04 July 2014
Our regular look at the news making the headlines, using our market insight information and analysis tools - now with online videos and tutorials.
By Shaun Murison, Market Analyst
The JSE All-Share index has traded to new all-time high territory, led by the heavy weight industrial and resource counters with rand hedging attributes. Although one may look at the recent run of economic data, such as contracting first quarter GDP and ratings downgrades as a negative reflection on our economy, the extensive earnings from outside South Africa for JSE listed securities has kept the upward momentum on the aforementioned index intact.
The rand has weakened significantly as South Africa moves from having the longest strike in history within the platinum sector to the largest strike in 5 years within the manufacturing sector. The NUMSA led strike of 220 000 workers is said to affect around 10 500 businesses in the industrial sector. Union wage demands have increased from 12% to 15%, while there are also calls to remove labour brokers within the sector.
Trade balance data showed a deficit of R6.57bn in May which provided temporary relief for the rand as the data was well ahead of expectation.
The celebration of Independence Day witnessed a shortened trading week in the US. As a result, the much anticipated employment figures were reported on Thursday as Friday was closed for a public holiday. The data was good, coming in ahead of expectation with the unemployment rate declining to 6.1% (6.3% expected) and 288 000 jobs being added to the non-farming payroll (215 000 expected). The employment data is being closely monitored by market participants in anticipation of the US Federal Reserve’s timeline in terms of raising interest rates. Upbeat data supports the notion that we could start witnessing the raising of benchmark lending rates as soon as the second quarter of 2015.
Also in the US, month on month Pending Home Sales data was a significant beat on consensus forecasts at 1.4%, coming in at 6.1%. ISM Manufacturing and Non-Manufacturing data alluded to industry expansion in line with forecasts, while the trade balance data showed a slightly smaller deficit than was expected.
The major data point in Europe was the European Central Bank (ECB) meeting. Benchmark lending rates were left unchanged as expected with the key lending rate remaining at 0.15%, the deposit rate at -0.1% and the marginal-lending rate at 0.4%. The unemployment rate for the region was reported at 11.6% while month-on-month retail sales showed 0% growth and services PMI showed 0.7% industry growth.
It has been a strong week on our local market with very little to mention on the decliners list. Steinhoff International heads up the decliners list on the back of new corporate activity announced during the week.
The company launched an Accelerated Book Build offering (ABB) and announced a rights issue to raise funds to strengthen the balance sheet and meet central bank requirements to list in Germany on the Frankfurt Stock Exchange. The rights offer price is set for 350m shares (incl.150m shares from ABB) at R52 a share in aim of raising R18.2bn.
Imperial Holdings finds its share price under pressure as labour inactivity hampers sentiment in the manufacturing sector and in particular the automotive sector.
Positive economic data out of China, has witnessed a buoyant resource sector, as the expectation for continued demand from the second largest economy in the world is reinforced. Higher commodity prices and a weaker rand have equated to strong gains on diversified resource counters in particular, such as BHP Billiton and Anglo American Plc. In broad-based market gains, rand hedge industrial counters less exposed to the strike within the manufacturing sector, are also benefitting from the currency weakness induced.
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Source: I-Net Bridge, as of 04/07/2014