Date published - 2024-07-09

Global markets began the third quarter positively, with the S&P 500 posting its best weekly gain since late April, closing 2% higher. The NASDAQ rose by 3.5% to new highs, while the Dow increased by 0.7%.

Gains were broad-based, led by communication services, with Meta (+3.92%) and Alphabet (+2.73%) performing well. Consumer staples saw notable increases, with Walmart (+3.2%) and Costco (+4%) as strong performers. Tesla (+27.4%) stood out, reporting better-than-expected results. Boeing (+1.2%) announced the acquisition of Spirit AeroSystems to address supply chain issues.

US 10-year bond yields fell by 10 basis points, gold climbed to $2,390 per ounce, and Brent crude saw its fourth consecutive weekly gain due to a significant drop in US crude inventories and Hurricane Beryl concerns.

This week, we consider an SA retail stock along with a global tech giant.

Educational slide - Understanding the US Earnings Season: Insights from Q2 2024

The Q2 earnings season will be an interesting period with strong earnings growth and revenue increases expected. Our feature slide highlights the trend in earnings growth over the last few quarters. This performance reflects broader economic recovery and corporate resilience, setting the stage for potential market momentum with a risk being considerably optimism already priced in.

Some SA company highlights last week:

Anglo American (+4.3%), Clicks (-4.6%), South32 (+5.2%), Bidvest (-3.4%), ArcelorMittal (+3.25%), Sibanye-Stillwater (+7.75%)

More detail in the full report.

Economic:

The UK snap election saw Rishi Sunak's Conservatives concede to Keir Starmer's Labour Party, strengthening the pound and lowering bond yields. In France, Marine LePen's far-right movement faced a setback in a snap election.

US jobs data revealed nonfarm payrolls rose by 206,000 in June, with revisions showing a combined reduction of 111,000 jobs for April and May. The unemployment rate rose to 4.1%, suggesting a cooling job market, bolstering expectations for Fed rate cuts starting in September.

The Fed's FOMC minutes indicated no rate cuts until greater confidence in achieving 2% inflation, with one cut expected in 2024 and four in 2025.

Global PMI data showed weak manufacturing, with German inflation falling to 2.2% and factory orders dropping by 1.6% in May.

In South Africa, PMI data indicated continued contraction in manufacturing, with vehicle sales down 14.4% year-on-year in June. The BER’s inflation expectations showed a downtrend to 5% in Q2 2024.

More detail in our full report.

For the week ahead:

SA: Mining and manufacturing production

Global: US inflation data, Fed Balance sheet, China loan growth and trade.

Our Market's and Risk view:

Our risk matrix has remained NEUTRAL for a second consecutive week. Momentum and the put/call ratio are still in EXTREME GREED, while stock price breadth and the number of new 52 week highs remain in EXTREME FEAR. Headline indices remain propped up by fewer (large cap) stocks. The overall mix lends us to be cautious as we head into earnings season.

(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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