Date published - 2024-03-26
(This is a very shortened version highlighting excerpts of our full report which is available for our paid subscribers).
Last week, US stocks rallied even further with the Dow Jones Industrial average rising 2%, lagging tech led gains on the S&P 500 (+2.3%) and the NASDAQ (+2.9%). Gains were across the board as the market was fuelled by a dovish perception of the FOMC meeting earlier in the week. On the company news front, while most of the board was green, Nike (-5.8%), Lululemon (-13%) and Equinix, (-5.8%) caught our eye and we discuss these in more detail.
After pushing to year-to-date highs in the preceding week, US bond yields decreased last week (down to 4.2%) following the Fed's meeting. Oil prices declined towards $85 per barrel after pushing close to $87 during the week. A stronger dollar pressured commodity prices in general. Gold prices also fell from intraweek highs with both crude and gold ending the week essentially flat.
In our feature educational slide this week, we often neglect how important it is to understand the interplay between economic variables, data and events that we read about and how they can affect markets. With the SARB MPC this week, it is an opportune time to explore how interest rate decisions can affect the Rand exchange rate.
Some SA company highlights last week:
South African markets lagged global markets last week, partially impacted by lower trade volumes amid a public holiday disrupted week. While the headline index moves appeared muted, there were still significant movers among the underlying stocks.
Our full report touches on what drove the moves in Discovery (-7%), Investec (+5.7%), Sibanye-Stillwater (+4%), Telkom (+6.9%), Remgro (-14%), Transaction Capital (-18.5%) and Thungela (+10.5%).
More detail on what drove the moves in the full report.
Economic:
The Fed maintained the fed funds rate at 5.5% for the fifth consecutive meeting in March 2024, in line with market expectations. The market’s move was driven by the ‘Dot Plot’ and forward guidance. We also look at the surprise from the Swiss National Bank and why Asia is countercyclical with the Bank of Japan raising rates.
South Africa’s inflation rate rose to 5.6% in February 2024, the highest in four months and above market forecasts. Our full report unpacks the drivers.
For the week ahead:
This will be a Public holiday shortened week pretty much globally with the upcoming Easter holidays.
SA: SARB expected to keep rates on hold with upside risks to inflation. Watch forward guidance with the introduction of several new MPC members including new Deputy Governor, Dr Mampho Modise who comes with a strong track record at National Treasury.
US: US Personal Consumption Expenditure Prices (PCE) inflation, the Fed’s preferred inflation measure. Fed speeches after black out period, US home prices, the final estimate for US Q4 GDP
Our Market's and Risk view:
We remain cautious and our risk indicators remain in GREED for a third week after being in EXTREME GREED for the 5 preceding weeks.
(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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