Date published -2023-10-24
(This is a very shortened version highlighting excerpts of our full report which is available for our paid subscribers).
Global markets experienced a challenging week last week marked by multiple factors. Major stock indices worldwide closed lower as concerns mounted over an escalating Middle East conflict, soaring bond yields, and mixed corporate earnings. In the U.S., the S&P 500 fell 3%, the Nasdaq declined 3.8%, and the Dow slipped by 2.3% to post the worst week in a month. All South African equity indices recorded negative returns last week pushing most local indices into the red on a year-to-date basis.
Megacap stocks faced a sell-off, notably Tesla (-16%) after the company highlighted concerns over demand and reconsidered their expansion plans in Mexico. NVIDIA (-9%) was also a notable loser as the company suffers the fallout of US-China trade tensions. Netflix surged 12% after results beat expectations and boasted its strongest subscriber growth in years as well as a price hike for customers.
In the energy sector, crude oil futures rose above $88 per barrel for the second consecutive week, driven by global supply concerns and fears that the Middle East conflict may expand. This rise was supported by expectations of a market deficit (supply vs. demand) in the fourth quarter and the U.S. government's plans to replenish strategic oil reserves. The US government has also eased sanctions on Venezuela as part of a deal to secure supply while requesting elections in that country.
Some SA company highlights last week (our full report includes detail on the moves and drivers):
Tiger Brands rose 9% last week as CEO Noel Doyle left the company. Sasol fell 5.5% last week, seeking shareholder approval to change the settlement of its convertible bonds from cash to equity. Pick n Pay slumped another 20% after releasing results.
Results we are watching this week: Amazon, Microsoft, Meta Platforms, Coca-Cola, and Chevron.
To the casual observer, it may seem that we are ALWAYS talking about 'Earnings Season'. This is because in the US, companies are required to report quarterly while in places like Europe and South Africa, investors need to be content with reports every 6 months (interim and final). This week, our feature chart outlines what investors and traders can look for during earnings season and why they sometimes can result in LARGE jumps or falls in stocks.
Economic:
Last week, several Fed officials spoke ahead of the blackout period and upcoming FOMC meeting at the start of November. Federal Reserve Chair Jerome Powell's comments during the week indicated a steady rate outlook, but with the potential for higher rates if the economy strengthens.
In China, the economy expanded by 4.9% in the third quarter of 2023, beating market forecasts. We also cover a host of detailed Chinese data releases last week which offers some additional granular insight in our full report.
SA CPI for September accelerated to 5.4% year on year from 4.8% in August. Consumer prices rose 0.6% on the month. This surprised the market which had expected a more muted monthly rise of 0.3%. Upward pressure continues to be felt from food and non-alcoholic beverages which ticked higher to 8.1%. Transport inflation also returned to positive territory, rising 4.2%. Core inflation (excluding food and fuel) eased to 4.5% in September.
Our full report includes detail on US retail sales and bond yields, Chinese retail sales, industrial production and fixed investment. From the UK we look at inflation and in SA we also covered retail sales in addition to the CPI mentioned above.
For the week ahead:
War remains at the front of mind driving risk appetite. On the economic calendar there are a few (but VERY important) releases.
US: GDP for Q3, PCE Price index (Fed's preferred inflation measure), Personal income and spending.
SA: Leading business cycle indicator and PPI
Global: Central banks (ECB, Turkey, Canada)
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