3 - 10 July 2015
A look at local and international economic data, major events, economic releases and company news expected in the week to come.
By Shaun Murison, Market Analyst
It has been a tentative week for both gainers and losers for as the market attempts to balance the sum of macro catalysts stemming from Greece, China and the U.S.
It was announced that the South African government had sold Vodacom shares to the amount of R23bn to the Public Investment Corporation with the aim of funding the utility parastatal Eskom. It was also announced by the Competition Commission that the Vodacom takeover deal relating to Neotel had been approved albeit with conditions. The approval follows the conditional approval from the Independent Communications Authority of South Africa’s (ICASA) received in recent weeks.
Tiger Brands has started experiencing its first rebound from the interim results induced selloff which commenced in May, suggesting a tentative perception by some market participants of value at the current share price.
Brait Se continues to gain as noted in last week’s comments, following its recent inclusion in the Jse Top 40 index as well a positive reception to recent results and acquisition announcements.
Resource counters, particularly those with a dependence of iron ore, remain nested in the decliners list. Iron ore dropped as much as 6% in a single day as data suggested record amounts of supply were being exported from Port Hedland in Australia, the largest iron-ore exporting port. A continued selloff in the China’s, Shanghai Composite Index would also have done little to improve resource sector sentiment.
Local trade balance data showed a reading of R5.00bn in May, compared with a trade deficit of R2.50bn in the prior month. This was well ahead of expectation which was for a trade deficit of R3.20bn.
On an annualised basis, private sector credit increased by 9.5% in May. This was a marginal increase on the previous month’s figure which saw private sector credit increase by 9.4%.
The consumer confidence index in South Africa dropped to -15.00 in 2Q15 which was significantly worse than the prior quarter which recorded an index reading of -4.00.
Manufacturing PMI data was recorded to have improved to an index reading of 51.40 in June, compared with a reading of 50.80 in the previous month.
New vehicle sales slid 4.8% in South Africa on an annual basis in June, higher than market expectations for a drop of 3.0%. In the previous month, new vehicle sales had fallen 3.2%.
The week started off on the back foot with volatility escalating as global markets digested the very real possibility of a Greek exit from the Eurozone. Those hoping for a last minute deal in Europe would have been bitterly disappointed as the Greek Prime Minister abandoned talks over the previous weekend and called for a referendum with its people on the current creditor demands/offerings. The scheduled referendum on July 5 follows a missed bundled payment of EUR1.6 billion to the International Monetary Fund (IMF) on the June 30. The European Central Bank has now capped the ceiling on emergency Liquidity Assistance to Greek lenders and in turn Greek banks have imposed capital controls (i.e. a maximum EUR60 daily withdrawal limit) and are also closed until at least July 6 in an attempt to try avoid a collapse in its banking system. A yes vote at the upcoming referendum could see the end of the Syriza government and a return to negotiations in lure of the country remaining part of the eurozone.
In China, the the Peoples Bank of China cut its one-year lending rate by 0.25% and its reserve requirement ratio by 0.5%. This has followed the recent selloff in the Shanghai Composite as the deleveraging of margin trading compounds the decline from the not so distant market highs.
In the US, employment data came in mixed as the unemployment rate improved more than expected to 5.3%, while 223000 jobs were added to the Non-Farming Payroll. This was below consensus which anticipated 231000 jobs to have been added in June 2015.
The week ahead
Monday will see global markets react to the outcome of the Greek referendum. There is no definitive future path set on a vote either way, however a “no” vote would consider a Greek exit from the Eurozone and a “yes” vote could see a restructuring of Greek parliament as well as a return to the negotiation table with the country’s creditors.
Markets will also be cognitive of U.S. trade balance data out on Tuesday and the Federal Open Market Committee (FOMC) meeting minutes on Wednesday.
|05-July||All Day||EUR||Greek Bailout Vote||Yes||-|
|06-July||16:00||USD||ISM Non-Manufacturing PMI||-||55.7|
|07-July||10:30||GBP||Manufacturing Production m/m||-||- 0.40%|
|07-July||14:30||USD||Trade Balance||-||- 40.9B|
|07-July||08:00||SA||Gold and Foreign Exchange Reserves (gross)||-||$46.45bn|
|07-July||08:00||SA||Gold and Foreign Exchange Reserves (net)||-||$41.52bn|
|08-July||14:30||GBP||Anual Budget Release||-||-|
|08-July||20:00||USD||FOMC Meeting Minutes||-||-|
|09-July||13:00||GBP||Official Bank Rate||0.50%||0.50%|
|09-July||Tentative||GBP||MPC Rate Statement||-||-|
|09-July||14:30||USD||Weekly Unemployment Claims||-||281K|
|09-July||13:00||SA||Manufacturing Ptoduction Index y/y||-||- 2%|
Source: Economic Calendar, as of 03/07/2015
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|30 July||18:30||Cape Town||1.5hrs|
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Source: INET BFA, as of 26/06/2015