Date published - 2024-02-13

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

Momentum remained strong on global markets last week with the S&P 500 and Nasdaq 100 both reaching new record highs, rising by 1.5% and 2% respectively, driven by rallies in megacap technology stocks. The S&P surpassed 5000 index point for the first time ever. We remain in the middle of the US reporting season and our full report outlines some of the key movers and the drivers behind their move.

Brent crude experienced a notable increase, settling around $82 per barrel, 6% gain for the week. This surge was largely attributed to escalating geopolitical tensions in the Middle East, with Israel's ongoing military operations in Gaza and a U.S. drone strike in Baghdad targeting a senior militant leader contributing to the rise. Gold, on the other hand, saw a slight decrease, dipping below $2,030 an ounce and ending the week with minimal changes.

This week's trade ideas look at a South African health insurer as a possible trigger trade and a global HR solutions company

Feature Slide - How to use Market Profile

Market Profile and the Point of Control provide a unique lens through which to view market activity. By identifying key price levels where the most trading has occurred, traders can gain insights into market sentiment, potential support and resistance levels, and areas of price acceptance or rejection.

Some SA company highlights last week: (details in full report)

Anglo American (AGL): Anglo American provided a Q4 production update with details in our full report. The share price declined by 5.8% for the week.

Anglo American Platinum (AMS): Fell 14.5% last week.

Impala Platinum (IMP): reported a decrease in HEPS. The share price fell by 11.5% for the week.

Kumba Iron Ore (KIO): HEPS for the year ended December is expected to be higher. There were some issues which we outline. The share price declined by 4.8% for the week.

British American Tobacco (BTI): achieved profitability in New Categories (detail in full report). The share price increased by 3% for the week.

Sappi (SAP): Sappi swung into a headline loss for the quarter. The share price decreased by 3.9% for the week.

Economic:

Last week was a relatively quiet week on the economic data front. Domestically, the State of the Nation address was a key focus. President Ramaphosa primarily focused on the achievements of the government thus far. He notably mentioned pressing challenges like crime, corruption, electricity shortage, and infrastructure issues. However, no new initiatives were announced, and the speech was largely viewed as an election platform. The upcoming budget will be the next key focus with significant fiscal challenges. Loadshedding remained a prominent feature and despite comments that the situation was improving, following the SONA, loadshedding resumed at Stage 6, and remains a hurdle to sentiment and economic growth.

Economic data in South Africa last week included the S&P PMI and foreign reserves as well as manufacturing production which we unpack in detail.

In Europe we had a full slate of German data. We also saw Eurozone retail sales continue to contract.

In the US, the trade deficit narrowed to $773.4 billion in 2023, marking the lowest level in three years. This reduction was primarily driven by a decrease in imports, which fell by 3.6% compared to the previous year. In contrast, exports increased by 1.2%, reaching a record high in 2023.

In China, deflation remains a theme.

For the week ahead:

SA: Mining production

US: Earnings season, Geopolitics, inflaiton, manufacturing production, retail sales and University of Michigan sentiment indicators.

Europe: Eurozone GDP, UK GDP, retail sales and inflation.

Global: Chinese lending rates, Japan GDP

Our Market's and Risk view:

Our risk indicators have remained in 'Extreme Greed' territory for a second consecutive week now. 52 week highs vs. lows ratio has risen further and the overall put/call ratio has fallen suggesting the extension into extreme greed. This has largely offset the rise in the VIX and other risk indicators. We remain cautiously long but out concern rises as our risk indicator metrics track higher.

(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.

Market Carousel (we remain cautious - but long):

We have maintained all 4 of our our existing long equity positions in the carousel. We also maintain some hedges in the commodity space. Our USDZAR spec long remains in play and is currently in the money. We watch our EURUSD position closely with some key levels on the charts.

This note is just a 'menu'. There's alot of detail underlying the comments above. Our paying subscribers can get under the hood to see what's driving the economy and the markets. Join us.

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