Date published - 2024-06-18

With Youth Day in SA on Monday and the Juneteenth Holiday on Wednesday in the US, trading volumes are likely to be disrupted on both ends of the Atlantic.  With record highs in markets, it will be interesting to see how price action resolves although a volume sustained moved will not be likely this week.

Last week, US markets were largely buoyed by the tech sector which managed to push the headline indices toward the best weekly gain in over a month on the S&P 500 (+1.6%). The unexpectedly mild inflation data acted as a key driver, overshadowing the Fed’s FOMC and company news. The tech heavy Nasdaq saw an impressive increase of 3.2%, while the Dow experienced a slight decline of 0.5% as overall market breadth remained poor with sectoral losses in most non-tech sectors.

In company news, Apple introduced "Apple Intelligence" as a new AI system to be integrated across Apple’s devices. Despite initial skepticism that saw Apple shares drop after the announcement, the stock rebounded to end the week 7.9% higher. In another landmark story, Tesla (+0.3% for the week) shareholders endorsed a record breaking $56 billion CEO compensation package for Elon Musk and approved the company's shift to Texas. The muted stock performance was partially related to escalating trade tensions as the European Union announced provisional tariffs on Chinese electric vehicles, particularly affecting companies like Tesla that manufacture in Shanghai.

The yield on US 10-year bonds fell around 20 basis points to 4.21%, the lowest since late March. This was despite a hawkish Fed FOMC and largely influenced by the lower-than-expected CPI data. The lower inflation print also largely supported gold bullion as prices bounced back above $2,330 per ounce, its first weekly gain in four weeks. Brent crude managed to end the week with a notable gain of over 3%. Optimism about summer fuel demand and upward revisions in global oil demand forecasts for 2024 by the US Energy Information Administration (EIA) were key drivers. Strong compliance of output agreements within OPEC and higher than expected US crude stockpiles contributed to balancing supply and demand dynamics as we enter peak (summer) driving season in the North.

This week, we consider an SA banking stock along with a global tech giant.

Some SA company highlights last week:

Gold Fields (-16.1%), Mr Price (+5.02%), Motus (+4.65%), MultiChoice (-5.5%), Spar (+21%), Omnia (+5.66%)

More detail in the full report.

Economic:

Last week, the US Federal Reserve's FOMC meeting was overshadowed by softer than expected inflation data, with annual inflation slowing to 3.3% and core inflation dropping to a three-year low of 3.4%. The Fed kept rates steady at 5.25% but projected only one rate cut this year. In China, inflation remained stable at 0.3%, and the country recorded its lowest growth in outstanding yuan loans. In Europe, the UK's economy grew by 0.6% year-on-year in April, while Germany's inflation rose slightly to 2.4%. South Africa saw a mixed performance in mining and a robust recovery in manufacturing production. In South Africa, political news was dominated by the announcement of a government of national unity between the ANC and Democratic Alliance, leading to improved sentiment and a stronger rand and a rally in banking stocks.

More detail in our full report.

For the week ahead:

SA: Youth Day, CPI

US: Manufacturing and retail sales

China: Housing and policy rates

Global: Bank of England, France election news, Eurozone and UK inflation

Our Market's and Risk view:

In an interesting development, our risk matrix has moved into FEAR territory after being NEUTRAL for three weeks. While momentum has pushed to EXTREME GREED, stock price breadth and the number of new 52 week highs both moved into EXTREME FEAR highlighting a trend we have spoken about for some time. This is that the headline indices are propped up by fewer (large cap) stocks. The put/call ratio remains in GREED territory.

(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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