Date published - 2024-06-04
Domestically, the focus remains on the market’s reaction to the election results released over the weekend. The results suggest that coalition politics are the new status quo for the first time with scenarios outlining a variety of options ranging from a government of national unity all the way through to variations of bilateral party coalitions.
These developments may take some time to evolve, and the parties will have around two weeks to negotiate and strategize before the next sitting of parliament. The initial market ‘read’ on the outcome saw an uncertainty premium creep back into the rand and bonds in late trade on Friday which was duly reversed on Monday. The outcomes remain fluid so traders need to remain vigilant.
Globally, after five consecutive weeks of gains, the S&P 500 slipped last week, falling 0.5% in a shortened trading week. This capped off a strong performance for the month of May. The Dow Jones and Nasdaq ended the week 1% and 1.1% lower respectively, weighed by underperforming tech stocks. Stocks that caught our eye include Salesforce (-15%), Intuit (-13%), Accenture (-7.7%), and Nvidia (+5.6%).
US bond yields remained range bound around 4.5% for the US 10 year, as the market continues to process its expectations around the timing of rate cuts. Gold prices slipped below $2,330 per ounce as inflation pressures eased, capping out a fourth monthly increase for bullion.
Oil prices also fell during the week amid ongoing concerns about demand. While US crude inventories dropped significantly, a surprising increase in gasoline stockpiles suggested subdued demand with the market now looking to the upcoming OPEC+ meeting, which is anticipated to extend supply cuts into 2025, potentially supporting prices.
This week, we consider an SA pharma stock along with a global apparel giant.
Some SA company highlights last week:
There was alot of company news. Some companies getting our attention:
Anglo American (-4.8%), BHP (+2.2%), Old Mutual (-5.3%), Woolworths (-11%), Pepkor (-8.11%), Barloworld (+2.2%), Pick n Pay (+5.4%), Tiger Brands (-4.9%)
More detail in the full report.
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Economic:
Domestically, the elections dominated the news, overshadowing the SARB's decision to hold the repo rate steady at 8.25% for the sixth consecutive time due to persistent high inflation. The SARB also updated its inflation and growth forecasts with more detail in our full report.
Globally, US GDP growth slowed to 1.3% in Q1, with mixed inflation metrics and rising house prices. German inflation rose to 2.4% in May, the first increase in five months, driven by higher service charges and food prices, but is unlikely to prevent expected ECB rate cuts due to regional growth pressures.
More detail in our full report.
For the week ahead:
Global: Final PMI for May, ECB (rate cut expected).
SA: Q1 GDP, Election newsflow
US: US jobs data (ADP and NFP)
Our Market's and Risk view:
Our risk matrix has remained in NEUTRAL territory for a second week now. While upside momentum remains on the back of a few stocks, stock price breadth remains poor. However, the put/call ratio has moved back into GREED and also gives us pause given the rise of meme stock mania again.
(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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