Date published -2023-10-31

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

The global markets had another tough week last week with major stock indices taking a hit. The S&P 500 and NASDAQ both dropped by about 2.4% for the week, while the Dow Jones Industrial index fell by around 1.9%. In corporate news, Alphabet's (Google's parent company) stock price fell by almost 10% despite strong earnings, as the company's progress on artificial intelligence (AI) was considered weaker than expected. Chevron saw a 13% drop in its stock price after announcing a $53 billion all-stock deal to acquire Hess Corp as energy mergers and acquisitions (M&A) activity picked up.

Interest rates were in the spotlight as the yield on the 10-year Treasury jumped to 5%. This increase was fueled by concerns over the growing budget deficit and US debt issuance. Oil prices were volatile and rose sharply at first before reversing equally as sharply toward the end of the week, trading 6% off the peaks. Developments in the Middle East and reports of increased crude inventories were contributing factors. On the other hand, gold exceeded $2,000 per ounce, marking its third consecutive weekly gain as it continued to act as a safe haven and hedge during uncertain times.

Results we are watching this week: Apple, McDonald's, AMD, Pfizer

Some SA company highlights last week (our full report includes more detail on the moves and drivers):

Clicks Group (+12%) reported an 11.5% rise in full-year earnings. Afrimat (+3.8%) achieved revenue growth of 9.6% in the six months ending August. Life Healthcare (-6%) provided a trading update with guidance but also an impairment. Sibanye-Stillwater (-9%) entered a labour retrenchment process.

Our trade ideas this week include a play on retail as well as a US healthcare stock

Medium Term Budget Policy Statement: MTBPS, What to expect

There is alot of event risk this week ranging from the Fed and Middle East conflict globally but domestically, this will all take a back seat when Finance Minister Godongwana takes the stage to update the country on its finances.

The Medium Term Budget Policy Statement or MTBPS for short is an important annual financial statement in South Africa. It is typically presented by the Minister of Finance to Parliament in October or November each year and provides an update on the country's economic and fiscal outlook and outlines the government's fiscal policies and priorities for the medium term, which usually covers a three-year period. It can be viewed as the proverbial 'litmus test' on how the country's finances are performing relative to the budget presented in February.

Key components of the MTBPS include revised revenue and expenditure projections, macroeconomic forecasts, and an assessment of the government's fiscal position. The MTBPS is a crucial document for planning government finances and often serves as a precursor to the next year's national budget, which is typically presented again in February.

The MTBPS is a key tool for transparency and accountability in South Africa's fiscal management, and it helps stakeholders, including investors, understand the government's economic and financial plans. It is an essential part of the budgetary process and is closely watched by financial markets and the public.

We outline our expectations of this week's MTBPS in the infographic below based on the economic performance for the year thus far.

Economic:

Last week, the focus was on the US GDP data, which exceeded expectations. We also look at Personal income, spending, and inflation.

In Europe, the European Central Bank (ECB) kept interest rates unchanged during its October 2023 meeting.

In South Africa, producer price inflation (PPI) increased to a four-month high of 5.1% in September 2023.

For the week ahead:

SA: Medium Term Budget Policy Statement (MTBPS)

US: Fed meeting (no change expected), Jobs data

Global: BOE meeting (no change expected), Eurozone GDP and inflation, OPEC Report

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