Date published -2023-09-05

(This is a very shortened version highlighting excerpts of our full report which is available for our paid subscribers)

Markets:

It was a long weekend in the US to mark the official end of summer and last week, markets enjoyed a fairly strong week in the run up to the holiday. US tech stocks led the gains with the NASDAQ ending the week 2.6% higher followed by the S&P 500 (+1.9%) and the Dow Jones industrial average (+0.6%).

While the key focus was on US macroeconomic data, there was also significant company news. We highlight key newsflow in Tesla, Vinfast, UBS, Salesforce, and Lululemon in our full report.

South African stocks tracked global markets higher last week led by gains on the large cap stocks. We highlight key newsflow in BID Corp, Aspen, Woolworths, Sibanye Stillwater,and Harmony Gold in our full report.

Despite a flat U.S. dollar over the week, the Rand lost some ground. Commodity prices were generally stronger with oil prices surging almost 6% as the market focused on tight supplies.

The earnings calendar is particularly light this week, and the focus will likely shift toward macroeconomic data globally.

Our feature chart this week borrows from our weekly markets carousel. Gold has been a good play within the flag formation and has run into short term resistance. We highlight the importance of demarcating short term vs. long term views. We take profit on our speculative long gold short term position and watch a range trade within the flag. Our long term view is triggered on a break up out of the flag.

Economic:

It was busy last week on the macroeconomic data front. Much of the focus was on U.S. jobs data as well as inflation data.

The US personal consumption expenditure (PCE) price index is the Fed’s preferred measure of inflation. PCE rose by 3.3% in July from 3.0% in June. US ADP employment numbers showed a marked slowdown to 177,000 in August, the lowest in five months. This contrasted with a slight uptick in US nonfarm payrolls data which rose to 187,000 in August. Nonfarm payrolls data has been relatively more downbeat over the last several months when compared to ADP data. This is the third consecutive month of job gains below the 200,000-mark indicating slowing momentum in the US jobs market.

We also had US GDP for Q2 and manufacturing PMI data across several geographies which remain in contraction territory. Home prices in the US fell by 1.2% over the last year with losses concentrated on the West Coast with San Francisco down almost 10%. The impact of the Fed's aggressive hiking cycle it's starting to show. The overarching view last week across several macroeconomic data points was one of a slowing growth outlook with some cracks showing in the labour and housing market. This provided some support to risk assets on the back of expectations of a more muted interest rate outlook and a possible reversal in the hiking cycle.

Globally, in China, building on rate cuts over the last few weeks, Chinese authorities have announced further measures providing stimulus to its economy through foreign currency reserve requirements and the FX market.

A key focal point for the Rand tends to be South African trade data. South Africa recorded a trade surplus of R15.96 billion in July. This was significantly better than the upwardly revised deficit of R4.75 billion in June. We provide more detail in our full report.

For the week ahead the calendar is light as US markets have a shortened week and as such the focus will likely remain on global data releases. We have South African GDP for Q2 as well as the current account as key focal points. Globally, we have US and German factory orders, Eurozone retail sales and GDP as well as Japanese GDP. Chinese data will include trade, foreign exchange reserves and inflation.

We continued with our demarcation of short term vs. longer term views. This week, we open 3 speculative long positions in key equity markets. We take profit on a commodity long and look to range trade it in the near term. We are stopped out at a loss on the short commodity speculative position we opened last week. We now have 6 'No Position' stances  but identify 5 range trades for more active traders. We highlight the details in the full report for our paying subscribers.

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