Date published - 2024-04-16
(This is a very shortened version highlighting excerpts of our full report which is available for our paid subscribers).
Last week, the S&P 500 (SP500) recorded its worst weekly performance of the year, dropping nearly 2%, primarily affected by strong economic data that lessened the urgency for the Federal Reserve to cut interest rates. The S&P 500 fell by 1.6%, the Nasdaq Composite by 0.5%, and the Dow Jones Industrials index by a notable 2.4%.
Geopolitical tensions ramped up with a retaliatory attack from Iran on Israel, prompting concerns about escalating conflict in the Middle East, which could disrupt oil production and influence global markets. Brent crude rebounded, rising above $90 per barrel on Friday, as worries about potential conflict escalation in the Middle East raised fears of supply disruptions. This came amid signals that Israel was preparing for possible strikes from Iran and a failure to reach a ceasefire between Israel and Hamas. The impending strikes commenced over the weekend signaling an escalation into a wider Middle Eastern regional conflict.
Gold markets witnessed a significant uptick, with prices soaring past $2,410 per ounce, hitting a new high before pulling back in later trade. This rise in gold prices was fueled by strong safe-haven demand. Moreover, physical demand for gold in China has been strong, driven by the search for alternative investment options due to volatility in the local currency and the need for additional economic stimulus.
This week we consider a health play in SA as well as a global news and entertainment stock.
The onset of the first quarter (Q1) earnings season in the United States is a period marked by heightened attention from investors, analysts, and financial journalists alike. As companies begin to release their earnings reports for Q1 2024, these documents and the accompanying executive commentary provide valuable insights into not only the past performance of these entities but also their future prospects. This week's educational slide outlines what to look out for as earnings seasons rolls in.
Some SA company highlights last week:
Sibanye (+13%) with job losses coming, Afrimat (+13%) on Competition Tribunal news, Sasol(+10%) on an environmental win.
More detail in the full report.
Economic:
The market was watching US inflation data along with the release of the FOMC minutes from the last meeting. US CPI accelerated to 3.5% year-on-year, marking the highest rate since September. In China, March 2024 saw a surprising pivot in economic indicators including inflation and trade data. In Europe, the ECB kept interest rates steady at 4.5% and signaled a potential easing of policy if inflation consistently moves towards the 2% target.
South Africa experienced a significant surge in mining production, which grew by 9.9% compared to the expected 3.5%, marking the highest growth since July 2021. Despite a robust monthly performance with a 5% growth in February, there was a slight seasonal decrease of 1.4% in the three-month period ending in February. The gold sector, however, did not follow the same upward trend as the broader mining industry. Gold production decreased by 3.6% year-on-year in February, contributing to a fourth consecutive month of declines in the activity, although the decline rate was softer compared to January.
In the manufacturing sector, February saw a notable year-on-year growth of 4.1%, outpacing forecasts and becoming the strongest increase since June of the previous year. Significant contributions came from the production of wood products, food and beverages, and petroleum and chemical products. However, on a monthly basis, manufacturing output slightly declined by 0.3%, contrary to market expectations of a rise.
For the week ahead:
Global: Escalating Middle East conflict, IMF Spring Meetings
SA: Inflation (March), retail sales
US: US retail sales
Europe: Eurozone retail sales, UK retail sales and inflation
China: GDP, Fixed Investment, Retail Sales
Our Market's and Risk view:
After banging our drum for 10 weeks, our risk indicators have finally pulled back to 'FEAR' from over 2 months in 'EXTREME GREED' and 'GREED'. The pullback in equities and a sharp rise in volatility coupled with a sharp rise in the put/call ratio have all contributed to the move.
(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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