Date published - 2023-12-12

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

Stocks closed higher for the sixth consecutive week, reaching their highest levels since early 2022, driven by strong economic data out of the US (see Economic section). The S&P 500 hit a new 2023 high, gaining 0.2% for the week, the Dow Jones Industrial index was flat, and the Nasdaq climbed 0.7%. On a sector level, the performance was mixed with energy stocks lower along with much of the resources sector while big tech stocks rallied.

McDonald’s was flat for week after the fast-food giant announced that they began testing a new small store format called CosMc's, aiming to open 10 locations by the end of 2024. The new format is aimed at featuring customizable specialty beverages to rival competitors like Starbucks. Lululemon (an athleisure wear giant) rose 6% after posting strong quarterly results but the growth outlook was a little more muted going forward. Boeing jumped 5.7% after the firm announced changes to its production schedule and a plan to expand in China.

Gold eased back last week especially on the Friday session as a stronger dollar weighed on commodity prices as a whole. Brent crude faced a weekly loss, impacted by rising global supplies, weak demand signals, and economic uncertainties in China. OPEC+ announced additional cuts, but concerns persisted. The US is also intent on rebuilding its Strategic Petroleum Reserves given lower crude prices but this offered little support to the market.

This week's trade ideas look at a South African based retailer and a global food giant. 

Some SA company highlights last week:

We look at what drove the moves at Absa (-8.4%), Anglo-American (-16%), British American Tobacco (-8.6%), and Nampak (+7%).

Our risk indicators have remained elevated in 'Greed' territory signalling a heightened caution. The Santa Claus rally we discussed last week may provide some seasonal boost but we remain concerned of extended price action as indicated in our carousel.

Economic:

The big economic focus last week was on US jobs data with nonfarm payrolls, unemployment, retail trade and factory orders. Globally, the surprise came from Chinese trade data where exports rose for the first time since April. Imports fell implying a complex backdrop which we unpack looking at which sectors were the drivers. We also looked at Chinese inflation.

In South Africa, the economy contracted by 0.2% quarter-on-quarter. This was weaker than market expectations and was attributed to persistent rotational load shedding, logistical constraints, and a challenging global environment. We unpack the sectoral view and also discuss the impact of the current account data on the Rand.

For the week ahead:

SA: Mining and Manufacturing production, retail sales, SARB Quarterly Bulletin

US: US Federal Reserve FOMC Meeting (rates expected on hold, forward guidance to be watched), US inflation, retail sales, industrial production.

China: Policy rates, loan data, industrial production.

Global: Eurozone, UK, Japan industrial and manufacturing data, ECB and BOE decisions.

Our full report unpacks all of this in more detail as well as their implications for the markets.

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