SA40 index up despite disappointing US data

The All Share index reached new all-time highs once again last week, ironically taking its cue from poor US economic data. 

The previously delayed Non-farm payroll figures provided the catalyst, after less people were reported to have been added to the payroll last month than what was anticipated. The data supports the recent sentiment that the current QE measures will remain in play for an extended period.

The US unemployment rate came in at 7.2%, which although ahead of consensus estimates, highlighted a low participation rate in those actively seeking employment. Post Tuesday’s US employment data our local bourse has traded on relatively light volume and failed to post any significant directional moves.

Wednesday’s Medium Term Budget Policy Statement (MTPS) presented by finance Minister Pravin Gordhan was met with little financial market reaction. Local GDP is forecast to grow from 2.1% in 2013 to 3.2% in 2015, while inflation is forecast to ease from 5.9% to 5.4% over the same period. Government spending over the next three years will increase in the following areas year-on-year: education at 7%, health at 7.3%, employment and social security at 14%. The annual growth of government debt is expected to average a further R172.5bn over the period. Perhaps the most notable mention in the Ministers speech was the tightening of the belt for government officials relating to travel, accommodation, and credit card use as well as limiting the services of external consultants.  

The economic calendar over the next week is relatively light and equity markets are likely to be subdued in the absence of any surprises, perhaps remaining cautious whilst trading near all-time highs.

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