Date published - 2023-12-05
(This is a very shortened version highlighting excerpts of our full report which is available for our paid subscribers).
Global stocks continued their move higher last week, reaching their highest levels in over a year, as Federal Reserve Chair Jerome Powell indicated that key interest rates may have peaked. Powell's remarks about "tight monetary policy" slowing economic activity were interpreted by traders as a signal that the Fed might be done with rate hikes, despite not explicitly stating so.
The three major US stock indexes posted gains for the fifth consecutive week, with the Dow rising 2.4%, the S&P increasing 0.7%, and the Nasdaq climbing 0.4%. While big tech and energy stocks faced pressure, most other sectors performed well.
Shein, a fast-fashion giant, confidentially filed for a U.S. IPO with a targeted valuation of $80B-$90B. Pharmaceutical giant, Pfizer declined 6% after announcing the halt of a Phase 3 trial for its weight-loss pills. Shares in Salesforce continued a rally, rising 3.2% after strong results. Tesla's Cybertruck launch event did not impress the market, with shares falling after the announcement. News of a higher price point for the Cybertruck ($60.99K vs $40K expected) weighed on the outlook but the stock still ended the week up 1.4%. Berkshire Hathaway, mourning the peaceful passing of Charlie Munger at 99, saw a 1.5% decline for the week.
Brent crude dipped below $80 per barrel, extending losses amid skepticism over OPEC+ voluntary oil output cuts for Q1 next year. While the cartel agreed to an additional 1 million barrel-a-day reduction, specific cuts by individual members are pending, and Brazil plans to increase output. Oversupply concerns and economic challenges contribute to recent oil market weakness. Gold hovered around $2,040 per ounce, set for a third weekly gain. Geopolitical developments in the Middle East, with Israel and Hamas resuming conflict also being monitored.
Our risk indicators are now firmly in 'Greed' territory signalling a heightened caution. While the Santa rally discussed may provide some seasonal boost, we remain concerned of extended price action on many indicators and would expect a pullback as part of healthy trend development on many core markets.
Some SA company highlights last week:
It was busy on the company front in SA last week and we look at the drivers and results behind moves like Impala Platinum (-10%), ArcelorMittal (-15%), Exxaro (+1.3%), Lewis Group (+2.8%), Spar Group (7% range but flat), Purple Group (-3.4%), Pepkor's (-2.3%) and Grindrod (-3.9%).
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Our educational slide this week looks at seasonal trends like the Santa Claus rally. In the world of finance, certain seasonal trends have been observed over time, one of which is the "Santa Claus Rally." This phenomenon refers to the tendency for equity markets to experience a boost in the last week of December through the first couple of trading days in January. Let's delve into what this rally entails and how it, along with other seasonal cycles, can impact equity markets in December.
Economic:
There was a big focus on Jerome Powell's speech last week and coupled with softer inflation and a beat on US Q3 GDP, the market consensus was that rates have likely peaked in this cycle and that inflation is cooling along with some cracks showing in economic momentum. This contributed to a strong risk-on sentiment in markets for the latter part of the week. In Europe, the Euro Area's inflation rate dropped and Germany’s EUR 17bn gap in its fiscal budget for 2024 led questions on whether the country’s debt brake needs to be circumvented again for another year.
In South Africa, the focus was on the trade balance which swung to deficit, weighing on the rand. We also saaw private sector credit and money supply data along with PPI. Globally, PMI data ticked higher with the exception of the US.
Our full report unpacks all of this in more detail as well as their implications for the markets.
For the week ahead:
SA: Q3 GDP - Growth is expected to weaken sequentially as headwinds of loadshedding and infrastructural constraints weigh on the outlook
US: Jobs data (NFP, ADP,etc), Factory orders, trade data
China: Trade data, inflation
Global: PMI data from several countries.
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