Date published -2023-07-18
(This is a very truncated version highlighting excerpt of our full report which is available for our paid subscribers)
Last week saw a remarkably strong ‘risk on’ move across most markets with a rally both domestically and internationally. US stocks posted gains across all major indices for the week with the Dow Jones +1.7%, the S&P 500 +2.3% and the NASDAQ +3.7%. The JSE tracked global markets higher with solid gains across all major sectors barring listed property.
On macro markets, the US dollar was notably weaker (we refer to it as a 'Smack Down') against most global currencies. A much softer CPI print from the US largely the driver (see more in Economic section). This helped the rand to its strongest level since April and also filtered through to US bond yields. Gold and in particular, platinum enjoyed a strong performance last week and oil ticked higher for the week, albeit ending the week on a softer note, below its intraweek high around $80 per barrel.
In company specific news, Absa Group (+4.8%) ended the week on a strong footing after posting a trading update for the six months to June. Tech giant, Naspers (+6.4%) rallied strongly last week riding the momentum of global tech stocks. However, it was also worth noting that the firm put out an update regarding the unwinding of its cross-holding structure of Prosus (+7.3%) with the latter stock similarly enjoining a strong rally last week.
In the US, earnings season kicked off well with United Health rallying over 7% off its lows to end the week 4% higher. The company beat both revenue and earnings estimates. Earnings from the big US banks came in stronger than expected with JP Morgan (+3.8%), Wells Fargo (1.6%) and Citigroup (0.2%) all beating revenue and earnings estimates but delivering very different performance for the week. Blackrock rallied 6.4% on the stronger market performance but lost 4% from its weekly highs as the firm missed on revenue estimates.
It's busy on the earnings front this week as we continue to see US banks reporting. Among other big names reporting this week, we also have real estate giant Prologis, IBM, Tesla and Netflix.
We recently took profit on some trades and got stopped out of others. This has resulted in the prevalence of 'No Position' stances in our carousel given changes in trend or price action which is still developing, our feature chart this week highlights how a neutral stance is still an active call that requires patience and discipline.
The US CPI was the key driver of the “risk on” move across many markets and a weaker US dollar. US inflation for June slowed markedly from 4% to 3.0% year on year, marginally below market expectations. In our full report, we delve deeper into the drivers of the slow down. We also had US consumer sentiment for July push to the highest level since 2021 at 72.6 index points versus expectations of 65.5 index points. The slowdown in inflation as well as continued strength in the labour market, remain key upside sentiment drivers. In China, inflation cooled in June, marginally avoiding deflationary territory which we last saw in early 2021. Chinese trade data presented a concerning picture.
In South Africa, we had mining and manufacturing data for May. Manufacturing production surprised to the upside and mining disappointed. We provide a more granular view in our full report.
For the week ahead, we start with Chinese GDP for Q2 along with various sectoral data from China as well. We have a data heavy middle of the week with UK and Eurozone inflation, US housing data along with Japanese trade data. Domestically, it’s a big data week as well. On Wednesday, we have South African inflation data for June with the market expecting a slowdown to 5.6% from 6.3% previously. We also have SA retail sales for May. Of critical focus this week with the South African Reserve Bank’s monetary policy meeting with the consensus expectation being for rates to remain on hold. This follows a surprise hike of 50 bps at the last meeting (25bps was expected), so the market will watch closely.
Our market carousel still has 2 open long positions with both being in a partial profit take stance. We close a long standing short position this week and get stopped out of another. This takes our total to 2 open short positions (down from 4). This week's changes leave our directional positions focussed on equity markets. We now hold 6 'No Position' stances (from 4 last week).
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