The Week Ahead

2 May 2014

Our regular look at the news making the headlines, using our market insight information and analysis tools.

By Leigh Riley,  IG Market Analyst

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Company announcements

Dividends

Economic catalysts

Market overview

A shortened trading week did little to discourage the markets from pushing higher, with the Dow closing at a record high on Wednesday and the FTSE at a near 2 month high.

Local Data

The local index rose to a record high of 44077 despite South Africa reporting a negative trade balance deficit of R11.39billion in a week full of international economic data. Platinum companies fell in the week after AMCU rejected the latest wage offer tabled in revived discussions, with the likes of Northam Platinum, Impala Platinum, Anglo American Platinum and Aquarius Platinum all falling.

The Rand strengthened against major currencies, citing the less harsh than expected sanctions by the USA on Russia as the main catalyst to increased confidence in emerging markets.

International Data

Asian markets have been mixed this week with China Purchasing Managers’ Index (PMI) at 50.4, missing its estimate of 50.5. The Bank of Japan lowered its fiscal 2014 GDP growth forecast to 1.1% from 1.4%, yet this seemed to have little effect as upbeat earnings pushed Japan to the largest rally in two weeks.

Merger & Acquisition activity in the United Kingdom from Pfizer for AstraZeneca along with better than expected GDP for the first quarter of 2014, strong housing data and positive manufacturing activity (57.3 up from 55.8) helped push UK and European markets higher. The Sterling reached a 5 year high against the Dollar of 1.69204. Euro zone inflation edged up slightly to 0.7% reducing the chance of interference from the European Central Bank (ECB) to starve off deflation but is still an area of concern under the 1% mark. The ECB is now considering a round of Quantitative Easing (QE) to help boost the Euro Zone economy which is experiencing a slow rate of growth relative to other parts of the world.

In the United States Pfizer climbed 4.2% earlier in the week after its announcement to acquire AstraZeneca for $98.07bn. US pending home sales were up to 3.4% from 1%. The market was driven further by upbeat corporate earnings and strong consumer spending despite the US economy only growing by 0.1% in the first quarter, below its forecast of 1.2%. Little reaction was felt by the Federal Reserve reducing its bond buying scheme by a further $10billion to $45billion, and its commitment to keep interest rates low. Non-Farm Payroll numbers were the highest in 2 years at 288,000 against estimates of 215,000 with unemployment at 6.3% giving further confidence to an ongoing recovery in the world’s largest economy.

Source: IG Insight, as of  02/05/2014

Top movers

Source: IG Insight, as of 02/05/2014

Aquarius Platinum fell further after negative news in the platinum mining industry and a fall in revenue and core operational earnings for the 3rd quarter. Aquarius is unaffected by the strike but has seen no benefit from a stagnant platinum price.

Naspers sunk to a low of 983.25 after China subsidiary Tencent suffered losses due to China’s State Administration of Press, Publication, Radio, Film and Television banned the broadcast of four US Television shows on internet video streaming sites.

Pinnacle Technology Holdings fell 7.4% in the week after reports that local regulators were looking into the company for alleged insider trading of shares.

African Bank Investments Ltd fell 19.89% in the latter part of the week after the company said it anticipated a half year loss of around R3.3billion due to non-performing loans.  Headline losses per share would be between 239cents and 254cents compared to a previously estimated 62.3cents.

Broker consensus

Brokers view on the markets.

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