Date published - 2024-03-12
(This is a very shortened version highlighting excerpts of our full report which is available for our paid subscribers).
Last week, the U.S. stock market was volatile but ended on a lower note. The S&P 500 (-0.2%), Nasdaq (-1%), and Dow Jones (-0.7%) all pulled back from recent highs. NVidia continued to shore up the mega caps, ending the week 6.4% stronger but significantly off intra week highs. Other chip manufacturers did not fare as well with Broadcom falling 6.5% after the company disappointed investors with its full-year outlook and quarterly profits. Tesla (-13.5%), and Apple (-5%) also caught our eye along with New York Community Bancorp raising over $1 billion from a group linked to Steven Mnuchin. Novo Nordisk (+4.5%) reached an all-time high after reporting promising results from a trial of its experimental oral weight-loss drug, positioning the company for further success in this market segment.
Oil ended the week lower last week, as concerns over demand, especially from China, where oil imports decreased in the early months of the year, weighed on market sentiment. Despite OPEC+ extending supply cuts, the anticipated demand surge from China has not materialized as expected. Gold soared to a new record high, now surpassing our price target level. Gold has benefited from safe haven demand amid concerns of elevated equity valuations and geopolitical risks. These factors also helped buoy cryptocurrencies with Bitcoin pushing to record highs over the weekend.
This week's longs include a low beta biotech stock and a South African financial services play.
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Some SA company highlights last week:
The stronger gold price was a boon for South African gold mining stocks which were among the top performers last week. The JSE bucked the weaker global trend with gains in most sectors led by a strong rally in Resource stocks.
Sibanye-Stillwater(+6.6%), Exxaro (+3.3%) and Grindrod (+6%) caught our eye to the upside. There was a stark contrast betweeen educational firms, AdvTech (+4%) and Curro (-2%) as results and guidance were weighed by the market. Quilter (-5%) disappointed despite decent results and MultiChoice (+5.8%) was supported by a higher offer price from Canal+. There were even results from Nedbank and Shoprite.
More detail on what drove the moves in the full report.
Economic:
The key focus last week was on US jobs data and comments from Chairman Powell’s testimony before Congress. The Fed chair’s comments emphasized the need to balance economic activity and inflation suggesting a cautious approach to rate cuts and emphasizing the importance of inflation reaching 2% sustainably. The jobs data was relatively more complex with significant revisions to prior months clouding a beat on the latest number. We cover the full detail in our report.
In China, trade data was upbeat and deflation was reverse but oil imports weighed on crude. In Europe, German data rebounded and the ECB was very dovish indicating a recalibration of how monetary policy will be implemented and suggests rate cuts may emerge around the middle of the year.
Domestically, the release of SA GDP data showed the economy growing marginally at 0.1% in Q4 2023, below expectations, with growth driven by the transport sector but offset by declines in agriculture and trade. Year-on-year growth was 1.2% stronger, marginally ahead of expectations but annual growth (full year) was down to 0.6% from 1.9% in 2022, a notable deceleration. We also saw business confidence and current account data.
For the week ahead:
SA: Mining and manufacturing data
US: Inflation (CPI), retail sales, Univeristy of Michigan sentiment indictors
Europe: German inflation, UK GDP, manufacturing and jobs.
China: Loan growth, house prices and policy rates
Our Market's and Risk view:
Our risk indicators have pulled back marginally to GREED after five weeks in 'Extreme Greed' territory. However, only 2 indicators were responsible leading us to question the sustainability. We remain Extremely Cautious. We also consider taking profit off the table in some of our commodity plays.
(Corporate clients can contact us for more detail on our overall risk matrix).
Our full report unpacks all of this in more detail as well as their implications for the markets.
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