Date published - 2023-11-21
(This is a very shortened version highlighting excerpts of our full report which is available for our paid subscribers).
Last week witnessed a robust performance in major stock market indices, marking the third consecutive week of strength, primarily driven by a decline in Treasury yields. The surprising moderation in U.S. inflation data instilled optimism among investors, hinting at a potential conclusion to the Federal Reserve's series of interest rate hikes. The 10-year Treasury note yield dipped to 4.44%, while the Dow Jones +1.9%, S&P 500 +2.2%, and Nasdaq +2.4% all rallied. Brent fell for a 4th week while Gold headed marginally higher.
Our full note looks at Target and Walmart that headed in opposite directions on differing guidance despite beating estimates.
Some SA company highlights last week:
We look at the annoucements from several firms in our full report to unpack what drove returns. Some companies that stood out for us were Gold Fields (+1.9%), Investec (+7.3%), Life Healthcare (-2.8%), MultiChoice (-8.4%), and Woolworths (-5.6%).
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Our trade ideas this week include an energy utility in the US and a local telecoms play.
Our educational infographic this week discusses The dollar's complex relationship with financial markets. The relationship between the US dollar and financial markets is fascinating. It is often described as an inverse relationship when referring to equities but a more nuanced view is required, discussing the relationship to other macroeconomic variables, international trade and investment flows. This week's educational slide aims to address some of these stylised relationshops with a caveat that while these tend to hold, that they are constantly evolving and require a holistic view.
Economic:
In the realm of geopolitics, a pivotal meeting between Chinese leader Xi Jinping and US President Biden took place, yielding some high-level agreements on crucial issues. Despite this success, tensions persist, with the U.S. continuing to characterize the Chinese leader as a 'dictator.' Later in the week, the U.S. Congress passed a short-term government funding bill, averting another federal shutdown, yet lingering concerns impact confidence and U.S. credit ratings.
We also take a detailed look at U.S. inflation data which decelerated to 3.2% on lower energy costs. But what is the outlook of the other subcomponents? We also look at manufacturing production and retail sales.
In Europe, we look at Q3 GDP revisions which went negative. Industrial production and inflation data was also out. In China we unpacked the mixed bag that was the economic release calendar last week with some interesting insights into which countries invested MORE in China despite the narrative.
In SA unemployement data improved but an expended definition stay elevated at 41.2%! We also look at retail sales and which sectors did a little better!
For the week ahead:
SA: CPI (October) and the SARB - rates expected to be kept steady.
US: FOMC Minutes, Durable goods orders and Thanksgiving Holiday.
Global: Flash PMI's to provide insight into global growth momentum.
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