. In fact, HSBC Bank Malta plc traded notably higher, followed by Bank of Valletta plc (BOV), which maintained its upbeat tone for the third consecutive week. Likewise, Lombard Bank plc managed a remarkable gain as it returned to the trading desk with an adjusted price, following the distribution of the previously announced bonus issue of one share for every 10 shares held.

Conversely, RS2 Software plc failed to sustain its all-time-high momentum as it slumped substantially lower, while Middlesea Insurance plc extended its streak of losses to touch a three-month low.

The week’s activity was based on 17 issues, with eight equities gaining value, including Simonds Farsons Cisk plc (SFC), which touched a new high. Trading activity over the week reached a value of €472,518 traded over a total volume of 289,880 shares, which in turn were executed in 99 transactions.

Locally, from the financial sector, HSBC emerged as the prime gainer of the week with a 2.3 per cent rise after touching yearly lows of €2.60 in the last trading days of April. The equity traded exponentially higher over dwindling volumes which over the week totalled 31,700 shares, to close the week at €2.69.

In line with its peer, BOV shares climbed another notch higher when it appreciated by 0.7 per cent, over the highest number of traded shares, 77,571 in total, which were transacted across 30 deals, thus closing the week at €2.265. Similarly, Lombard gained just over one per cent to reach €1.70, before after adjusting to €1.683 due to the awarded bonus issue.

Conversely, on a sour note, Middlesea Insurance plc continued its current bearish trend with a further decline of 3.6 per cent, which was registered in a single session, thus ending the first trading week of the month at €0.81.

Meanwhile, from the beverage sector, SFC added a further 3.1 per cent to its share value in two sessions, and thus touched a new all-time-high of €2.65 on a mere 2,000 shares as shareholders are unwilling to let go of their shares.

On a similar note, in the hotel industry, on Monday, International Hotels Investments plc snapped back last week’s 0.1 per cent decline, to re-position itself at €0.90, while Island Hotels Group Holdings plc managed to recoup 2.9 per cent from its recent 13.8 per cent loss to end the week at €0.535.

Likewise, Grand Harbour Marina plc shares headed the list of gainers, as buying interest was reinstated, with the equity soaring by €0.10 on low volumes of 2,000 shares to close the week at €1.95.

In the IT sector, Crimsonwing plc extended its year-to-date gains with a further appreciation of 1.8 per cent to close the week at €0.58, while RS2 retreated from its all-time-high of €1.171, as it drifted notably lower by 4.3 per cent on Thursday, thus reversing back to €1.11. RS2 will hold its annual general meeting on Wednesday.

From the same sector, 6pm Holdings plc closed the week unchanged at £0.60 after a single trade of 2,900 shares.

Meanwhile, the other losers for the week were Midi plc, which depreciated by 0.4 per cent to close at €0.249, Malita Investments plc, which crept lower by €0.014, and Plaza Centres plc which fell 1.8 per cent over 1,275 shares.

Meanwhile, other non-movers for the week were Go plc, Maltapost plc and Loqus Holdings plc, which closed flat at the €1.55, €1.05 and €0.14 respectively. Go’s turnover reached 11,000 shares while there was insignificant turnover in the latter two.

Finally, on Wednesday, Malta International Airport plc an­nounced its traffic results for May, in which passenger movements for the reviewed month increased by 9.8 per cent when compared with the same period last year, thus achieving a new record for the month.

It is interesting to note the increase of 23 per cent in the French market when compared to last year, despite the not-so-good economic indicators in France.

This article, which was compiled by Jesmond Mizzi, managing director of Jesmond Mizzi Financial Advisors Ltd, does not intend to give investment advice and the contents therein should not be construed as such. The company is licensed to conduct investment services by the MFSA and a member of the Malta Stock Exchange and a member of the Atlas Group. The directors or related parties, including the company, and their clients are likely to have an interest in securities mentioned in this article. For further information contact Mr Mizzi at 67 Level 3, South Street, Valletta, or on Tel: 2122 4410 or e-mail jesmond.mizzi@jesmondmizzi.com.